MAC: Mines and Communities

Papua New Guinea refuses lease extension for Barrick's Porgera mine

Published by MAC on 2020-04-26
Source: Radio New Zealand,

Despite the threat of Covid-19 work must "proceed full steam ahead"

Lease extension for PNG's Porgera mine refused

25 April 2020

The long-running request for a Special Mining Lease extension for Papua New Guinea's troubled Porgera mine has been denied.

Prime Minister James Marape made the announcement on Friday saying the National Executive Council's decision to refuse the request from Barrick, was based on recommendations from the Mining Advisory Committee.

In a statement, the government said it has carefully considered the issue and decided it was "in the best interests of the State, especially in lieu of the environmental damages claims and resettlement issues", that the lease not be renewed.

The NEC agreed to enter into a transitional agreement with the multi-national Barrick, to develop an exit plan.

The government said local landowners and the Enga Provincial Government would be consulted widely during the transitional period.

James Marape said, despite the threat of Covid-19, work in these sectors of the economy must "proceed full steam ahead".

There had been numerous controversies, claims and counter-claims regarding pollution of water supplies, environmental and social problems, questions around local economic returns and violent clashes in the area.

"Nationalisation without due process" - Barrick

Barrick Niugini Limited challenged the decision, saying it was "tantamount to nationalisation without due process and in violation of the government's legal obligations".

The company said it was willing to discuss the issue further with the James Marape government in the hope of averting "a catastophic situation for the communities at Porgera and in Enga, and for the country as a whole".

However the company warned it was willing to pursue all legal avenues to challenge the government's decision and recover any costs that might occur as a result of the denial.

Barrick said since it had first applied for the extension in June 2017, there had never been an indication of alternative plans for the Special Mining Lease or indeed that it would not be extended.

The company claimed it had the overwhelming support of Porgera landowners.

Papua New Guinea snatches Barrick Gold’s Porgera mine

Cecilia Jamasmie

24 April 2020

Papua New Guinea is set to take control of Barrick Gold’s Porgera mine after refusing to extend the company’s lease on environmental and social grounds, Prime Minister James Marape said on Friday.

“In the best interests of the state, especially in lieu of the environmental damages, claims and resettlements issues, the Special Mining Lease will not be renewed,” Marape said.

The decision comes nine months after the mining lease expired. During that time, the world’s second largest gold miner has faced backlash from landowners and residents over what they claim are negative social, environmental and economic impacts from the mine.

Negotiations with Porgera’s operators were complicated further by a split among the landowners.

The manager of Porgera, Barrick Niugini Limited, applied for a permit extension in June 2017 that would have renewed its rights for 20 years and had been engaging with the government on the matter since then, Barrick said in the statement.

In response to a request from Marape, the company proposed in 2019 a benefit-sharing arrangement. The deal would have delivered more than half the economic benefits to PNG stakeholders, including the government, for 20 years, according to Barrick.

Tier One Potential

Barrick’s president and chief executive officer, Mark Bristow, had said last month that Porgera had “tier one potential” but faced many challenges in the form of “legacy issues and an unruly neighbourhood.”

The gold mine, located in PNG’s northern highlands region, is a joint venture between Barrick and Zijin Mining. Each own 47.5% of the mine, with the remaining 5% held by landowner group Mineral Resources Enga.

The government has said it plans to give a portion of Barrick and Zijin’s stakes to the national and provincial governments and to landowners.

“Once the transition phase has been completed, then the state will enter into owning and operating the mine after transition arrangements,” Marape said in a televised speech from the capital Port Moresby.

Porgera contributes to about 10% of the nation’s exports and employs over 3,300 Papua New Guinea nationals.

The open pit and underground gold mine sits at an altitude of 2,200-2,600 metres in Enga province, and is about 600 km northwest of Port Moresby.

“We don’t have many details on the implications of this decision yet, including the timing of transition,” Jackie Przybylowski of BMO Capital Markets said in a research note.

“Barrick has warned that it will pursue all legal avenues to challenge the government’s decision and to recover any damages. We expect that discretionary spending, such as development capex, will be minimized through the current period of uncertainty,” Przybylowski noted.

The mining analyst also said that “while removing Porgera from Barrick’s portfolio would have a negative financial impact, it would improve the ESG performance of the company’s portfolio going forward.”

“On its website, Barrick reports allegations of human rights violations in the region,” she pointed out, “including allegations of ‘extreme’ violence linked to local police forces or private security forces acting on behalf of the joint venture.”

Several other mining companies are waiting on government approval for new projects, including Australia’s Newcrest (ASX: NCM) for its Wafi Golpu gold and copper asset.

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