In a surprise development, the Porgera gold mine looks set to re-open, ending a period of intense disagreement between Papua New Guinea’s government and Barrick Niugini, the mine’s operator. In a related shock, however, the Chairman of Kumul Minerals Holdings, the recipient of a new Special Mining Lease for the mine, has resigned.

Prime Minister James Marape and Barrick Gold’s Mark Bristow. Credit: Porgera Joint Venture

After months of speculation about the future of the Porgera gold mine in Enga Province, the PNG Government and developer Barrick Niugini have made a joint announcement which will give hope that the mine may reopen sooner rather than later.

The joint statement from Prime Minister James Marape and Chief Executive of Barrick Gold, Mark Bristow, confirmed that Marape and Enga’s Provincial Governor, Sir Peter Ipatas, met with Bristow in Port Moresby last week to discuss terms for the re-opening Porgera, which has been closed since April.

The Prime Minister indicated he was ‘very happy’ with the discussions which, he said, focused on ‘mutually acceptable arrangements for a new Porgera partnership to reopen and operate the mine’.

In principle agreement

‘We have agreed in principle that Papua New Guinea will take a major share of equity under the new arrangements and BNL [Barrick Niugini Limited] will retain operatorship and there will be a fair sharing of the economic benefits,’ the Prime Minister’s statement said. ‘This is a very significant step forward and I look forward to hearing of the outcomes of further discussions on the economic principles to guide future mining operations.’

Bristow said Barrick will be providing a ‘high-level team’ to progress negotiations. According to the statement, Marape and Bristow have agreed to meet again in the coming weeks once negotiations conclude.

A separate statement by BNL said the two sides agreed that ‘any legacy issues would be limited to transgressions against law, contract or permit and that disputes would be resolved under historical agreements.’

Kumul Minerals board

Meanwhile, there are signs of internal issues at Kumul Minerals Holdings Ltd (KMHL), the state-owned enterprise granted a new Special Mining Lease (SML) to Porgera by the Marape government back in August.

The Chairman and Acting Managing Director of KMHL, Peter Graham, has announced his resignation.

In his resignation letter to Marape, Graham said he was ‘disappointed’ in the process of appointing new directors at KMHL, which he claimed has been handled in a way ‘that does not comply with the Kumul Minerals Authorisation Act.’

There have been six appointments to KMHL’s board since 3 September.

‘This will leave the new board at risk of being challenged as non-compliant, constitutes a board of negligible industry experience and results in there being no continuity on the board,’ Graham wrote. ‘The appointments of existing directors have been terminated without any notice to them.

‘I have passed on my apologies to the previous board members who have performed their duties as board members in a most responsible manner in dealing with a host of legacy issues related to poor investment decisions by a previous board and management.’

The departure of Graham, one of PNG’s most experienced and respected resource executives, puts into question KMHL’s immediate capacity to manage and develop the State’s mineral assets.

Responding to the resignation, the Prime Minister Marape issued a statement saying ‘Mr Graham told me six months ago when he took office that he would resign in November 2020. So, I stress, I was already expecting his resignation.

‘The new Board Members are credible Papua New Guinean men and women who have served their country well in various capacities.’

Special Mining Lease

Credit: Porgera Joint Venture

The joint statement from the Marape government and BNL represents a stark reversal from previous exchanges.

In April, the government refused to extend BNL’s expired special mining lease, citing environmental and social concerns. BNL responded by describing the move as ‘tantamount to nationalisation without due process and in violation of the Government’s legal obligations.’ BNL also claimed ‘it had no interest in discussing transitional arrangements for the management of the mine’.

On 25 August, the government issued a new 20-year lease for the mine to Kumul Minerals Holdings (KMHL). In response, BNL sought legal redress in the courts, lodging an application for a Judicial Review.

“‘Restoration of full operations at Porgera’ would be an important element in PNG’s economic recovery.”

During this period there was growing pressure on the government to reopen theme from a variety of sources.

Motivation

The motivation to reopen the mine is clear. As well as an estimated 2650 workers losing their jobs following the mine’s closure, there’s also the impact on PNG’s broader economy at a time of economic hardship.

The Governor of the Bank of Papua New Guinea, Loi Bakani noted in his recent September 2020 Monetary Policy Statement that the closure of the mine ‘contributed to negative economic growth’ pointing out it ‘added’ to tax revenue losses.

‘It is therefore important that the mine resumes production as soon as practicable,’ he said, arguing that ‘restoration of full operations at Porgera’ would be an important element in PNG’s economic recovery.

Barrick Gold estimated that there was a 10.8 per cent drop in its third-quarter gold production because of the mine closure.