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. Last Updated: 07/27/2016

Troubled Solomons Look to Gold

HONIARA, Solomon Islands -- An abandoned gold mine in a jungle in the Solomon Islands, one of the richest veins in the South Pacific but shut due to ethnic violence, could be a lifeline for the troubled nation.

The government hopes the Gold Ridge mine, expected to resume gold production by the end of 2007, could spark vital investment and create jobs in an impoverished nation where just 9 percent of people are formally employed.

Finance Minister Peter Boyers said the youth of the Solomon Islands, half the island's 500,000-strong population, need a future if the chain of 992 islands is to end the cycle of instability.

"These youth want a vision and some sort of hope that they are going to have a future, whether it's formal or informal -- it's our responsibility to create it," Boyers told Reuters in an interview at parliament house in the capital, Honiara.

Companies such as Japan's Sumitomo Metal Mining had shown interest in nickel and cobalt exploration, he said.

For most of this decade, political risk has plagued the Solomon Islands, a nation with rich gold veins, possible offshore oil and gas, and nickel and cobalt deposits hidden under its jungles.

Prime Minister Snyder Rini resigned last month after riots over accusations that his government was influenced by Chinese businessmen, but foreign troops and police are still patrolling the streets -- an image the Solomon Islands fears will hinder foreign investment.

There has been little economic recovery since ethnic fighting brought the country to the brink of bankruptcy in 2003, leaving many in the 500,000 population angry at what they see as continuing political corruption.

Dense lantana weeds cover rusted earth-moving equipment at the Gold Ridge mine, an hour and a half's drive from Honiara.

Worker camps and tool sheds are barely visible through the dense tropical foliage. Only a handful of squatters now pan the land in search of gold dust.

Australian Solomons Gold, or ASG, was granted rights to rehabilitate the mine two years ago. The company's chief operating officer, Mike Christie, said there had been delays to the project, the price of doing business in the Solomon Islands.

When ASG, about 40 percent owned by Australian miner Michelago, completed the ownership deal for the mine in May last year, the company had aimed to be producing gold by the end of 2006, but that target has been pushed back.

Before the warring factions in the province overran the mine and chased workers off with machetes in 2000, Gold Ridge was yielding 150,000 ounces of gold annually, making it one of the biggest lodes in the region behind neighboring Papua New Guinea.

ASG plans to mine about 120,000 ounces of gold annually when it starts operations late next year.

Gold bullion sells for as much as $636 per ounce on exchanges half a world away in New York and London, more than double the bullion price when the mine closed six years ago.

Boyers said the Solomon Islands, which relies on aid for 70 percent of its budget, has worked hard to restart the mine, offering tax and duty exemptions.

ASG, which plans to list on the Australian Stock Exchange with an initial public offering by mid-2006, hopes to employ up to 600 people at Gold Ridge.

Christie said three percent of the expected annual revenue from Gold Ridge of $78 million would be split between the government and local landowners.

"Gold Ridge can set an example in which projects can invest and prosper in the Solomon Islands and in such a way that the benefits are shared," he said.