MAC: Mines and Communities

Is the PNG Government buying Rio Tinto's Bougainville shares?

Published by MAC on 2016-01-10
Source: ABC News, PNG Mine Watch (2016-01-09)

According to president Momis of Bougainville, the Papua New Guinean Government is trying to secure ownership of the Panguna mine, by purchasing Rio Tinto's majority share in Bougainville Copper Ltd.

This poses a serious risk of conflict between the central government and Bougainville islanders.

See also: Would restarting Bougainville's Panguna contribute to sustainable development?

Panguna mine: PNG attempt to buy Rio Tinto's shares in Australian mining company 'completely unacceptable'

By South East Asia correspondent Liam Cochrane

ABC News

9 January 2016

The Papua New Guinea Government wants to buy Rio Tinto's shares in the Australian company Bougainville Copper Limited (BCL), according to Bougainville's President.

Such a move would be "completely unacceptable" to Bougainvilleans and would be "potentially a source of conflict", according to a series of leaked letters obtained by the ABC.

BCL once operated the Panguna mine, which sparked a decade-long civil war in 1989 and remains a source of tension between the autonomous island of Bougainville and the PNG mainland.

Rio Tinto holds 53 per cent of shares in BCL and the company still holds an exploration licence for the now-derelict mine area.

The ABC has obtained correspondence between the Autonomous Bougainville Government (ABG) President, the PNG Government and Rio Tinto regarding BCL's future.

"I refer to the Monday 8 December discussion in Kokopo with you [PNG Prime Minister Peter O'Neill], and other ministers concerning proposals for National Government to purchase Rio Tinto's equity in BCL," Bougainville President John Momis wrote to Mr O'Neill, two days after the meeting.

"You emphasised a need for urgent purchase for fear Rio Tinto might otherwise sell the equity to some other entity."

He also voiced concerns in a separate letter to Rio Tinto's managing director Sam Walsh.

"[PNG State Enterprises] Minister Ben Micah has advised that following a series of meetings with Rio Tinto, PNG wishes to purchase Rio's equity in BCL and is seeking ABG agreement," Dr Momis wrote on December 4.

It is no secret the mining giant is considering its options, launching a review of its stake in BCL in mid-2014.
On December 10, Rio Tinto's chief development officer Craig Kinnell assured Dr Momis that no deal had been done.

"The review has not reached any final conclusions, but as you would expect Rio Tinto has engaged further with interested parties since we met earlier this year," Mr Kinnell wrote to Dr Momis.

The PNG Government said its main priority was to rebuild Bougainville's broken infrastructure and deliver services, but confirmed it was involved in talks about a sell-off.

"There has been some discussion between the ABG, the National Government and Rio Tinto about the possible divestment of Rio Tinto's interest in Bougainville," Mr O'Neill told the ABC.

"But again this is a decision on which the land owners and the people of Bougainville will have to guide the National Government.

"We have no interest in owning the mine or reopening the mine."

Dr Momis has warned Mr O'Neill of the possible consequences of a deal that was perceived to favour the mainland.

"Given the tortured history of the Panguna mine it would be completely unacceptable to virtually all Bougainvilleans if that 53 per cent equity were to be transferred to the National Government," he said in a letter to Mr O'Neill.

"It would be political suicide for the ABG, and potentially a source of conflict, if the ABG were to agree to the National Government becoming the majority shareholder in BCL."

The suggestion of conflict is a serious one, considering the large number of weapons still on the island and the highly factionalised population.

Questions over why PNG Government wants the mine

The once-lucrative open cut mine has been abandoned for more than two decades and will need an estimated $8 billion to $10 billion investment to restart operations.

Some commentators, including Matt Morris, an associate with the Australian National University's Development Policy Centre, have questioned PNG Government's interest in Panguna, given the nation's current financial state and its poor track record managing other mines.

"I think the main questions are why does the Government want to buy the mine, what is the value added that the PNG Government would bring to a shareholding in BCL and thirdly what would be the political implications?" Mr Morris told the ABC.

"The last year has been a pretty awful year for the PNG Government's finances with the collapse of the commodity prices and that's led to rising debt levels and the PNG Government's had to cut back on expenditure for things like health and education and infrastructure.

"So it's not really clear how the Government would go about finding the funds to purchase the company or where it would find or borrow the billions of dollars that would be required to reopen the Panguna mine."

In addition to operational costs, any restart at Panguna would have to deal with demands for compensation from locals and expectations of an environmental clean-up around the mine site.

But the potential revenue it could bring is central to Bougainville's political future.

As part of the peace agreement that ended the civil war in 2001, Bougainville will hold a referendum on independence from PNG some time in the next five years.

Dr Momis told Bougainville's Parliament in December that "real autonomy" would only come when the island became financially stable and that would probably mean a large-scale mining project.

"If Rio's decision is to divest itself of the equity then the ABG's considered view is that it is most unlikely that any potential responsible developer will be able to find the $US6 billion to $US7 billion needed to reopen the mine," he said.

"It is therefore most unlikely the mine will reopen in the foreseeable future."


Bougainville’s President Momis caught lying to parliament about mining

PNG Mine Watch

4 January 2016

In a recent speech to Bougainville’s Parliament, President Momis, declared that his government has stripped BCL of its rights to the Panguna mine (had anyone checked they would know they expired in 2011). The new Mining Act he argued, will only allow BCL to return to Panguna if they have the consent of the landowners:

‘So the Mining Act does provide tough conditions applying to the possibility of re-opening Panguna. But that possibility is subject to very big protections for landowners, and for Bougainville more generally … The law makes landowners the owners the minerals in all customary land. As a result, Panguna landowners can veto both exploration of their land, and any mining licence, including for re-opening Panguna. As a result, there will be no re-opening of Panguna unless landowners of the area agree. Obviously landowners will agree only if they are satisfied with the proposals that BCL makes. If BCL does not satisfy the concerns of the landowners and the ABG, it will lose its Exploration Licence. It would then be possible for another developer to be considered’.

Several minutes later in the same speech, Momis raises concerns over alleged plans by the O’Neill government in PNG to purchase Rio Tinto’s stake in BCL. In a dire warning to his compatriots, Momis argues this will give the PNG government full control over Panguna, to do with it as they wish:

‘If PNG does purchase Rio’s 53.83 per cent shares, there would be several consequences, including:
• together with the 19.3 per cent BLC shares it already owns, PNG would own over 73 per cent of BCL;
• transfer of 30 per cent of the BCL shares to Bougainville would still leave PNG the largest shareholder in BCL, and effectively controlling Panguna’.

So which is it – BCL has been humbled by the Momis government, and can only return to Panguna if they can convince landowners? Or BCL has total effective control over Panguna, which means if BCL is purchased by the O’Neill government they will be able to once again terrorise landowners and claim Panguna’s ore body?

Surely according to Momis himself, if the PNG government owns BCL, it gives them no rights whatsoever to reopen Panguna unless they have landowner and ABG consent? Why the fear campaign then?

Perhaps Panguna landowners are not protected to the extent Momis claims by the Mining Act? Recent criticisms by Jubilee Australia suggest this is the case. Has Momis just agreed with Jubilee via the back door?

Or maybe the threat posed by O’Neill is being inflated by Momis to distract people from more important issues closer to home?

Either way, issuing such clearly contradictory statements only inches apart – all in the cause of manipulation – demonstrates how elites have little respect for the grass roots people or their intelligence.

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