(Yicai Global) April 27 -- Zijin Mining Group’s shares sank by the exchange-imposed limit after China’s top gold producer failed in a bid to extend the mining rights to its biggest source of the precious metal, a concession in Papua New Guinea that accounted for over a fifth of the firm’s output last year.

Zijin’s stock price [SHA: 601899] closed 9.2 percent lower today at CNY3.84 (USD0.54), after earlier slumping as much as 10 percent.

The government of Papua New Guinea decided not to extend the mining rights for the Porgera Gold Mine on environmental and social grounds, Prime Minister James Marape said on April 24. The shutdown will have a big impact on the Xiamen-based Zijin’s gold production, the company said yesterday.

The gold mine, located in western Enga province, is a joint venture between Zijin and Canadian gold mining firm Barrick Gold, which each own 47.5 percent with the remaining 5 percent held by a local landowner group. Their mining rights expired last August, and the pair had applied to extend the license by a further 20 years.

International gold prices have taken off this year as investors sought a safe haven from routs in other asset classes as a result of the global coronavirus pandemic. Prices have rallied to a seven-year high.

Porgera is a cornerstone of the local community’s and the country’s economy, Zijin said. The stable and sustainable operation of the mine is in the interests of all parties, and the firm will actively seek legal and reasonable solutions to the matter, it added.

Barrick will pursue all legal avenues to challenge the government's decision and to recover any damages that the company may suffer as a result of this decision, the Toronto-based firm said in a statement on April 24.

Zijin has already recovered its initial investment of USD298 million in the project, it said. The company will accelerate the development of domestic gold mines in order to try to keep this year’s gold output on a par with last year’s, it added.

Editor: Kim Taylor