Bougainville's pot of copperPublished by MAC on 2005-06-16
Bougainville's pot of copper
Sydney Morning Herald
Editorial, June 16 2005
Few listed companies have such an unfortunate history as Bougainville Copper. It is 16 years since its gigantic copper and goldmine was abandoned as secessionist rebels fought to wrest control of Bougainville from Papua New Guinea. The Australian-owned miner was not, in the eyes of many locals, merely a hapless victim of circumstances. Many blamed the environmental damage the mine wrought, and the export of its handsome profits, for igniting the civil war. The jungle has since been slowly reclaiming the rich Panguna site and its mining equipment is corroding away. In its quarterly production reports, Bougainvillea Copper continues flatly to note "no production". Why then has its share price jumped so dramatically that the ASX was prompted to ask the company to explain?
The answer lies in yesterday's inauguration of Bougainville's first autonomous government, led by its newly elected President Joseph Kabui. Bougainville's independence forces never quite achieved their ultimate political goal, but a 2001 ceasefire deal came with considerable autonomy and the promise of a future referendum on full independence. Mr Kabui was the last premier of the province in the late 1980s, under Port Moresby's authority, before the system collapsed into anarchy. He defected to the armed opposition just in time to retain his local standing, and has since manoeuvred his way through factional tensions among the veterans of the war to again emerge in charge. Bougainville now desperately needs an economic beginning. Whether Mr Kabui will be tempted to lift the ban on mining is as yet unclear. For its part, Bougainville Copper recently pointed out that it holds the only exploration licence for the area.
The war cost about 10,000 lives in a community of fewer than 200,000 people. It wrecked local agriculture and destroyed the island's tiny manufacturing base. But it would be reckless and unrealistic to pin too much hope on Panguna's pot of copper and gold. Small economies which rely on windfall resource royalties are extremely vulnerable, especially to corruption, as the budgetary woes of Nauru and Papua New Guinea attest. International investors can afford to speculate. The new Bougainville administration cannot.
Political rivalries are still simmering on Bougainville, despite Mr Kabui's clear election win. And the mine is in no condition to be quickly reopened. Mr Kabui's immediate attention should be focused on establishing good governance and restoring basic services. The lure of mineral wealth should not distract from that fundamental task.