Goliath fights back against David in PNG mine battle

Published by MAC on 2010-08-08
Source: The Australian

Goliath fights back against David in PNG mine battle

Rowan Callick, Asia-Pacific editor

The Australian

29 July 2010

A HUGE resources boom that has been hidden behind Australia's mining success stories is under way in Papua New Guinea.

Billions of dollars have been pouring into Australia's closest neighbour to explore, study and develop massive deposits, chiefly of gas, copper-gold and nickel-cobalt.

As an Australian colony almost a century ago -- when the young Tasmanian Errol Flynn was prospecting there -- its income derived chiefly from mining. It was the lure of gold traces in fast-flowing rivers that led the first outside explorers to "discover" the populous Highlands, in the 1930s.

Since independence in 1975, the controversies over the Bougainville and Ok Tedi copper mines have significantly shaped Australians' knowledge of PNG.

And now, it is undergoing a boom as never before -- a boom led by Australian geologists, mining engineers, environmental experts, drill rig technicians, construction supervisors and others.

North Queensland's prosperity is riding, to an extent, on this PNG surge in resources, which provide 75 per cent of the country's export receipts.

But the boom is facing an unexpected threat, exacerbated severely by the government's stringent overreaction, which risks dividing the country and turning landowner groups against deals that promised to enrich them.

The core issue is new legislation that seeks to protect resource companies from any challenge to approved projects, including both legal action and protests. This has already been passed by the parliament -- whose scrambled and controversial adjournment, to protect the government led by Michael Somare from a no-confidence vote, means it will not sit again until November.

It was approved last month by 73 votes to 10 in parliament, but has not been ratified.

The legislation, in the form of amendments to the Environment Act, shelters resource projects from all litigation over the destruction of the environment, labour abuse, or landowner exploitation.

The amendments were driven by China's Metallurgical Construction Corp, the developer of the $1.8 billion Ramu Nickel mine, which is 8.56 per cent-owned by Brisbane-based Highlands Gold.

Injunctions were won by Ramu landowners to put on hold the completion of the pipeline intended to slurry waste from the mine, once it is operational, out to sea off Madang.

Mount Hagen-based lawyer Tiffany Nonggorr, who represented landowners in obtaining an injunction from judge David Cannings said: "There are grave environmental concerns. MCC must find an alternative to dumping the mine waste into the bay. The mine's proposal is just too risky. This injunction is a massive victory for us, definitely a David and Goliath struggle." Goliath fought back, with the support of the Somare government.

Ms Nonggorr responded that, as a result of the new legislation, if an oil company had a catastrophe such as BP's off the US coast, "they would escape all liability for environmental damage".

The amendments give the director of the government's environment and conservation office wide-ranging discretion to award certificates granting exemptions to resource developers from state requirements. Deputy Opposition Leader Bart Philemon, a former treasurer, said the new legislation protected the interests of investors at the expense of the resource owners and of the environment.

Port Moresby Governor Powes Parkop said it delivered "almost absolute power to the government"' on such matters.

But Sir Michael, defending the legislation, said: "We cannot get mining going while this is in court. The Prime Minister's Department has been held to ransom by (the judiciary). The government will lose a lot (of money)".

However, he has granted the Ramu project an unprecedented 10-year holiday from paying taxes.

The group that obtained the interim injunction is now seeking to make it permanent. This would trigger the need for a total reconfiguration of the project, which has always been predicated on dispersing its tailings in the ocean, which requires some preparatory blasting at the Basamuk reef.

The injunction was taken out by four people living on the Rai Coast. They claim that the discharge into the sea risks causing irrevocable damage to their lifestyle, which depends heavily on marine life.

Although the legislative amendments have been passed, they have not been ratified. So for now, the legal process continues to take precedence. Last week, a hearing with three judges decided 2-1 to keep the injunction in place.

Greg Anderson, the executive director of the PNG Chamber of Mines and Petroleum, said on Monday that the controversial cause of the challenge to the Ramu Nickel mine -- its deep sea tailings placement -- had already been deployed in PNG by the gold mines at Lihir, Misima and Simberi without arousing controversy.

He said that Ramu Nickel had suffered from "a long, orchestrated campaign" of opposition that now threatens the whole project, on the verge of the completion of its construction.

"It's really causing major problems for us," he said. "Everybody in the industry is watching the issue with great interest.

"If such a major project -- for which the state has issued the required permits following the proper process -- is blocked, that will lead to ramifications for any economic activity in the country."

A core argument contributing to the injunction has been that the construction comprises a "public nuisance". But, Mr Anderson asked, "how can you build anything without causing a degree of nuisance?"

The conflict that caused the closure of the Bougainville copper mine was not, fundamentally, triggered by such environmental issues about the mine itself, Mr Anderson said. And now, the newly elected government of Bougainville is seeking to negotiate the reopening of the mine.

The Ok Tedi mine, whose original tailings dam collapsed, has been operating highly profitably since BHP-Billiton left in the wake of the resulting controversy that mired it in the courts.

The community groups in the area are now voting on whether to extend the mine's life beyond its planned closure in 2013. The pipeline from Ramu Nickel's mine site down to the refinery on the coast is now complete, and ready for commissioning. But concerns about the effects of the challenge on the completion of the Ramu Nickel project are underlined by the size of the other new projects on the move in PNG.

Besides the $16.5 billion ExxonMobil liquefied natural gas project under way, piping the gas down from the Southern Highlands to a liquefying plant near Port Moresby, there are promising gas finds in Western Province, and an onshore project in Gulf Province led by InterOil.

The Frieda River copper-gold project led by Xstrata is due to move soon to full feasibility mode, and the Wafi project -- also copper-gold -- is not far behind, also in Morobe. These are each likely to become $4-$5bn ventures.

The latter is owned by Newcrest and Harmony, which are commissioning the Hidden Valley gold-silver project.

Marengo Mining is proceeding with a feasibility study at Yandera, a copper-gold deposit not far from Ramu Nickel -- for which the most likely solution for tailings, would be to hitch a ride on the Ramu Nickel pipeline, if it is finally allowed to operate.

Mr Anderson said: "All our members are watching the developments over Ramu Nickel very carefully. Deep sea tailings disposal will become a growing issue."