The proposed Wafi Golpu mine will contribute to the diversification of Papua New Guinea’s economy, according to Craig Jones, Executive General Manager Wafi Golpu at Newcrest Mining. He told the Australia Papua New Guinea Business Forum in Brisbane that, if the project gets the go-ahead, it will help local agriculture.
Wafi Golpu’s Craig Jones. Source: BAI
Jones’ comments reflect a growing inclination among resources companies to present their operations as being good for the overall economy, not just good business.
‘There are many opportunities for the mining industry to contribute to the diversification of the Papua New Guinea economy through smart and sustainable development,’ Jones said.
‘Wafi Golpu is a case in point, as the development of the mine’s infrastructure paves the way for a substantial agricultural industry.’
Jones pointed to proposed new roads that will ‘open up’ the region, from the Highlands Highway to the Bulolo Highway.
New infrastructure for the Wafi Golpu mine, a joint venture project between Newcrest and Harmony Gold, could create the opportunity for up to 10,000 hectares of land in the Watut River valley to be used for agricultural purposes.
‘The extractive industries are likely to remain critical to the future.’
‘The joint venture has a strong focus on unlocking Morobe’s agribusiness potential.’
Diversification
Jones’ emphasis on stimulating local, non-resource industry benefits may be designed to counter critics within PNG who argue that extractive companies do not pay sufficient tax and that the tax laws should be changed.
As the Executive Director of the Institute of National Affairs, Paul Barker, noted in the forum, according to the Extractive Industries Transparency Initiative, the State currently receives more income tax from resource company employees than it does from the companies themselves.
The emphasis on economic diversification also appears to be a response to statements by PNG leaders, including Prime Minister Peter O’Neill and central bank Governor Loi Bakani, that PNG urgently needs to diversify its economic base to withstand the boom and bust cycles that routinely occur with resource industry projects.
Jones said, however that the extractive industries are ‘likely to remain critical to the future’ while such economic diversification is being undertaken.
He said the extractive industries account for 84 per cent of the total exports of PNG, with 45 per cent from oil and gas, and 39 per cent from mining in 2016.
Exports
Jones said Newcrest’s Lihir gold mine contributed about K3.5 billion in export revenue in 2016.
‘If it proceeds, the potential annual revenue from Wafi Golpu is expected to exceed even Lihir when it reaches peak production, with average free cash flows projected to be around US$900 (K2.92 billion) per annum.
‘This goes on for about the first 10 years after the beginning of commercial production.
‘There are currently policy issues that remain a concern for our industry.’
‘It would make Harmony and Newcrest very significant contributors to the growth of the Papua New Guinean economy.’
Policy
Jones noted that the Wafi Golpu project requires very significant upfront investment and has very long lead times for its return on investment.
He said there will be K16.7 billion (US$5.14 billion) invested over the life of the mine if it gets the go-ahead.
‘This is why a stable investment and legislative environment is so crucial for the development of Wafi Golpu and other mineral projects.
‘There are currently policy issues that remain a concern for our industry.
‘These are the economic drivers that have a multiplier effect.’
‘Apart from the highly debated contributions made by resource companies in company tax there are many other contributions that resource companies make and many of them are voluntary.
‘These benefits have a direct impact on the lives of Papua New Guineans.’
Multiplier effect
Jones pointed to Lihir’s investment in infrastructure, including schools, roads, bridges, Lihir airport, Lihir medical centre, water and sanitation projects.
He said K23 million was channeled through the PNG government’s tax credit scheme ‘which has been an effective vehicle’ for delivering rural value in New Ireland Province.
‘On top of royalties we paid K82 million to landowners and local and provincial governments, PNG employees earn K189 million in wages and one of the most substantial economic flows from the mine is the almost K1 billion paid to local businesses and suppliers to support the mine’s operation.
‘These are the economic drivers that have a multiplier effect on the economy.’
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