MAC: Mines and Communities

Bougainville: Is it sitting on a hornets nest?

Published by MAC on 2019-02-12
Source: Bloomberg, Jubilee Australia (2019-02-12)

Resuming mining may not be of any benefit

Two Bloomberg mining journalists have examined the latest attempt by the Bougainville Autonomous government (ABG) to rope a foreign speculator  into "rescuing" its mineral  industry, prior to the forthcoming independence referendum.

A recent announcement by the Papua New Guinea government has suggested that this event may be postponed  from June until October 2019, much to the anger of Bougainville citizens.

Meanwhile,  the ex-Rio Tinto-owned subsidiary, BCL - already persona non grata on the island and opposed to any intervention by a rival exploiter - claims it would require up to eight years, at a cost of U$ 5 or $6 billion, to get mining started again.

Jubilee Australia has stated that all this politicking amounts to a "land grab" by ABG President John Momis, which may well be illegal.

Additionally, Jubilee's executive director says: "We are highly dubious that mines like Panguna could ever raise enough revenues to satisfy both foreign investors and the people of Bougainville" - a point made on this website more than three years ago [See: Would restarting Panguan contribue to sustainable development? ].

 

The Remote Island Sitting on $58 Billion of Gold and Copper

By Aaron Clark and Dan Murtaugh

Bloomberg News

12 February 2019

A mining company claiming interests in copper and gold reserves estimated
at $58 billion on the Pacific island of Bougainville said its rights are
under threat by efforts to revive the resource sector in the run up to a
independence referendum.

At the heart of the dispute is the Panguna mine, which was operated by
Sydney-listed Bougainville Copper Ltd. for 17 years before shutting in
1989 amid clashes that killed as many as 20,000 people in the autonomous
region of Papua New Guinea. Now the company, known as BCL, is warning
investors that legislation proposed by Bougainville’s government will make
significant changes to its mining law, including granting powers to a new
British Virgin Island-registered company to take mining leases across the
island.

“These proposed bills appear to further undermine our rights under the
Bougainville Mining Act,” Company Secretary Mark Hitchcock said by email.
“We still assert our rights to ownership.”

Officials with the Autonomous Bougainville Government and Executive
Council didn’t respond to emails and phone calls requesting comment.
Buried Treasure

Legislation could allow mine with $58 billion of copper and gold to re-open

The changes to the mining law come as Bougainville moves toward an
independence referendum as soon as this year, which may push it to seek
new revenue streams to replace current subsidies from Papua New Guinea.
The Panguna mine has an estimated 5.3 million metric tons of copper and
19.3 million ounces of gold, according to BCL, worth about $58 billion at
today’s prices, according to Bloomberg calculations.

When it was operating, Panguna was one of the largest mines in the world
and accounted for 44 percent of Papua New Guinea’s exports, according to
BCL.

Protests by communities demanding greater compensation for absorbing the
impacts of the mining operation turned violent in 1989 and revitalized an
independence movement, prompting BCL to shut the mine and the Papua New
Guinea government to send in troops. A peace agreement in 2001 set up the
region’s autonomy and paved the way for an independence vote.

The proposed legislation includes an amendment to the country’s Mining Act
of 2015, which details rules and regulations as well as rights and
compensation principles for landowners and communities. The proposed
change would supersede the 235-page law with a 1-page section that gives
all available mining rights to a new company, Bougainville Advance Mining
Ltd., according to documents provided by BCL.

In a separate filing Monday to the Australian Securities Exchange, BCL
also said that Bougainville Advance Mining will be 40 percent controlled
by Caballus Mining, which it said is owned by Jeffery McGlinn “and
other unknown foreign investors and sovereign states.” Caballus and
McGlinn could not be reached for comment.

BCL, which has a market capitalization of about $41 million, estimates
that it would take seven to eight years and $5 billion to $6 billion to
resume operations. Rio Tinto Group, which controlled BCL when it operated
the mine from 1972 to 1989, gave away its stake in 2016, effectively
abandoning the mine for no gain. That left the governments of Papua New
Guinea and Bougainville with 36.45 percent each of BCL.

BCL dropped 9.4 percent, the most in three weeks, to close at 14.5
Australian cents a share. The benchmark S&P/ASX 200 gained 0.3 percent.

The Bougainville government denied BCL’s request to extend its temporary
exploration license in January 2018, according to the company. The
government argued that the company’s past operation of the mine ignited
civil strife, so allowing BCL to re-open it threatens to ruin the region’s
peace and unity ahead of the independence referendum, the filings show.

Bougainville may not see revenue from reopening of the mine for at least
five years after first production because tax resource laws typically
allow profits only after capital costs and debt repayments are recouped,
said Luke Fletcher, executive director of Jubilee Australia Ltd., a
non-profit that has tracked the effect of resource extraction on the
economies of Papua New Guinea and Bougainville.

Resuming industrial-scale mining before a full reconciliation of the civil
strife it contributed to also has the potential to rekindle resentment, he
said.

“The thing about Panguna is, the community is fiercely divided about
whether there should be mining or not,” he said. “It’s a tinder box.”

— With assistance by David Stringer, Andrew Janes, and Hannah Dormido


 MEDIA RELEASE

Jubiliee Australia

11 February 2019


FOR IMMEDIATE RELEASE

Proposed Bougainville mining laws a ‘reckless land grab’, says Jubilee
Australia

 

Over the last two weeks, the Autonomous Bougainville Government (ABG), led
by its president the Reverend Dr John Momis, has announced its
intention to amend Bougainville mining laws.

 The proposed amendments to the 2015 Bougainville Mining Act, along with
accompanying legislation, will give the ABG the power to hand over mining
leases to all parts of the island not under existing leases to
Bougainville Advanced Mining, a new entity created for this purpose. The
ABG would have 60% ownership of Bougainville Advanced Mining, while 40%
would be owned by a foreign partner.

 Statements made by the President last week suggest that Caballus mining, a
Perth-based company headed by Jeff McGlinn, will be the foreign partner
involved.

 ‘These are radical changes and appear to be nothing more than a reckless
land grab,’ said Dr Luke Fletcher, Executive Director of Jubilee
Australia. ‘First, this would hand over control of the majority of the
island to the President and his foreign partner, Mr McGlinn.

‘Second, the President would have the power to unilaterally distribute
leases without any consultation or permission from landowners. As a
result, landowners will be cut out of the process. These amendments
undermine the principal of Free, Prior and Informed Consent,
said Dr Fletcher. ‘Doing so is both anathema to Melanesian culture
and vitally important in the Bougainville context.’

 ‘It is not clear to us that this legislation is even constitutional,’
said Dr Fletcher. ‘It is a startling and dangerous move. Given the
disastrous history of the Panguna mine in Bougainville, which has caused
irreparable environmental damage to the Jaba river and was the major cause
of the Pacific region’s worst ever civil war, forcing through such
enormous changes with very little consultation is a reckless and desperate
ploy.’

Comments made by the President to Radio New Zealand justified the move
based on the need to hold the Bougainville independence referendum: ‘The
people of Bougainville are determined to have the referendum and they must
find the money to fund the referendum,’ the President said. ‘One way of
doing it would be if we started our own company and generated the revenue
to enable us to conduct the referendum. We cannot sit on our hands.’

‘As our recent study of the question demonstrates, we are highly dubious
that mines like Panguna could ever raise enough revenues to satisfy both
foreign investors and the people of Bougainville,’ said Dr Fletcher.

 ‘It is certainly impossible that the mine will raise any revenues before
the independence vote. It will take years for the building/repair of
infrastructure, the completion of environmental studies and
other importance processes that need to take place before the mine can
generate revenue.’

Background—Mining on Bougainville

The Panguna Mine was one of the world’s biggest copper-gold mines until a
civil war forced its closure in 1989. The war took up to 20 000 lives and
displaced an additional ten thousand people. The Panguna Mine was a
leading cause of the war. The communities have not been offered redress
for the damage.

Since 2009, there has been a push to re-open the mine, with proponents
claiming that Bougainville needs the mine to be economically independent.

President Momis has been at the forefront of this fight, under the
auspices of former operator Bougainville Copper Limited (BCL), claiming
that it would be the best and quickest option to generate revenue.

In December 2017, however, the president announced a moratorium of mining
at Panguna and revoked BCL’s mining license, after a meeting of landowner
meetings voted against such an extension.

Contact

Dr Luke Fletcher +61 435 901 086

Luke@jubileeaustralia.org

 

About Dr Luke Fletcher

Dr Luke Fletcher is the Executive Director of the Jubilee Australia
Research Centre. He is the principal author of a number of Jubilee’s
reports, including Pipe Dreams (2012) about the PNG LNG project and Risky
Business (2009) on the activities of Australia’s export credit agency,
Efic. Dr Fletcher has a PhD in Politics and International Studies from the
University of Cambridge and has been involved in Jubilee in both staff and
Board roles since 2005.

About JARC (www.jubileeaustralia.org)

The Jubilee Australia Research Centre (JARC) engages in research and
advocacy to promote economic justice for communities in the Asia-Pacific
region and accountability for Australian corporations and government
agencies operating there. Jubilee’s work has been quoted in Australia and
international media: The Australian, ABC, The Guardian,Reuters, The Asia
Pacific Report. Jubilee has made Parliamentary submissions to a number of
government inquiries as well as provided testimony.

 

 

 

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