Rio Tinto’s billion-dollar mess: ‘unprincipled, shameful and evil’

Heavy trucks sit rusting on the edges of Panguna copper mine, closed in 1989 as a result of sabotage. Photo: Friedrich Stark / Alamy Stock Photo

Heavy trucks sit rusting on the edges of Panguna copper mine, closed in 1989 as a result of sabotage. Photo: Friedrich Stark / Alamy Stock Photo

Daniel Flitton | Sydney Morning Herald | 21 August 2016

The gaping hole carved into mountains was at one point the world’s largest open-cut copper mine. Right on Australia’s doorstep, it delivered riches beyond imagining and a mess big enough to tear a country apart.

This controversial pit became the flashpoint for a bitter civil war in Papua New Guinea in the 1990s that cost as many as 20,000 lives.

Now, 27 years after the war forced the closure of the Panguna mine on the island of Bougainville, resources giant Rio Tinto has finally made the decision to cut its losses and walk away.

In a decision slammed as “remarkably unprincipled, shameful and evil”, the mining giant has also side-stepped demands for a billion-dollar clean up.

Furious local leaders on Bougainville – struggling for cash and contemplating forming an independent nation – are threatening an international campaign to shame the company into making a contribution.

Illustration: Matt Golding

Illustration: Matt Golding

But they also want Australia – as the former colonial power responsible for authorising the mine – to contribute to a special fund to repair rivers poisoned by toxic sludge and compensate the people who lost their homes.

“It would be a big amount of money that would be required to restore as much as possible the damaged environment and relocated villages,” John Momis, president of Bougainville’s autonomous government, told Fairfax Media.

“Probably a billion dollars. Nobody really knows, but that would be about the amount of money required.” 

Rio Tinto has refused. Correspondence obtained by Fairfax shows the dual London-Melbourne listed giant insisting it has no responsibility for environmental or other consequences from the mine.

“We believe that [the company] was fully compliant will all regulatory requirements and applicable standards at the time,” Rio Tinto executive Joanne Farrell wrote to Dr Momis on August 6.

The rebellion

The mine has not operated for more than a quarter of a century after locals – angry about environmental destruction, poor wages and distribution of profits – broke into the site, seized explosives and sparked a separatist rebellion that would last almost a decade. PNG police and military carried out severe reprisals. Rio Tinto has never been back.

Before that, Panguna mine had accounted for about 45 per cent of exports from PNG and generated more than $1 billion in national tax revenue and dividend payments.

But locals complained only a trickle of cash ever made it to Bougainville, while millions of tonnes of acid-laced mine tailings killed the Jaba and Kawerong rivers. The rivers had been a source of water and food for thousands, but large sections now resemble a moonscape, forcing people to leave their homes.

Abandoned heavy mechanised trucks are still rusting on the deep tracks that loop around the edges of the pit. Local landowners, some armed, have designated the surrounding area a “no go zone”.

panguna pollution

The abandoned Panguna copper mine in Bougainville – once a rich source of profits – sparked a costly environmental and social crisis. Photo: Friedrich Stark

A peace deal in 2001 saw Bougainville win autonomy within PNG, but any talk of reopening the mine remains hugely controversial.

Dr Momis wants the mine to start again. It is the best, perhaps one of the only, sources of revenue for his government, he believes. With a final decision on Bougainville’s independence approaching in a referendum expected in 2019, the future economy of the island nation is a pressing issue.

“Rio was able to pay back its debt in loans within three years, I think. After that it was all profit,” Dr Momis told Fairfax Media.

“The people of Bougainville got a pittance out of it, even though they were the owners of the resources.”

Dr Momis said he was disappointed people in Australia do not show more concern about the problems.

“PNG was Australia’s only colony, and the Bougainville mine bankrolled PNG’s independence,” he said.

Rio withdraws

Rio Tinto’s announcement on June 30 it had freely surrendered its 53.8 per cent controlling share of Bougainville Copper Limited came after years of variously flirting with reopening or quitting the mine.

To get out, the company created a trust to split the shares between the governing authority on Bougainville and the PNG national government in Port Moresby – provided they were taken up within two months.

“By distributing our shares in this way, we aimed to provide landowners, those closest to the mine, and all the people of Bougainville a greater say in the future of Panguna,” a spokesman for Rio Tinto said.

“It also provides a platform for the [autonomous government] and PNG government to work together on future options for the resource.”

The decision to divide control immediately raised fears of complicating the already fragile peace process. Momis’ government said it would accept the shares – but insisted Port Moresby should surrender its offer. On Wednesday, PNG Prime Minister Peter O’Neill declared all the shares offered to Port Moresby would instead be handed over directly to the landowners, rather than the autonomous government. Dr Momis accused Mr O’Neill of deliberate interference in Bougainville’s affairs and warned, ominously, “the future of peace is now truly under threat”.

In August, 2014, Bougainville paved the way for reopening the mine, with a new mining law that led some to hope the trucks might once again rumble into the pit at Panguna.

But that too would be controversial. Some locals, supported by activists overseas, including a group known as Jubilee Australia, have accused Dr Momis of consistently downplaying opposition to mining.

A family panning gold in the polluted Jaba river flowing from Panguna copper mine. Photo: Friedrich Stark

A family panning gold in the polluted Jaba river flowing from Panguna copper mine. Photo: Friedrich Stark

Jubilee believes farming and horticulture offer Bougainville a sustainable future.

But Dr Momis insists the mine is supported.

“My well considered view is the majority would want the mine to be opened so the mine legacy issues can be addressed, as well as to generate revenue.”

Is it even economic?

Panguna was once considered the jewel in the crown for Rio Tinto, and the company is expected to hand over valuable technical survey data about the estimated 3 million tonnes of copper reserves remaining in the mine.

But other close observers doubt there is any way the mine could re-establish operations.

“This really puts the nail in the coffin – there is no way the mine is going to reopen in the next decade,” said Thiago Oppermann, a Pacific specialist at the Australian National University.

For Rio Tinto’s part, it based the decision to withdraw on the results of an almost two-year strategic review. The company’s Ms Farrell wrote to the Bougainville government that low global commodity prices meant they could not to take any part in future mining at Panguna.

“This does not mean we don’t see a future for the mine which is a significant resource but we are not in the position to participate,” Ms Farrell wrote.

And Rio Tinto insists the way to address environmental concerns is to get the mine running again, with local safety and stability assured, and investor friendly laws.

Dr Momis said Rio Tinto must take responsibility for the mess it left behind, and has challenged the company over its claims of corporate social responsibility.

“They justify their position by saying they operated under PNG law, although everybody knows the people of Bougainville never accepted [that] PNG law was a just law,” the Bougainville president said.

“When Rio walks away like this, the resource owners are left high and dry for no fault of their own. They are now going to be left with this hugely destroyed environment.”

“It is a major disaster which the people of Bougainville do not deserve to have. It was really imposed on them by outside forces.”

rio letter to momis 1

letter to momis 2

3 Comments

Filed under Environmental impact, Financial returns, Human rights

3 responses to “Rio Tinto’s billion-dollar mess: ‘unprincipled, shameful and evil’

  1. Sylvester Anu

    Typical Momis, blaming everyone else but himself. But he opposed all efforts to bring Rio Tinto to justice. He is directly responsible for this mess.

    Momis in 2013: “I think it can be negotiated outside of court. In fact, I believe if our people are prepared to allow negotiation with Rio Tinto we would get a much better deal”.

    Momis in 2014: “if you kill the duck, it won’t lay eggs” ” my suggestion to landowners and the people of Bougainville is for us to start negotiating, get our mining law passed, and start negotiating with them”

    The art of politically convenient amnesia is well and truly alive!

  2. One of the best-known commentators on inequality is Prof Joe Stiglitz from Columbia Business School. In 2015, he told the BBC that:
    “What we’ve seen, particularly in the last 15 years, is that even those who are college graduates have seen their incomes stagnate. The real problem is the rules of the game are stacked for the monopolists, the CEOs [chief executives] of corporations.”
    “CEOs today get pay that’s roughly 300 times that of ordinary workers – it used to be 20 or 30 times. No increase in productivity justifies this change in relative compensation.”
    See report at http://www.bbc.com/news/business-32824770

    Let us not forget that Peter Taylor resigned from his role as Chairman of Bougainville Copper Limited as announced on 1 July 2016, following the decision by Rio Tinto to transfer its shareholding in the company to an independent trustee when it handed the poisoned chalice to both PNG and Bougainville – in equal shares. But there’s more….

    Peter Taylor still remains the President of the PNG/Australia Business Council and connected to Rio Tinto so remains involved with
    “Rio Tinto’s billion-dollar mess: ‘unprincipled, shameful and evil’”. And obviously very connected to the current Prime Minister of Papua New Guinea (PNG) who decided that the 17.4 per cent BCL equity recently transferred to PNG by developer Rio Tinto will be given to landowners and Bougainville’s people.
    As stated in the Postcourier, on 19 August 2016, “Mr O’Neill said he deliberately decided that way so that the “ABG does not control the shares”.
    It seems apparent that President Momis of Bougainville (ABG) has the right to be furious, knowing that the same “unprincipled, shameful and evil” people like the President of the PNG/Australia Business Council, Peter Taylor and Rio Tinto are still calling the shots about Bougainville.

  3. MINISTER MIRINGTORO RESPONDS TO THE ATTACKS ON THE NATIONAL GOVERNMENT BY PRESIDENT MOMIS OVER THE TRANSFER TO THE LANDOWNERS OF RIO TINTO’S BCL SHARES **** DISTRIBUTED FOR THE OFFICE OF THE MEMBER FOR CENTRAL BOUGAINVILLE 21 August 2016 I, as the member for Central Bougainville elected by the people of Central Bougainville into the National Parliament of Papua New Guinea, am concern about the continued media attacks by the ABG President John Momis regarding the transfer of 17.4% shares to landowners and people of Bougainville, by the National Government. As far as I know during his meeting with the Prime Minister which was attended by the Regional Member for Bougainville and Minister for Bougainville Affairs, Joe Lera, the President Momis agreed to the share distribution to the Landowners and ABG. The 17.4% BCL share equity in effect were gifted to the National Government by Rio Tinto. It was therefore was the prerogative of the Prime Minister to give the shares to the landowners as a token of goodwill. ABG on the other hand was offered 36% percent by Rio Tinto through the National Government, making it a majority shareholder. This distribution of shares was tabled and approved by the cabinet on the 11th of August 2016. I don’t see any logic in the President’s Statement that such a move is a threat to the Peace Agreement. In my it is a step in the right direction in strengthening the peace by addressing one of root causes of the Bougainville Crisis, by giving shares to landowners who had been deprived of proper compensation, for permanent damage to their land and their environment. Even any attempt by BCL to clean up the mess will not restore it to it’s original state. Firstly let me remind the good President that in the 20 years when the mine was in operation during his terms in office as a Senior Minister and Statesman, he never made any effort to negotiate for equitable benefits to landowners from the proceeds from the mine through ownership of shares in BCL. Needless to say that during that time Panguna mine was one of the most profitable mines in the world and the shares were worth their weight in gold. Today we have to put up with childish bickering from the President over shares that are worthless unless there is mining operations churning out profits. The President goes on to say that the ABG Mining Law gives landowners full decision-making involvement and good revenue sharing opportunity if mining resumes. That is untrue. Firstly the mining law was written by an organization that has a reputation of undermining rights of indigenous people and liberalizing economies in the Third World for take over by large corporations. Secondly, the Mining Law violates the United Nations Charter on the Rights on Indigenous People especially the concept of “Free Prior Informed Consent” or FPIC. The Mining Law should have gone under the scrutiny of the landowners via independent legal consultations. The whole matter was virtually dropped on the people in the mine-affected areas of Central Bougainville and also the people of Bougainville at large. As the mandated Member of the National Parliament, representing the landowner of Central Bougainville, I have consulted with the Prime Minister prior to making the decision to give the shares to the landowners. It is the only way justice can be served to people who have not lost their land, their environment which is their livelihood, but also their lives. The President’s outbursts are shameful because he was the one who stirred up the landowner sentiments to cover up his failures at the national level, in securing better outcomes for the landowners in the mine affected areas. He verbally attacked BCL in 1989 and came up with a dream he called “The Bougainville Initiative” in which he tried to bring in another company to replace BCL as the miner at Panguna. The President can start to make peace with the people of Panguna and Bougainville by admitting that he had failed them. He should apologize to them for the sufferings and miseries they faced when they chose to take up arms because he did not hear their cries as their leader and representative in the National Parliament. He could have prevented the war if he had been honest right from the start. The President must now talk with the Landowners about the shares instead of making unnecessary attacks on the National Government, which has done its part. The giving of shares to landowners and ABG is an indication that the Government has a genuine concern for the welfare of the landowners. It anticipates further negotiations and discussions with ABG and landowners to decide how best to work together for the benefit of all parties. However, up till now President Momis has proven that he is incapable of running a Government which is struggling with the delivery of services to the population and the management of funds given to it. His Mining Law has proven ineffective in preventing BCL from exiting without meeting it’s obligation to clean up the mess it left behind. The only option left now is to make the landowners shareholders of mine, as they cannot be compensated for the loss and damages they have suffered. Court battles that the President is hinting at can take years and there is no guarantee that they will be won and may meet the similar fate to the class action previously lodged in the USA. In addition, it is highly questionable at this point in time who will meet the legal costs of the legal challenge against Rio Tinto. The Bougainville Peace Agreement deliberately steered clear of the mining issue because it was a very sensitive and emotional issue owing to the fact that it was viewed by many as the root cause of the conflict that led to loss of many lives and properties. ABG’s premature effort to reopen mining in Bougainville when the wounds of the war were still fresh and people are still deeply divided was always going to create problems for ABG and the National Government. Over the years, ABG has been crying for money which it cannot manage as it was indicated in audit report from Auditor Generals Office. Currently we have complaints from the President about the shares. How can his inappropriate Mining Law protect landowner interests when the law gives ultimate power back to ABG and not the landowners. A law which carries jail terms and monetary penalties against landowners who disrupt mining operations if the mining company did not respond to their grievances. Is this the sort of law to protect rights of the landowners? I recommend that the President cede control of Bougainville to someone who has the energy, commitment and vision to move Bougainville forward instead of wasting time trying to kick up a dead horse. I see nothing wrong with building wealth for the landowners who can then contribute meaningfully to Bougainville’s economy instead of them being spectators all the time. Our people are tired of vague idealism by those who live in utopia that has brought no tangible benefits to us but continued exploitation by foreigners. Hon. Jimmy Miringtoro, OBE MP
    http://www.pm.gov.pg/

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