Frontier to sue PNG govt for over $3bn

North Perth-based Frontier Resources is preparing legal action against Papua New Guinea to recoup over $3 billion in expenditure and lost profits after the government refused to renew the licence covering its Kodu deposit.

In a statement today, the company said it is also considering its legal options against the Commonwealth of Australia will be evaluated, including the possibility of a class action lawsuit by shareholders.

The legal action surrounds Frontier's flagship Kodu copper-gold project, which covers part of the historic Kokoda Trail. A conceptual mining study on the project completed last year estimated the project would cost around $750 million to come online.

This is not the first time Frontier has considered legal action however figures on how much the company would sue for had not been released.

Frontier is seeking to recoup sunk expenditure of around $3.2 million, plus lost potential future profit of around $3 billion. The company said it will honour its equity commitment to the Kodu landowners by giving them 5 per cent of any lost potential profits that may be awarded.

Below is the full announcement from Frontier.

Frontier Resources is disappointed to announce that EL 1348 (containing the Kodu copper-goldmolybdenum Deposit) has been officially refused renewal by the Minister of Mining for Papua New Guinea. No reasons were given.

Security of licence tenure is fundamental to mining/exploration stability and this decision is a major blow to PNG's Sovereign Risk.

The Company has made every conceivable compromise to ensure the best outcome for all stakeholders, including offering to relinquish 'all' the original Kokoda Track in the EL and 5% carried equity in the project to landowners, plus 2% to the 'Kokoda Track Authority'. In addition, an independent Initial Environmental Assessment showed there is no danger at all to Port Moresby's current or future water or power supplies and general environmental concerns can be effectively 'managed'.

The EL 1348 landowners last week threatened to again close the Kokoda Track until the El is renewed. Landowners indicated this morning that they are still likely to continue with their plan to close the Kokoda Track in protest of the decision. Frontier thanks the various landowner groups of EL 1348 for the positive working relationship that has existed over the last 4.5 years and their support, understanding and commitment to the project and management wish them all the best in their endeavours.

Frontier will now move post- haste to initiate legal proceedings in the courts of Papua New Guinea to recoup sunk expenditure of approximately K8.5 million (~A$3.2 million), plus lost potential future profit, likely of the order of approximately K8 billion (~A$3 billion). Frontier confirms that it will honour its original 'equity commitment' to Kodu (and Elo) landowners and will give them 5% of any 'lost potential future profit' that may be awarded.

Legal options against the Commonwealth of Australia will also be evaluated, including the possibility of a class action lawsuit by shareholders.