With less than nine months until PNG’s National Elections, set for July 2022, the ‘Take Back PNG’ agenda of the Marape Government is moving into new areas.

Will PNG have its own bullion bank eventually?  Credit: Pixabay

Prime Minister James Marape. Credit: Office of the Prime Minister and NEC

‘We have been a gold-producing nation since the 1920s and 30s … Our gold has continued to flow out – and other minerals – without us processing or refining them in-country.

This [agreement] is consistent with our downstream processing agenda. Whether it’s fisheries, forestry, agriculture, oil and gas or mining – we must finish downstreaming in our country and export finished product because it value-adds to our economy.

‘It will make our industry accountable. It will make and ensure there is only one gate for all our gold going out of the country. ‘

— Prime Minister James Marape, announcing plans for a joint venture to open a new gold refinery and mint in PNG last week.

With provisional agreements reached for the reopening of the Porgera gold mine and the ExxonMobil-led P’nyang gas project, the government has also signalled its desire to make an increased State share of the PNG LNG project (and a listing on PNGX?) a condition of approving Santos’ merger with Oil Search.

Last week, it moved to derive greater revenues from the mining sector, by signing an agreement to building a gold refinery and mint outside Port Moresby, through which all the nation’s gold exports would pass.

This is not a new idea but the government appears to have found an investor able and willing to put up the US$120 million to US$150 million necessary to build the facility, which will be powered by gas from the PNG LNG project.

‘While some sectors, such as tourism, have been badly affected, business as a whole has shown itself to be remarkably resilient.’

The Prime Minister even suggested this could be the first step towards PNG having its own gold bullion bank.

Of course, as the old adage goes, ‘there’s many a slip ‘twixt the cup and the lip’, but the goal is to have a refinery open by 2025 – also the self-imposed deadline the government has set for its envisioned new resources laws.

Value

Successive governments in PNG have talked about value-adding for decades. In the case of tuna and palm oil, the country has made great progress, but most of PNG’s commodity exports still leave the country with little value added to them.

Value-adding means local jobs in a country where a declining number of workers have formal employment (less than 15%). The Prime Minister surely has a point when he asks: if there are non-gold-producing countries with their own mints, why shouldn’t PNG have its own?

If the new refinery and mint is cost-competitive with Perth’s mint, for example, it will be welcomed. If not, however, forcing industry to use it may not be help either the national interest or investors.

While business in PNG has shown itself generally supportive of the aspirations sitting behind the ‘Take Back PNG’ agenda, the practicalities are not without their challenges.

As Barrick Gold, TotalEnergie, Oil Search, Twinza Oil and others have discovered, reaching to a ‘win/win’ position on a project in PNG can now mean greater delays in executing agreements, potentially lower margins and therefore more risk.

This is perhaps one reason why the deal Telstra has struck to buy Digicel Pacific (which has been greeted cautiously by our readers) was only signed once the Australian Government agreed to provide the Australia’s largest telco with ‘cash repatriation from the regions, FX protections, and political risk insurance for six years’.

Some might observe that the fact that such protections were pre-requisites doesn’t reflect particularly well on PNG as a place to do business, particularly at a time when arguably there is greater access to concessionary loans and grants to invest in the country than ever.

Nevertheless, there are examples of mutually successful ventures. PNG Ports’ leasing of Motukea and Lae ports to ICTSI comes to mind. Perhaps this is a model the new head of Kumul Consolidated Holdings, when found, will consider for other state-owned entities.

Stalwart efforts

If the PNG Government needs to be reminded of the value that a strong business community can provide to a country, it need look no further than the stalwart efforts being made by many businesses in the fight against COVID-19.

While some sectors, such as tourism, have been badly affected, business as a whole has shown itself to be remarkably resilient. Long may that continue.