MAC/20: Mines and Communities

Papua New Guinea update

Published by MAC on 2006-03-14


Papua New Guinea update

14th March 2006

According to the Korea Herald, Papua New Guinea's ambassador to the country is offering his state's mineral resources on a platter to the Asian "tiger". That a PNG diplomat could do so - presumably with his government's blessing - shows the degree to which any concept of prior community consent has now been eroded in the south Pacific nation.

Equally outrageous is the reported statement by ambassador Kuma Aua that Korea may be first in line to benefit from re-opening the Panguna mine on the autonomous island of Bougainville.

Mr Aua says he has already asked the PNG government to "lift" the moratorium on mining in Bougainville which dates back to 1989 (not 1971 as mis-stated in the article below), when Rio Tinto (CRA) was forced to pack up and leave by the nascent Bougainville Revolutionary Army.

However, Rio Tinto still controls Bougainville Copper Ltd, and ostensibly hasn't yet decided whether to re-enter the island or sell the company. Nor have the people of Bougainville been given the opportunity to make their own decision on this vital issue.

But last week, apparently for the first time since Bougainville was granted autonomy, there were official talks between PNG and Rio Tinto, mooting the UK-Australian mining company's resumption of mining on Bougainville.


PNG, a gold mine of resources ready for the taking

by The Korea Herald

13th March 2006

Ever since the reopening of the Papua New Guinea Embassy, Ambassador Kuma Aua has been busy promoting the richness of his country's mineral sector.

Aua has attended meeting after meeting with government officials and mining companies to spread the word concerning the opportunities Korean companies have in buying equities in eight new medium size gold, copper and silver mines.

"These opportunities are waiting to be grabbed by any Korean mineral company," Aua told The Korea Herald in his downtown Seoul office.

During a meeting last month with senior representatives from 15 member companies and organizations of the Korea Resource Corporation, he said that interested Korean companies would have to negotiate directly with enterprises that have been issued Mining Development Licenses by the Papua New Guinea government.

The advantage of doing business with mining companies from P.N.G. is that the landowners have already covered the expensive costs of exploration. Gold, copper and silver has been found in plentiful amounts but these companies cannot proceed and begin mining operations because of a lack of funding. This is where Korean companies can cash in with very little risk, the ambassador said.

One of the places Aua suggested that could offer a very lucrative opportunity for a Korean company is the Panguna mine on the island of Bougainville which is under a new government after a decade long secessionist revolt that claimed some 20,000 lives.

"This is a good investment for companies interested in buying copper," Aua said. "There is 400 million tons of ore and copper to be excavated."

The island, however, has been subject to a mining moratorium since 1971.

"One thing I did before I came (to Korea) was submit a proposal to the government for them to lift the moratorium. I am hopeful the government will lift it -- it's very rich in resources there," he said.

"We are trying to diversify our policy. My government has recently installed a 'Look North Policy' in the hope of attracting business from Asian countries, especially the ASEAN Group and the three large economies of Korea, Japan and China."

He explained that Korea is already heavily involved in P.N.G.'s fishing and forestry sectors, so why not mining also.

"One thing we've been trying to emphasize to Korean companies is their investment is already guaranteed. The exploration is already done, the resources have been found. Now it's just mining it out," he said.

There are several mines scattered across P.N.G. just waiting for foreign investment. Ok Tedi on the mainland has a production rate of 500,000 ounces of ore and 200,000 tons of copper per year but environmental challenges remain.

Also on the mainland is the Porgera mine ready to produce 900,000 ounces of ore per year.

Another possibly lucrative gold mine is on Lihir Island in the province of New Ireland which produces 600,000 ounces of ore each year and has a mining life of over 40 years.

The ambassador pointed out that by buying into mine companies, Korean investors won't be vulnerable to massive world market commodity price fluctuations.

"Companies will be safe because their share of the product is guaranteed by their equity ownership," he said.

Papua New Guinea's recently lowered mining taxes including opportunities for granting a 10 year tax holiday and are very attractive to foreign investors.

During his eight months in Seoul, Aua has made five other presentations on the advantages of mining in P.N.G. which included a presentation to executives from the Samsung Group Resources Division.

To help promote his government's plans he invited his country's mining minister to visit Seoul with representatives of mining companies in April to hold discussions and negotiations with interested Korean mineral importers and investors.

Drumming up tourism is another part of his duties as ambassador.

Papua New Guinea is relatively undiscovered. There are locations in the country which are relatively untouched and hardly visited. He said it is something that would be perfect for those interested in more unorthodox vacations.

Aua has been encouraging tourism officials back home to organize package tours for Koreans to visit different parts of the country.

Flying to Port Moresby is relatively easy from Seoul. It's a two hour flight to Japan and then a nine hour flight to the nation's capital.

"The tours would include a pickup at the airport to take them to their next destination. If they are going to a resort, someone will be at the airport to hand them their next ticket," he said.

Aua, who considers himself a business and trade ambassador, is always out and about trying to drum up business for his country.

He explained that in 2001 the embassy was closed do to financial problems brought on by the 1978-1979 droughts that crippled P.N.G.

"During that time the prime minister looked at where to cut costs. So he closed missions in Kula Lumpur, Seoul, missions in Sydney and Cairns, and the mission in Bonn."

The embassy reopened last year because his government saw the advantage of improving bilateral relations with Korea which the ambassador described as "very very good."

"So my prime aim here is to work very hard to make sure that the government won't consider closing the embassy again," he said with a smile.


PNG intensifies drive on mining investment

by The National (Papua New Guinea)

14th March 2006

PAPUA New Guinea has intensified its campaign to attract new batch of potential investors in mineral explorations and development at the recently-concluded mining convention in Toronto, Canada, drawing a steady flow of enquiries on the feasibility of doing business in the country.

Called the Prospectus and Developers Association of Canada (PDAC) meet, the event attracted about 16,000 delegates from more than 90 countries who represented major international exploration, mining and investment companies from around the world.

At the PNG convention display booth, the staff had received a steady flow of convention participants and visitors requesting information on mineral prospects, mining operations, governance and fiscal provisions, infrastructure and opportunities for business partnerships.

The country's delegation was led by Mining Minister Sam Akoitai who was with a team of experts from the European Union Sysmin project and World Bank. "My department (mining) had attended this premier mining event consecutively over the last six years to promote and market PNG's geological prospects to some of the largest exploration, development, financial and investment companies from around the world," Mr Akoitai said in a statement from Washington yesterday.

The delegation is now in Washington DC to hold discussions with the World Bank and Australian gold miner Rio Tinto.

Discussions with Rio Tinto would centre on the possible lifting of the moratorium on Bougainville to attract potential exploration investors. Mr Akoitai said PNG's attendance at the Toronto convention and other mining-related conferences in the past had generated an "immense interest" from international resource developers who applied for a record number of exploration licences to date.

Junior exploration companies accounted for almost half of the US$5.1 billion (K16.32 billion) spent on exploration worldwide last year.

"It is therefore critical that PNG attracts and retains these junior exploration companies to add value to new as well as existing mining tenements.

"We expect that an increase in exploration spending by the junior explorers, coupled with expanded programmes by an intermediate and major producers, would result in a modest gain in this year's exploration investment," he said.

Mr Akoitai had acknowledged the continued assistance from the World Bank in making it possible for his department to attend the convention. This year, the World Bank assisted the Mining Department in producing a CD and booklet containing information on PNG's geological prospects and its advanced exploration projects.

Both items were on high demand at the convention.


PNG mining chooses sustainable energy

by Jesse Riseborough, Environmental Management News

14th March 2006

IN a move said to potentially pave the way for additional sustainable energy projects in PNG, landowners within the massive $US1 billion Ramu nickel project area have signed a deal with PNG Sustainable Energy for development of a hydro-powered facility.

The two landowner companies, Bina Holdings and Angori, signed the deal in Port Moresby last week, according to the National newspaper.

PNGSE is 50% owned by PNG Sustainable Development Program. Australian engineering firm Snowy Mountains Engineering Corp (SMEC) will reportedly be responsible for developing the Ramu hydro-power project.

PNGSE chairman Rod Sims told the paper a feasibility study, assessing all the potential rivers systems for the facility, would begin shortly.

Sims said the deal paved the way for PNGSE to begin working with additional landowner groups in PNG to look at other potential hydro-power facilities. Given the current high price of diesel fuel, hydro power was becoming increasingly attractive, according to Sims.

SMEC, based in Cooma, New South Wales, recently signed an agreement with PNGSE to "investigate, finance and develop a series of projects based on small-scale hydro power, geothermal energy and other sustainable energy sources".

SMEC said it had been involved in a broad range of PNG projects in recent years, including road and bridge maintenance, port development, airport rehabilitation and water transport.

The company has a local subsidiary in Port Moresby that employs largely PNG nationals.

The Ramu hydro project will also reportedly supply power to the Ramu nickel mine, a joint venture with state-owned Chinese company MCC (85%) and Brisbane-based Highlands Pacific (8.56%).

But Highlands managing director Ian Holzberger told PNGIndustryNews.net he was unaware of any proposal for a hydro-powered facility to power operations at Ramu.


Highlands frustrated by landowner process

by Jesse Riseborough, PNGIndustryNews.net

9th March 2006

HIGHLANDS Pacific says it shares the frustration of landowner groups, who have threatened to shut down its Kainantu gold operation in PNG, as both parties continue to suffer lengthy delays in establishing a Lands Title Commission hearing concerning the project.

General manager of finance Jeff Forbes told PNGIndustryNews.net the company was just as interested in finding a resolution to the matter as the landholders.

"We are trying to keep everyone happy but we are the meat in the sandwich. We are as equally as frustrated as the landowners," he said.

Forbes confirmed there has been a nine-month delay in setting up a Lands Title Commission hearing to determine the landholder groups involved in the project, resulting in threats from them to shut it down.

Forbes said he did not expect the operation to be shut down as a result of the dispute.

"We have to manage the landowner expectations and we have empathy with their frustrations," he said.

The delay has been due to K1.18 million ($A528,600) in funds, set aside to finance the hearings, being held by the PNG Department of Finance and Treasury.

Chief Land Titles Commissioner Josepha Kiris told a press conference in Port Moresby yesterday the funds were for both the Kainantu and the Ramu nickel project, according to the Post-Courier.

The Kainantu land dispute hearings reportedly require K470,000 while the Ramu hearings require more than K700,000 to complete.

Kiris said she was not aware of any reason to withhold the funds after approval for the hearings issued by the National Executive Council in June last year.

She said she had spoken with finance ministry officials on Tuesday but "was given a vague answer that the funds will be released sometime this month".

"If the Government is allowing new (major) resource projects to operate in the country, it should be prepared to fund the land dispute hearings. But now it seems the Government is not serious."

Kiris said tentative dates for the hearings had been set for April, according to the Post-Courier.

Meanwhile, Forbes said the current chronic fuel shortage being suffered in the Highlands region of PNG was not affecting the Kainantu operation.

He said Highlands sourced all its fuel from Lae and had significant storage capacity on site. He said he was not aware of any fuel-related issues that pertained to the Kainantu project.

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