The Bougainville parliament has just passed an interim mining act, paving the way for its troubled Panguna copper mine to re-open. Even though the new act removes the automatic renewal of its lease to continue, Bougainville Copper Limited is still the preferred mine operator, as Kevin McQuillan reports.

Panguna open cut mine. Credit; Ramumine

Bouginaville’s mining regime seeks to redress what Dr John Momis, the President of the Autonomous Bougainville Government (ABG), describes as the ‘extremely unjust and unfair Mining (Bougainville Copper Agreement) Law 1967’.

The issues include control over the terms of mining leases and the share of the income from mining.

At the heart of the new mining regime is that:

• traditional landowners, and not the State, own the minerals in, on or under their land;
• the ABG will own the minerals in, on or under non-customary land;
• customary owners will have a right of veto over the grant of any exploration licence over their land. (See box below for further details.)

No independence without revenue

Finance Minister Albert Punghau

Earlier this month, Bougainville’s Finance Minister, Albert Punghau, outlined Bougainville’s delicate financial situation to the 65-member forum tasked with developing a negotiating position on the future of Panguna.

This year, he said, the ABG will collect revenues of about K25 million—less than 10 per cent of its annual budget—with the rest coming from PNG’s National Government.

‘Without much more revenue, we can’t reach [the] highest autonomy or independence. We cannot meet the increasing needs of our people,’ he said.

John Momis recently told Business Advantage PNG that only the re-opening of Panguna will provide the revenue necessary for economic development: ‘with the way things are going, we don’t have much option, really.’

‘Landowners want the devil they know, not a new devil, because the devil they know accepts that it did many things wrong and accepts responsibility for fixing them up and they fear that a new devil would not accept those responsibilities,’

The vast majority of Bougainvilleans agree the mine should reopen, according to a source close to the ABG.

‘The clear message coming from the Panguna landowners is to resume mining, not because it’s wonderful, but because we’re not going to have economic development and independence which clearly the vast majority think they can achieve,’ they tell Business Advantage PNG.

Re-opening Panguna

The ABG’s John Momis. Credit: New Dawn

While Momis has described the Transitional Mining Bill as ‘stripping’ BCL, the previous operator of the Panguna mine, of its seven exploration licences and its special mining lease over Panguna, the issue is not that clear-cut.

The new Act does not grant any minerals to BCL, but it does give BCL the first right of refusal to negotiate with both the ABG and landowners for a mining licence over the Panguna site, says Momis.

‘Landowners want the devil they know, not a new devil, because the devil they know accepts that it did many things wrong and accepts responsibility for fixing them up and they fear that a new devil would not accept those responsibilities,’ say government sources.

‘BCL will continue to engage and continue in talks about reopening the mine.’

Rio Tinto reviewing BCL ownership

This week, Rio Tinto announced it was reviewing its 54 per cent ownership of BCL, in light of the new legislation.

BCL Managing Director, Peter Taylor, is unfazed by the news, telling Business Advantage PNG that any changes to the ownership of BCL shares will not affect its plans to continue negotiating with the ABG and landowners.

He says he’s still ‘optimistic’ of striking a deal to re-open the mine.

‘BCL will continue to engage and continue in talks about reopening the mine,’ he tells Business Advantage PNG.

Rio is reviewing a whole bunch of projects and BCL is just one of them,’ he said. ‘They might decide not to sell. I don’t want to pre-empt an outcome.’

Other buyers

‘Rio Tinto is large enough to have done their sums, looking at the costs of benefits, so I don’t know if we will see a new player on the scene,’ according to Satish Chand, a finance professor at the University of New South Wales.

BCL’s Peter Taylor

Chinese buyers are currently looking at copper deposits in PNG. Guangdong Rising Assets Management Co. has been considering a takeover of Pan Aust, an Australian company poised to acquire a majority stake in the Frieda River copper project in East and West Sepik provinces.

Carpetbaggers?

In the ABG parliament this month, Momis named four companies from Canada, the US and China ‘with very dubious or limited track records in the mining industry’, who were ‘entering into arrangements with Bougainville factions and leaders’.

He also named five local landowners who were bypassing the ABG and dealing with the companies.

‘Very largely opposition to mining has been orchestrated by the Bougainville[-based] partners or agents of outside groups seeking to get control of significant mining resources in Bougainville without any government approval,’ sources advise Business Advantage PNG.

‘The truth is that the Bill is designed to stop unscrupulous and dishonest outsiders who together with a few weak or dishonest Bougainvilleans are the ones trying to both buy and sell Bougainville,’ said Momis.

The cost of rehabilitating the mine is about A$6 billion (K13.72 billion), and revenues for the life of the mine are estimated at $A75 billion in 2014 dollars.

A lot of reasons to attract modern-day carpetbaggers.

Summary of the Bougainville Mining (Transitional Arrangements) Bill 2014

The guiding principle of the interim Mining Bill is recognition of customary ownership of minerals, under s23 of the Bougainville Constitution, rather than ownership of minerals by the State.

• Customary landowners will own the minerals in, on or under their land;
• The Autonomous Bougainville Government (ABG) will own the minerals in, on or under non-customary land.
• Customary owners will have a right of veto over the grant of any exploration licence over their land;
• Landowners don’t have a power of veto, but can raise objections to a development proposal;
• Landowners also have significant rights to share in mine revenues, including royalties, rents and compensation;
• Landowners will also be entitled to free equity in every major mining project;
• Small-scale mining will be legal on one’s own land with the permission of Landowners;
• The draft Act does not grant any minerals to Bougainville Copper Limited (the previous operator of the Panguna mine). It gives BCL a right to negotiate with both the ABG and Landowners for a mining licence over the Panguna site;
• There can only be a maximum of two ‘major mines’ operating in Bougainville at any one time;
• The final draft of the long-term law is expected to be ready by the end of2014, or early 2015.