The Papua New Guinea Government has announced that it will not renew the existing Special Mining Lease at the Porgera Gold Mine, which is operated by Barrick Gold. Barrick is set to challenge the decision.
Workers at Porgera. Credit: Barrick Gold
Prime Minister James Marape said in astatement last Friday that the decision not to extend the special mining lease for Porgera for another 20 years is ‘in the best interest of the state, especially in lieu of the environmental damages claims and re-settlement issues.’
He said the National Executive Council had agreed to enter into a transitional arrangement with Canada's Barrick Gold, ‘with priority given for an exit plan for Barrick that considers all outstanding issues’.
Barrick Gold and China's Zijin Mining Group each own 47.5 per cent of the Porgera operation.
Marape said the exit plan will take into account the ‘value of assets, settlement, future management and operation of the mine as well as addressing legacy matters such as re-settlement, environmental issues and tax liabilities.’
He said this will ensure the continuity of mine operations while ‘longer term plans are finalised’.
A State Negotiation Team to resolve issues is to be led by Ambassador Isaac Lupari.
In September 2019, Marape said that his government would push tobring revenues from resources projects back to PNG. According to theBank of PNG, PNG's mineral GDP has tripled since 2008, but tax paid has declined and is at negligible levels.
Barrick to suspend mining
Astatement from Barricksaid the decision ‘was tantamount to nationalisation without due process’ and in violation of the Government’s legal obligations to the company.
It said the company will ‘pursue all legal avenues to challenge the Government’s decision and to recover any damages that BNL [Barrick Niugini Limited] may suffer as a result of the Government’s decision,’ adding that it had ‘no interest in discussing transitional arrangements for the management of the mine, as proposed by the Government’ saying this was not consistent with Barrick Niugini’s rights. The company said it will suspend all mining.
‘Barrick Niugini’s right to therenewal was confirmedby the PNG National Court in August 2019,’ the statement said.
‘Neither the Prime Minister nor anyone acting on behalf of the Government has ever proposed any alternative terms on which the Special Mining Lease could be extended, or indicated that it would not be extended.’
The Barrick statement said that in 2019, in response to a request from Marape, the company proposed a benefit-sharing arrangement that would deliver ‘more than half the economic benefits to PNG stakeholders including the government for 20 years’.
Environmental and resettlement issues
Credit: Porgera Joint Venture
The Barrick statement rejected the government’s claims about environmental issues and resettlement.
‘The environmental management practices at the mine were studied and approved by the government.
‘The PNG Conservation and Environmental Protection Authority (CEPA) has carried out regular audits of the mine and has always found it to be in compliance with its permits. In fact, Barrick Niugini’s environmental management system exceeds the requirements of its permits.
‘As far as resettlement is concerned, Barrick Niugini has compensated and relocated more than 1400 households impacted by the mine’s operations, and at no stage has the government indicated that the mine had not complied with its obligations in this regard.’
Repercussions
The decision raises questions about how the PNG government will approach mines that are owned and operated by foreign companies in the future.
The Marape statement said that theprospective Wafi-Golpu mine, a joint venture between the South African company Harmony Gold and the Australian company Newcrest Mining, will be ‘advanced within the existing legal parameters of our country’.
Marape said Wafi-Golpu, along with LNG projects P’nyang and Papua LNG, are the government’s ‘three priority projects.’
Lihir Gold Ltd, Ramu Nickel and Morobe Consolidated Goldfields (Hidden Valley) have Special Mining Licences, according to theExtractive Industries Transparency Initiative(EITI). The Ramu Nickel licence is under review.
Special mining lease applications have also been lodged for both PanAust's Frieda River and Wafi-Golpu.
In 2018, Barrick Gold Corporation’s President and Chief Executive, Mark Bristow, said Porgera has the potential to deliver 500,000 ounces a year for 10 years.
Should Porgera come under state ownership, it would be the second major mine in PNG to do so in the past seven years, following the O'Neill government'snationalisation of the Ok Tedi mine in 2013, which occurred under very different circumstances.
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