Panguna's precipice

AFTER YEARS of dialogue and tentative progress, uncertainty once again surrounds the viability of reopening Panguna copper mine in Bougainville.
Panguna's precipice Panguna's precipice Panguna's precipice Panguna's precipice Panguna's precipice

Once the largest open cut mine in the world, Panguna was at the centre of the Bougainville conflict after environmental damage and social unrest led to an uprising and a decade-long civil war.

Peace has been maintained since the signing of the Bougainville Peace Agreement in 2001 but local media reports suggest continued local opposition to the mine reopening.

The issues has been further complicated by the passing of the Bougainville Mining (Transitional Arrangements) Act 2014 by Bougainville's Parliament which vested Rio Tinto subsidiary Bougainville Copper with an exploration licence for the area where a mining lease was previously held. While Rio Tinto has responded with an announcement that it will review its stake in BCL, it is unclear what the impact of the legislative changes will be.

BCL, has been working towards the resumption of mining of the giant copper deposit after the mine was closed in 1989 following civil war. It says it will continue to pursue dialogue with landowners in Bougainville to assess the possible reopening of the copper mine.

Bougainville Copper chairman Peter Taylor previously warned both the national and Bougainville governments of BCL's concerns about the potential adverse impact the new mining act might have on its asset base.

While headlines had documented the passing of the Bougainville Mining (Transitional Arrangements) Act 2014, Taylor said Bougainville Copper operated under an agreement with the PNG National Government.

"There is no immediate impact," Taylor said during an interview with PNG Report.

"There has been talk about how that particular bit of legislation sits with the National Government legislation.

"Bougainville Copper operates under the Bougainville Copper agreement, which is a contract between the national government and BCL.

"That contract is enshrined in National Government legislation, which is the Bougainville Copper Agreement Act.

"What actual impact [the Bougainville legislation] will have in the long term really depends on how the relationship between the National Government and the Bougainville government works out."

Taylor said dialogue would continue with both governments and landowners in an effort to reach agreement on providing the company with the assurance it needs to go forward with community and study programs that are required to further assess the viability of reopening the mine.

BCL received a letter from Bougainville president John Momis in August stating the Bougainville Mining (Transitional Arrangements) Act 2014 had been passed by Autonomous Bougainville Parliament.

The transitional mining bill transfers powers from the Papua New Guinea government to the Autonomous Bougainville Government before a complete mining law which is expected by early next year.

As a result, when the Bougainville Mining Act begins, section 212(2) will vest Bougainville Copper with an exploration licence for the area where a mining lease was previously held for the Panguna mine.

That exploration licence will give BCL the right to apply for a mining lease under the Bougainville Mining Act, while the grant of a lease will depend on the outcome of negotiations in the Bougainville mineral resource forum.

"Assuming that Bougainville has powers over mining, which was part of the Peace Accord, the only granted tenements on Bougainville were those held by BCL.

"The new legislation gives BCL an exploration licence where it once had a mining lease, and in turn that gives BCL an exclusive right to negotiate the terms and conditions of mining.

"BCL always accepted that the Bougainville Copper Agreement Act would need to be changed at some stage, if not repealed, because it was no longer relevant to the current situation.

"My approach, and my preference, was for the negotiations to be concluded first. In other words, all the parties would agree on what the new arrangements were before the Autonomous Bougainville Parliament legislated. But that hasn't happened.

"Bougainville has decided to legislate and as far as

BCL is concerned we will continue with negotiations

with all the parties in an effort to get a mutually acceptable agreement which will allow us to reopen the mine."

Taylor said negotiations were continuing in Bougainville with stakeholders led by a joint negotiating committee which has representatives from the National Government, the Autonomous Bougainville Government, BCL and landowners.

The committee's brief is to establish an agenda between parties as to whether the mine should reopen or not, and agree terms and conditions if the preference is yes.

"[The legislation] doesn't change the negotiation

progress," Taylor said.

"That process is going on.

"My understanding is that if the group comes to the conclusion that the mine should reopen, and the terms and conditions were acceptable to all the parties, that would lead to Bougainville granting a mining lease."

While BCL continues with negotiations, Taylor said he could not pre-empt the outcome of the Rio Tinto review.

"As far as Bougainville Copper is concerned and as far as I am concerned, we have to wait and see," he added.

"We don't know any more about where that review is

going, what it will entail and what the outcome will be until Rio Tinto makes the announcement."

The mining major issued a brief statement to the market, noting that it was an "appropriate time" to review all options.

"In light of recent developments in Papua New Guinea, including the new mining legislation passed earlier this month by the Autonomous Bougainville Government, Rio Tinto has decided now is an appropriate time to review all options for its 53.83% stake in

Bougainville Copper Limited," the statement said.

"For some time, BCL has been involved in discussions with the government of Papua New Guinea, the ABG and landowners about whether it would participate in a future potential return to mining at Panguna."

Up to 20,000 people were killed in the conflict fought between PNG forces and the Bougainville Revolutionary Army, which began in 1990.

A peace agreement was established in 2001 which included a deferred referendum for full independence.

While BCL has been engaging with stakeholders, including local landowers regarding the possible reopening of Panguna, a recent report suggests local people are opposed to large scale mining activities.

Results of a survey conducted by the Jubilee Australia research foundation in villages and hamlets surrounding Panguna mine at the end of last year, found "near universal" opposition to the reopening, as well as unhappiness and mistrust of the consultation process.

Asked whether Panguna was realistically likely to reopen, Taylor said it was a difficult question to answer.

"If you go back five or six years it wouldn't have been economic to reopen the mine," he added.

"It is very sensitive to metal prices. The opportunity is when metal prices are at the right level to support reopening.

"There is the risk that if it's not reopened during a window of opportunity, it will make it difficult until the next cycle comes around.

"But these cycles do come around so then the question is do you have the government and the landowners on side at that particular time.

"At the moment if we got everything in line, someone would open the mine - the economics stack up, it's the other issues which make it difficult.

"Given the background you are going to have a fair degree of certainty around the terms and conditions.

The mine was closed down. Obviously you have to ask the question, will it happen again? And are we certain that it won't happen again?"

Published in the October/November 2014 PNG Report magazine

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