The Autonomous Bougainville Government (ABG) says it is likely to put exploration licences out to international tender as a first step towards restarting the K177 billion Panguna gold and copper mine. Governor John Momis tells Business Advantage PNG he expects the ABG to take up Rio Tinto’s offer of shares, adding that the national government should pass on the shares it was given by Rio to the ABG.

Panguna mine. Credit: Forest Wallpaper.com

Last month Rio Tinto offered to give away its 53.8 per cent shareholding in BCL to the Autonomous Bougainville Government (ABG) and the national government. Both the ABG and the national government would have an equal equity holding of 36.4 per cent.

The Panguna mine was closed in 1989 at the start of a two-year civil war—prompted by landowner concerns–over the damage to the local environment and the returns they were receiving.

The cost of rehabilitating the mine is estimated to be about A$6 billion (K13.72 billion), and revenues for the life of the mine are estimated to be $A75 billion (K177 billion) in 2014 dollars.

Bougainville Governor, Dr John Momis. Credit; EMTV

There was no explanation for Rio’s decision to walk away from the mine. However, two years ago, Rio said it was reviewing its options after BCL mining rights changed from a Special Mining Lease to an exploration licence under ABG’s new mining laws (the change was made in August 2014). Last month’s decision follows the appointment of a new CEO at Rio, Jean-Sebastien Jacques.

‘We will probably take up the 36.4 per cent and then push for the 17 per cent that Rio gave to the PNG government,’ Bougainville Governor, Dr John Momis, tells Business Advantage PNG.

Justice

‘Bougainville was marginalised and devastated and there was no equity or justice at all in the way benefits from the long life of the mine were distributed,’ says Momis. ‘So we believe Rio should have transferred the total 53.8 per cent to us.

‘The only advantage of taking the (extra) 17 per cent is to have [better] access to that (mine) data. Hopefully, we can create political space for us to work together. Our fear is that the national government could buy out some of the private shareholders and then have a controlling interest—which would not be acceptable to Bougainvilleans.’

‘If the worst comes to the worst, there is a provision in our mining law which would stop them operating in Bougainville. So it would be a lose-lose situation. Our proposal is a win-win deal.’

Momis is opposed to the national government handing over its Rio shares to landowners, ’who are vulnerable to manipulation by fly-by-night businessmen, who are running around in Bougainville right now, from America, from Australia, from China, who are colluding with some locals. It’s best to give it to the government.’

‘If the worst comes to the worst, there is a provision in our mining law which would stop them operating in Bougainville. So it would be a lose-lose situation. Our proposal is a win-win deal.’

Mine re-opening

Momis says the role of BCL in re-opening the mine will be critical. He says that not only does it own the mine data, it is also a registered operating company. He also claims it has a solid reputation.

Momis acknowledges, however, that the relationship between the ABG and the national government is ‘not good’.

He says the national government owes the ABG about K700 to K800 million under the terms of the Bougainville Peace Agreement: money, he says, which is ‘constitutionally guaranteed’.

‘We would probably make use of the provisions in the Mining Act empowering the ABG to put exploration licences up for international tender.’

A new process

If Panguna is to again become a going concern, it is likely that there will need to be a different approach to the usual manner in which mining is developed.

When opening a new mine typically the first step is to prove the reserves are viable, then there is a stakeholder analysis to address the social and environmental responsibilities. This is considered essential to protecting the company’s reputation.

Given the mine’s potential, there is hope for both governments can come to some agreement.

With Panguna, the situation is the reverse. The value of the copper resource is proven. In 2012, BCL reported the mine’s reserves consisted of more than five million tonnes of copper and 19 million ounces of gold.

Given the mine’s potential, there may be hope for both governments can come to some agreement. One area where there does seem to be agreement is that the people issues must come first.

Papua New Guinea Treasurer Patrick Pruaitch, speaking on EMTV, said the first priority should be the people, not the mine’s potential income. Momis, speaking at the Australia-PNG Business Council conference in Cairns in late May, made a similar comment when he said that the first issue should always be the ‘dignity’ of the people.

It represents rare common ground in the complex and fractious issue of restarting the mine.