The Papua New Guinea Government has announced that it will not renew the existing Special Mining Lease at the Porgera gold mine, which is operated by Barrick Gold. Barrick is set to challenge the decision.
Workers at Porgera. Credit: Barrick Gold
Prime Minister James Marape said in a statement last Friday that the decision not to extend the special mining lease for Porgera for another 20 years is ‘in the best interest of the state, especially in lieu of the environmental damages claims and re-settlement issues.’
He said the National Executive Council had agreed to enter into a transitional arrangement with Canada’s Barrick Gold, ‘with priority given for an exit plan for Barrick that considers all outstanding issues’.
Barrick Gold and China’s Zijin Mining Group each own 47.5 per cent of the Porgera operation.
Marape said the exit plan will take into account the ‘value of assets, settlement, future management and operation of the mine as well as addressing legacy matters such as re-settlement, environmental issues and tax liabilities.’
He said this will ensure the continuity of mine operations while ‘longer term plans are finalised’.
‘Neither the Prime Minister nor anyone acting on behalf of the Government has ever proposed any alternative terms on which the Special Mining Lease could be extended.’
A State Negotiation Team to resolve issues is to be led by Ambassador Isaac Lupari.
In September 2019, Marape said that his government would push to bring revenues from resources projects back to PNG. According to the Bank of PNG, PNG’s mineral GDP has tripled since 2008, but tax paid has declined and is at negligible levels.
Barrick to suspend mining
A statement from Barrick said the decision ‘was tantamount to nationalisation without due process’ and in violation of the Government’s legal obligations to the company.
It said the company will ‘pursue all legal avenues to challenge the Government’s decision and to recover any damages that BNL [Barrick Niugini Limited] may suffer as a result of the Government’s decision,’ adding that it had ‘no interest in discussing transitional arrangements for the management of the mine, as proposed by the Government’ saying this was not consistent with Barrick Niugini’s rights. The company said it will suspend all mining.
‘Barrick Niugini has compensated and relocated more than 1400 households impacted by the mine’s operations.’
‘Barrick Niugini’s right to the renewal was confirmed by the PNG National Court in August 2019,’ the statement said.
‘Neither the Prime Minister nor anyone acting on behalf of the Government has ever proposed any alternative terms on which the Special Mining Lease could be extended, or indicated that it would not be extended.’
The Barrick statement said that in 2019, in response to a request from Marape, the company proposed a benefit-sharing arrangement that would deliver ‘more than half the economic benefits to PNG stakeholders including the government for 20 years’.
Environmental and resettlement issues
Credit: Porgera Joint Venture
The Barrick statement rejected the government’s claims about environmental issues and resettlement.
‘The environmental management practices at the mine were studied and approved by the government.
‘The PNG Conservation and Environmental Protection Authority (CEPA) has carried out regular audits of the mine and has always found it to be in compliance with its permits. In fact, Barrick Niugini’s environmental management system exceeds the requirements of its permits.
‘As far as resettlement is concerned, Barrick Niugini has compensated and relocated more than 1400 households impacted by the mine’s operations, and at no stage has the government indicated that the mine had not complied with its obligations in this regard.’
Repercussions
The decision raises questions about how the PNG government will approach mines that are owned and operated by foreign companies in the future.
The Marape statement said that the prospective Wafi-Golpu mine, a joint venture between the South African company Harmony Gold and the Australian company Newcrest Mining, will be ‘advanced within the existing legal parameters of our country’.
Marape said Wafi-Golpu, along with LNG projects P’nyang and Papua LNG, are the government’s ‘three priority projects.’
Lihir Gold Ltd, Ramu Nickel and Morobe Consolidated Goldfields (Hidden Valley) have Special Mining Licences, according to the Extractive Industries Transparency Initiative (EITI). The Ramu Nickel licence is under review.
Special mining lease applications have also been lodged for both PanAust’s Frieda River and Wafi-Golpu.
In 2018, Barrick Gold Corporation’s President and Chief Executive, Mark Bristow, said Porgera has the potential to deliver 500,000 ounces a year for 10 years.
Should Porgera come under state ownership, it would be the second major mine in PNG to do so in the past seven years, following the O’Neill government’s nationalisation of the Ok Tedi mine in 2013, which occurred under very different circumstances.
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I think it’s a reflection on foreign investors operating in the country to re-think and manage closely things like tax credit schemes or similar investments and assistance to the community and the country in general.
Over years, things had been taken for granted and investors failures through strong corrupt political ties been accepted as a norm.
I guess it all comes back to either reaping a country in the time-frame or setting up for failure and bad reputation. Legacies will prevail eventually.
PNG is a good country. You have to live in it to tell it yourself. People are lovely and down-to-earth, on-top of all, there has never been a COVID-19 case in the country – ZERO.
The PNG government should be encouraged to critically review the Porgera Special Mining Lease and make bold decisions that may be of WIN-WIN situations for the direct beneficiaries and keen stakeholders. It would be appreciative if solid facts and figures on resttlements and environmental destructions claimed by the PNG government be made available for negotiations. This would justify PNG government’s proposition for transition of the mine from its current owners to PNG government.
It saddens me to understand that there were MoAs negotiated and formulated during stakeholders’ review meetings. MoAs represent the benefit sharing arrangments and breaches of meeting legal committments captured in the MoAs can be trialed legally. Hence, I would encourage the PNG government to evaluate relocation and environment destructions challenges and allign them with MoA to establish breaches. The PNG government is further encouraged to learn appreciate contributions of Barrick and deal with the lease review maturely. This is because we may scare interested and genuine investors from investing in the future in PNG. I believe the PNG government does not have sufficient technology, technocrats, financial capacity and so on to establish and sustain a large reputable mine not just in the mining industry but in other industries such as in agricutlure, forestry, gas, fisheries and so. Further, corruption is rife and physical observations indicated socioeconomic outlooks are alarming nationwide. PNG need good and great leadership now and in the future to save our mother land.
Allan Wawah, ok tedi is owned by png government and running successfully and thus Porgera will follow. Do not down play png potential to run this mine. We do not need chinese and canadians fool us and rip us off. They build their fortunes and we became beggars and spectators for 30 yrs. Thanks to PMJM.
The company, be it Placer Dome, or Barrick as PJV, or the current partnership/consortium, the monies due from profits have always been paid to the relevant authorities, from decades ago. Your comment regarding equitability between developers and PNG Citizens not sharing rewards is accurate, due to the one glaring fact that the PNG Government is right/smack bang in the middle of those equity payments. Owners pay due taxes to the PNG Government (while at the same time, meeting obligations to local stakeholders/landowners and employees), and it is the Taxes/revenue that is paid to the PNG Government that goes no further than it’s own coffers, for the use of incumbents within. This is a money grab, and the PNG Government has no idea what the hell they are bringing on here, other than taking “control” of a major facility, that may (or may bloody not) allow the members of same to individually make a few hundred thousand kina pocket-money out of this debacle, just enough to buy a decent property in Expat territory. ie: Australia. Good luck to all of my mates in Porgera, and other parts of PNG, I wish the absolute worst possible result (a major claim worth billions) against the PNG Government, and all who sail (or will fail) in her.
The world will never run short of ideas..there is always one like minded around to uphold indigenous participation on par with genuine developers..OKTedi is a success so be Porgera
While its the prerogative of the government of PNG not to renew the SML, the question that we have is about the legal, social and economical implications that comes with such an undertaking for now and into the future
Country & Political risk are very real when you operate in a foreign country. This will certainly make others looking at foreign investment into PNG think again and those foreign investors already in PNG will be concerned! That said I believe foreign investors, particularly mining, have had a very good run in PNG and don’t do enough for Papua New Guineans. It’s all about getting the fattest returns to shareholders and doing the absolute minimum that’s required to appease landowners and the PNG government. The system isn’t designed to be equitable so that developers and PNG citizens share the rewards. Perhaps with any future foreign entities operating in PNG there has to be agreed exit strategies where there’s a deadline that is agreed between the foreign investor and the State. That will also address the abused system whereby expatriates are meant to be training PNG citizen to take over their roles. Lihir, on the surface, have an enviable nationalized workforce when in fact they simply employ contractors to provide the expatriates they want. Makes their numbers look great but it’s smoke and mirrors. The PNG government is also at fault for not monitoring and ensuring that foreign companies are doing the right thing by Landowners and PNG citizens in general. It’s such a complex thing really and as a shareholder of Lihir shares I certainly wonder if I should sell what I have! I’ve not worked in PNG under the new PM’s reign but I know first hand how corrupt politicians are in PNG and what that does to the country. I’d just like to see real benefits flow to the people of PNG and there’s enough mining history in PNG for me to confidently state that the people of PNG have gained very little in tangible benefits since mining begun many many years ago.