On behalf of Bougainville Copper Limited (BCL), I thank the Chamber for the opportunity to be part of this interesting session.
The Chamber with its emphasis on community affairs and sustainable development, has an important place as part of this inaugural PNG Resources Week.
It’s quite an exciting time for BCL, following the ABG’s decision in February to grant a five-year extension of our EL01 exploration licence, for the Panguna project area.
This was the culmination of a period of extensive dialogue between BCL and the ABG.
There was a mutual aim to amicably resolve what had been a long-running tenure dispute that dates back to a decision taken by the previous ABG in early 2018.
It is true we had to negotiate some difficult and complex issues, but through the commitment, goodwill, and mutual respect of both parties we found a way forward.
We certainly appreciate the opportunity and do not take for granted the faith placed in us by the ABG under the leadership of Hon. President Ishmael Toroama.
Compared to the past, BCL operates today as a truly local company. This is not a misconception. It is a fact.
For the first time, the ABG and people of Bougainville are set to become our clear majority shareholders.
They currently hold a 36.4 per cent share in BCL which is to increase to 76.8 per cent, once an agreed transfer of shares, held by the National Government, is realised.
The BCL board reflects our local identity, with five of seven directors being Bougainvilleans. That is more than 71% of the board.
In addition, and unlike others, BCL has offices in Buka and Arawa with a senior officer co-ordinating 11 Village Liaison officers (VLOs) embedded among our communities and another senior officer liaising with all levels of government on the island. All of them are the eyes and ears of the company.
With the ABG and others we share a common goal to make Bougainville stronger both economically and at the social and community levels.
It is widely recognised that the successful redevelopment of Panguna is pivotal to Bougainville’s self-reliance ambitions.
Importantly, the granting of the EL01 extension has the support of landowner communities and veterans with notable alignment among various groups. In other words, we understand our challenges, differences in opinions and perceived risks but we have a common goal a strong alignment exists to redevelop Panguna to help the island regain wealth and prosperity.
As I mentioned, BCL, through a well-established local team in Bougainville, has put considerable effort into building constructive relationships on the ground over several years. This extended to providing support for worthwhile community activities and projects.
An intimate understanding of the importance of local Nasioi customs, system of landownership, family and social dynamics, which is not well understood by non-locals, has helped us to build mutual respect and effective engagement.
So having been in something of a holding pattern for several years, certainty of tenure provides impetus to intensify our activities on the ground in accordance with the Bougainville Mining Act 2015.
The first phase of exploration will include social mapping and landowner identification studies followed by geological work to inform the necessary pre-feasibility and bankable feasibility studies. We have the IP (intellectual property) and technical advisers who are helping us to achieve this objective.
We will scale up our resources as required and explore the necessary investment and partnership opportunities as things advance.
As we move forward, we do so with respect for our regulator and the laws of the land. In this respect we are totally committed to industry best practice in all that we do.
THE IMPORTANCE OF COPPER
When Panguna previously operated between 1972 and 1989 it was among the world’s largest open cut copper mines.
In its 17 years, the mine produced three million tonnes of copper concentrate, 306 tonnes of gold and 784 tonnes of silver.
Significantly, based on latest resource statements at least 5.3 million tonnes of copper and 547 tonnes of gold remain in situ.
To put this into perspective, copper is currently trading at about US$9,500 a tonne and recently topped US$11,000 a tonne for the first time on the London Metal Exchange (futures).
Meanwhile, gold has been trading at about $74 million a tonne US. Even conservative estimates place the current ballpark value of Panguna’s remaining minerals in the tens-of billions-of-dollars.
The likes of Goldman Sachs (global investment banking) remain bullish about copper prices in the mid-term of the back of industry disruptions and declining inventories. (Industry cost cutting, industrial disputes, labour shortages, anticipated monetary easing and continued growth in copper demand among reasons for increasing pressure on supply).
In the longer term, others warn of a potential structural supply gap of up to 10 million tonnes per year by 2030, with new supply not keeping pace with demand. This is good for the Panguna deposit.
In no small part this is being driven by the global transition to cleaner energy in the quest to meet ambitious carbon emissions reduction targets.
Copper, because of its efficient transfer properties is an essential material in clean energy technologies with about five times the quantity needed when compared to traditional energy systems.
A conventional combustion engine for example contains 10-22 kilograms of copper whereas an electric car requires more than 80 kilograms.
Meanwhile, a single three MW wind turbine can contain up to 4.7 tonnes (4,700kg) of copper and a solar power system can require 5.5 tonnes per MW (5,500kg).
As it stands, about 35 per cent of current copper demand is met from recycling and while recycled copper is sufficient for products such as pipes & fittings; uncontaminated, virgin copper is the most suitable for clean energy technology. That is what Panguna copper concentrates will provide to help satisfy world demand.
Ominously, something like 200 copper mines around the world are expected to run out of ore before 2035 (in about 11 years). This augurs well for the Panguna deposit.
While expansion of existing mines, including the likes of Ok Tedi, will help ease some of the deficit through to 2030, Bloomberg Intelligence warns of the lack of new shovel-ready projects between now and then. The redevelopment of Panguna comes in handy.
It has been said that closing the predicted supply gap would require building the equivalent of eight new projects the size of the world’s largest mine (BHP’s Escondida mine in Chile).
Due to long lead times for green field projects, anywhere from 14 to 20 years, there is a strong logic to the redevelopment of a brown field project such as Panguna.
It is both a known and proven resource that is logistically accessible both to redevelop and to ship concentrate to market.
The fact the project also has the strong political backing of the ABG as well as landowners and veterans sends an important signal to would-be investors.
ECONOMIC BENEFITS
It is true that Panguna’s redevelopment will require substantial new investment in the billions of dollars to be realised.
An initial smaller scale, high grade operation with a lower upfront capital cost is perhaps feasible, with the option to expand scale output further, once initial production is well-established.
The feasibility process will of course explore the redevelopment options in detail.
Irrespective, Panguna’s redevelopment promises to be a transformational investment for Bougainville. The project will stimulate economic activity during three distinct phases, including (a) the exploration and feasibility phase which we have now entered, (b) the mine and ancillary construction phase, and (c) finally the operational phase.
It will produce significant dividends for government, landowners, including land access payments, investors, and shareholders alike with multiplier effects across the local economy, even cascading down to village communities.
During the construction phase for instance, it has been estimated that accommodation and services would be required for around 500 construction workers. To support the mine a new residential community would also need to be developed in Arawa.
In addition, local roads will need upgrading along with Aropa airport as well as ports such as Loloho and Kieta and local healthcare facilities. Legacy issues associated with previous operations could also be logically addressed during the mine’s redevelopment.
For the ABG, Panguna can potentially deliver substantial ongoing payments, including royalties, corporate taxes, GST from goods and services, withholding tax and personal income tax, not to mention the value of shares themselves and any associated dividends.
This year (2024), the ABG’s total budget is about K761 million or about US$197 million. Revenue from Panguna could deliver multiples of this for Bougainville, of course subject to metal prices and future taxation arrangements. To underline the potential, when the mine last operated, it consistently contributed between 15-20 per cent of PNG’s internally generated revenue.
Such revenue will help support the broader development of community infrastructure and services on Bougainville, leading to improved living standards for our local people.
The new employment and training opportunities for local people will be significant.
Panguna previously employed more than 3,500 people in its latter days of which 83 per cent were PNG nationals and Bougainvilleans.
Over the mine’s life, about 12,000 people received training, including more than 1,000 who completed trade apprenticeships and 400 who completed tertiary studies. This added real capacity to the national workforce and benefited subsequent projects in PNG.
In addition, since 1997, BCL has provided scholarships for more than 1,200 Bougainvillean students to pursue tertiary education under the Bougainville Copper Foundation. The program continues to this day.
The construction and operational phases of a redeveloped Panguna will also generate new demand for the provision of goods and services which in turn will promote the development of local SMEs across a range of areas, including cash crop (cocoa, copra vanilla etc.) development in agriculture.
Previously, local contract opportunities arose in construction, catering, transport, accommodation, trades and general labour, livestock production, security, and steel fabrication to name but a few.
Looking back, the original investment in Panguna as a greenfield development amounted to about $400 million (AUD) in 1969 which equates to about $4.0 billion (AUD) today.
Just like then, a sizeable investment in Panguna Mark II will be game-changing for Bougainville, triggering multi-dimensional changes to a struggling, fledgling local economy.
BCL, having been endorsed as a trusted project partner, stands ready to advance this priority project for the people of Bougainville.
Thank you, ladies and gentlemen.
BOC Price at posting:
48.0¢ Sentiment: Hold Disclosure: Held
(20min delay)