London Calling asks: Is Rio Tinto getting cold feet in Bougainville?Published by MAC on 2015-04-23
Source: The Australian
Has Rio Tinto now decided to dispose of its majority holding in the world's most controversial mine (certainly historically-speaking)?
"No" is the short answer. Almost certainly, it won't make a final decision until its 53.38%-owned Bougainville Copper Ltd (BCL) has completed an "Order of Magnitude" study on the Panguna mine "assets", begun some years ago.
This is intended to value of the mine's "assets" and the costs of returning them to profitable production. Although BCL has had some access to the mining lease area of late, it has by no means been able to perform such due diligence. Indeed, the company admits it would take some years before it can come up with a feasibliity study that would attract any major investment.
As noted on this website, BCL has been cock-a-hoop about re-opening the mine for the past three years; and the Autonomous Bougainville Government (ABG)'s president, John Momis, has been solidly behind the move.
Out of corporate allegiance to the company (no doubt), Rio Tinto has also made some encouraging sounds and endorses BCL's current, albeit limited, strategy.
Nonetheless there's been some speculation that Rio Tinto has recently discussed selling its stake in BLC to the government of Papua New Guinea (PNG) - which has the right to decide on who will control the Panunga lease until Bougainville achieves its independence. These rumours have been denied by the PNG prime minister.
Another Pebble in the pond?
Now, according to a correspondent for The Australian, Rio Tinto may off-load its stake in BCL in the manner it used to withdraw from the Pebble mine in Alaska last year - by donating it to one or more charitable trusts.
It would be mistaken to compare Pebble with Panguna. The first is a project, still on the drawing board, which has aroused considerable opposition from native Alaskan fisherfolk, the US Environmental Protection Agency, and many other groups. The second is a mine that's been inoperable for twenty six years, plagued by fierce debate between its indigenous landowners over whether it should be re-opened at all.
Meanwhile, the new Bougainville Mining Act is distinctly ambivalent over what the actual rights of those landowners will be; and no-one has come up with a formula for properly assessing how they can implement free, prior and informed consent in the event that a licence is eventually given.
One thing is certain however: Rio Tinto now has the opportunity to repudiate perhaps the most egregious error it has made in recent decades, one which directly and indirectly took the lives of up to 20,000 children, women and men.
We shouldn't for an instant kid ourselves that it's going to adopt any ethical stance. There are still questions being raised in Bougainville over BCL's alleged tax evasion during the period that it operated there, and there are potential costs of making reparations for its past activities.
However, as it did in the case of the Pebble mine, it could now take a purely corporate decision while hoping that critics may regard it as a moral gesture.
If any mining company can get away with that, it's Rio Tinto.
[London Calling is written by Nostromo Research. Opinions expressed in this coilumn are not necessarily held by any other party. Reproduction is welcomed under a Creative Columns licence.]
Rio Tinto’s window opens for Bougainville Copper exit
23 April 2015
Rio Tinto’s review of its controlling stake in Bougainville Copper, now in its ninth month, is considering the options not only of a trade sale but also of giving its shares away, possibly to a charitable trust.
A year ago the mining giant gave away its 19.1 per cent shareholding in Northern Dynasty, owner of the Pebble copper-gold project in Alaska, to two Alaskan charitable foundations.
Rio owns 53.38 per cent of the Papua New Guinea mine, closed by conflict in 1989, that still contains copper and gold worth more than $50 billion, as well as possessing a recently reconfirmed exploration licence.
The mine, which would cost an estimated $6.5bn or more to reopen, is also owned 19.06 per cent by the Papua New Guinea national government, and 27.36 per cent by other shareholders through its ASX listing.
In the current commodity environment, even the largest miners are not contemplating starting — or restarting — a massively expensive project at a stroke, preferring instead to work green-fields sites less ambitiously, gradually building up output.
Rio has waited patiently for its social licence to mine to be restored but despite the desire of the Bougainville Autonomous Government, under its president John Momis, to restore mining revenues — with no clear income alternative in sight — landowner issues have not been fully resolved.
And under new mining legislation passed by the Bougainville parliament recently, all resources are owned by traditional landowners, while the national government based in Port Moresby continues to insist that geological resources remain the property of the state.
Apart from Rio, there are few potential alternatives with the capacity to rebuild the mine, except for a handful of other international miners and some large Chinese corporations.
But the window of opportunity for an exit is looking reasonably favourable now, while the prospect for the medium to longer term appears more shaded.
The prospect of a change of leadership on Bougainville, with an election due there at the end of May, injects a note of potential uncertainty.
At the Port Moresby end, Prime Minister Peter O’Neill is leading a government with rare political strength — and has the appetite for the state to run mines. But PNG’s history shows this may not last forever.
Mr Momis has warned Mr O’Neill to reveal any dealings with Rio.
The PNG Prime Minister confirmed that “we have had discussions with other shareholders of on a range of issues including the reopening of the mine and the disposal of shares by existing shareholders including Rio Tinto”. But, he added, “there are no secret deals”.
The Bougainville government’s concern was aroused by information it had received that law firm Norton Rose Fulbright, which works for Rio internationally, had received instructions to handle the sale of Rio’s shares . A Norton Rose spokesman decline to comment.
Bougainville mine now in play, government says
Rowan Callick, Asia Pacific Editor
20 April 2015
Melbourne - The Bougainville Autonomous Government is convinced Bougainville Copper — which owns a mine containing copper and gold worth more than $50 billion, as well as a recently reconfirmed exploration licence — is now in play.
Bougainville President John Momis last week called on Papua New Guinea’s Prime Minister Peter O’Neill and Rio Tinto to reveal any dealings over Rio’s 53.58 per cent shares in BCL.
“For over a year now, Mr O’Neill has expressed interest in the national government taking control of BCL,” Mr Momis said.
“He proposes that PNG operate the Panguna mine in Bougainville in the same way it operates the Ok Tedi mine,” which Mr O’Neill’s government took over in 2013.
The PNG government has hired Peter Graham, who led ExxonMobil’s successful construction of the country’s first liquefied natural gas project, to manage Ok Tedi mine and potentially to steer other state-owned mining assets.
The Bougainville mine, which was closed by conflict in 1989 and which would cost an estimated $6.5bn or more to reopen, is also owned 19.06 per cent by the PNG government, and 27.36 per cent by other shareholders.
Mr O’Neill confirmed that “we have had discussions with other shareholders of BCL on a range of issues including the reopening of the mine and the disposal of shares by existing shareholders, including Rio Tinto”.
But, he added, “There are no secret deals, and we are disappointed that President Momis is trying to use this issue at the time of the election” for a new Bougainville government that takes place at the end of next month.
“President Momis has been informed of whatever talks we have with other shareholders of BCL, only because the state is the second biggest shareholder,” Mr O’Neill said.
There would be no talks about reopening the mine, he said, “until landowners and the people of Bougainville are ready”.
It is understood the Momis government’s concern was aroused by information it had received that law firm Norton Rose Fulbright, which does a considerable amount of work for Rio internationally, had instructions to handle the sale of Rio’s shares, and had held discussions with agents in Port Moresby in relation to the deal. A Norton Rose Fulbright spokesman declined to comment when questioned by The Australian.
The BCL share price suddenly soared by 50 per cent a fortnight ago. The ASX issued a “speeding ticket”, asking the company to explain the leap. BCL said it couldn’t.
Mr Momis, whose government has recently passed new mining legislation that hands back control of all resources to landowners, said: “We cannot allow a new form of colonial dealings in Bougainville’s resources to occur.”
He said that last month he wrote to BCL, seeking advice from either it or Rio Tinto, about whether share transactions between Rio and PNG were under discussion or preparation.
“I received a brief reply from Rio, addressed to BCL but passed on to me, dated March 23. The letter simply stated that ‘Rio Tinto … is reviewing its options with respect to its stake in Bougainville Copper Ltd. This review is continuing’,” Mr Momis said.
“Secret dealings of this kind are completely unacceptable to the people of Bougainville,” he said. “It would be unacceptable to the people of Bougainville for the national government to try to take control of Panguna.” Such a move, he said, would trigger demands for immediate independence.
Peter Taylor, who has been chairman of BCL for 12 years, told The Australian “the Bougainville government seems to want the mine reopened, but we have to sit down … and see what’s doable”.