Monthly Archives: August 2019

PNG puts Barrick, Zijin on notice over Porgera gold mine negotiations

Communities living around Papua New Guinea’s Porgera gold mine lack enough access to clean water to meet their basic needs. Photo: Columbia University

Government stake in Porgera mine won’t solve the appalling human rights and environmental abuses.

Jonathan Barrett and Mell Chun | Reuters | August 19, 2019

Papua New Guinea plans to take a larger share of the Porgera gold mine as part of lease-renewal talks, diluting the ownership of joint venture partners Barrick Gold Corp and Zijin Mining Group, the country’s commerce minister told Reuters on Monday.

The planned changes are part of a push by the South Pacific archipelago to transform its economy under new government leadership amid a perceived lack of benefits flowing from resources projects back to communities.

Porgera, located in PNG’s northern highlands region, is expected to produce 240,000 to 260,000 ounces of gold this year. Barrick and Zijin each own 47.5% of the mine, with the remaining 5% held by landowner group, Mineral Resources Enga.

PNG’s Minister for Commerce and Industry, Wera Mori, said a portion of Barrick and Zijin’s stakes would be given to the national and provincial governments and to landowners.

“We would like to see the mine to continue, but this time to be structured in such a way with a lot more national interest in it,” Mori told Reuters in an interview in Sydney.

The final figure to be held by Barrick and Zijin would be determined during on-going negotiations over a requested 20-year extension to the lease, he said.

“It will decrease correspondingly, like if the state picks up say 30% or 40%,” said Mori.

Barrick and Zijin were not immediately available for comment. In early August, Barrick Chief Executive Mark Bristow said in a statement that there needed to be a “partnership approach” over the future of the mine.

The Porgera lease recently expired, although the operators are allowed to keep producing during lease-renewal negotiations.

Papua New Guinea land-owners have raised concerns over what they say are negative social, environmental and economic impacts from the mine. Negotiations with the project operators have been complicated by a split among the landowners.

GOLD RUSH

PNG was the world’s 14th largest gold producer in 2018, according to the World Gold Council.

Mori, who was standing in for PNG’s new prime minister, James Marape, at an investor forum in Sydney, said the resources-rich nation was developing policies to keep more of the commodities it produces to improve its economy.

“We are in the process of developing the framework to retain at least 30% of our gold that we export every year,” Mori told the forum early on Monday.

Proposed changes to the country’s mining laws are expected to be presented to PNG’s parliament in the coming weeks, capturing all new projects.

Mori said that PNG would also consider pegging its currency, the kina, to gold, rather than the U.S. dollar.

PNG’s central bank currently fixes its currency to a narrow U.S. dollar band, propping up the kina’s value while creating a shortage of dollars available in the Pacific nation.

Marape, the former finance minister who became PNG’s new leader in May after winning a vote in parliament, has put some of the world’s biggest resources companies on notice over how profits are shared from the country’s resource riches.

He said he wanted to turn PNG into the “richest black nation” on earth over the next decade.

This includes sending a team to renegotiate its Papua LNG agreement with French oil major Total SA.

Gerea Aopi, PNG country director at Papua LNG partner Oil Search, told the forum that the sector required certainty.

“I think the industries both in oil and gas and mining have indicated that we don’t object to the changes that are going to take place as long as there’s proper consultation,” Aopi said.

The Total-led Papua LNG, which also includes Exxon Mobil Corp, is part of a $13 billion project set to double the country’s exports of LNG.

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PNG aims to retain 30% of exported gold, may change currency pegs

Jonathan Barrett | Reuters | 19 August 2019

Papua New Guinea wants to retain at least 30% of the gold it currently exports as it transforms its economy under a new government leadership, the country’s commerce minister said on Monday.

PNG was the world’s 14th largest gold producer in 2018, according to the World Gold Council. Its assets include the Porgera gold mine, majority controlled by a joint venture between Barrick Gold Corp and Zijin Mining Group , which has a lease currently up for renewal.

PNG’s Minister for Commerce and Industry Wera Mori told an investor forum in Sydney that the resources-rich nation was developing policies to keep more of the commodities it produces in the country to improve its economy.

“We are in the process of developing the framework to retain at least 30% of our gold that we export every year,” Mori told an investment forum in Sydney.

Mori said that PNG would also consider pegging its currency, the kina, to gold, rather than the U.S. dollar.

PNG’s central bank currently fixes its currency to a narrow U.S. dollar band, propping up the kina’s value while creating a shortage of dollars available in the Pacific nation.

James Marape, the former finance minister who became PNG’s new leader in May after winning a vote in parliament, has put some of the world’s biggest resources companies on notice over a perceived lack of wealth flowing from their projects back to communities.

This includes sending a team to renegotiate its Papua LNG agreement with French oil major Total SA.

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$14bn PNG LNG expansion hangs by a thread

Esmarie Iannucci | Mining Weekly | 15 August 2019

The share price of ASX-listed Oil Search stumbled on Thursday after the government of Papua New Guinea (PNG) sent a delegation to Singapore seeking to renegotiate the terms of the PNG liquefied natural gas (LNG) agreement, signed in April this year.

Minister for Petroleum Kerenga Kua said on Thursday that the agreement was signed by the previous PNG government, in a period when “serious moves” were being made to remove and replace said government.

He added that the new government took office in May with a firm view that the PNG gas agreement was disadvantageous to the state, and was seeking to renegotiate the deal.

Kua warned that the negotiations could work out “disastrously” but said that the people of PNG had to be ready to accept the outcome.

The efforts to renegotiate the PNG LNG agreement come despite the PNG government’s earlier assurances that it would, in principle, stand behind the signed agreements in the best interest of the State.

At the time, however, the government reserved the right to discuss “a shortlist of matters” with the project proponents.

Oil Search MD Peter Botten on Thursday said that the company was looking forward to gaining further clarity on the PNG government’s position regarding the agreement, which was inked in April this year, and the ways forward for the project.

The April agreement between the PNG government, Oil Search and ExxonMobil, and operator Total SA defined the fiscal framework for the PNG LNG project, and included a domestic market obligation, a deferred payment mechanism for the State’s payment of past costs, and a national content clause to support local workforce development and the involvement of local businesses.

The agreement gave the project proponents the confidence to start the initial work on a $14-billion plan to double the expansion of LNG in PNG to around 16-million tonnes a year.

The expansion plans include three new 2.7-million-tonne-a-year trains at the PNG LNG project, two of which will be operated by Total on its own acreage, while the third will be operated by ExxonMobil and fed from its existing and new gasfield P’nyang.

A final investment decision on the expansion is targeted for 2020. 

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Papua New Guinea sends team to Singapore to renegotiate Total LNG deal

Sonali Paul | Reuters | 15 August 2019

Papua New Guinea has sent a team to Singapore to renegotiate its Papua LNG agreement with French oil major Total SA, the nation’s petroleum minister said in a statement on Thursday, warning the talks could end “disastrously” for the gas project.

The strong language from minister Kerenga Kua marked an about-turn from a statement 10 days earlier, when he announced the new government would stand by the gas deal agreed by the previous government with Total in April, with some minor changes.

The state negotiating team, which includes Kua, left on Thursday for Singapore and will return early next week, the minister said in a statement released by his office.

“The negotiations could work out well or even disastrously,” he said.

Papua LNG, a joint venture between Total, Exxon Mobil Corp and Australia’s Oil Search Ltd, is part of a $13 billion plan set to double the country’s exports of liquefied natural gas (LNG).

The Papua LNG gas agreement, key to the project going ahead, came under review when Prime Minister James Marape came to power in May promising to reap more benefits for the impoverished nation from its huge oil, gas and mineral resources.

“Success in the discussions could lead to an early progress of the project. By the same token failure could have very serious ramifications,” Kua said.

“This is a risk we take as we try to move in the direction of taking PNG back and making it wealthy.”

Total declined to comment ahead of the talks, but its Chief Executive Patrick Pouyanne said on July 25 that he expected the government to respect the gas agreement.

Oil Search said on Thursday it looked forward to “further clarity on the state’s position” on the agreement and ways to advance the project.

The government has said it wants to sort out Papua LNG before resuming talks on another gas deal, governing the Exxon-led P’nyang field, which will also feed the $13 billion expansion of LNG exports.

Oil Search is a partner in both Papua LNG and P’nyang.

The renewed uncertainty around the status of the Papua LNG agreement and potential for further delays on the P’nyang deal knocked Oil Search’s shares down 6.7% on Thursday.

“We remain of the view that we can’t rule out a tougher approach to the Papua gas agreement being taken by the new government, which would present risk of material delay,” Credit Suisse analyst Saul Kavonic said in a note.

Analysts have warned that delays on sealing the agreements and any changes to terms could see the gas projects put on the backburner as Total and Exxon may then look to pursue other LNG projects elsewhere in their global portfolios.

Exxon Mobil in PNG was not immediately available for comment.

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Marape Backs Moratorium, Leans Towards Ban On Experimental Seabed Mining

Matthew Vari | Post Courier | August 15, 2019

Prime Minister James Marape has indicated he will support a proposed regional moratorium on seabed mining, however, could not go as far as to say a ban outright would be needed.

In an interview with the Post-Courier at the opening ceremony of the Pacific Islands Forum on Tuesday, Mr Marape responded when asked in relation to Fiji’s stance on the matter, that he would support the move, making specific reference to what he described the Nautilus Solwara 1 project as “a total failure”.

During Fiji Prime Minister Frank Bainimarama’s opening remarks at the Sautalaga climate update meet on Monday, he informed leaders present of Fiji introducing its own climate change act, of which the country will push an ambitious proposal for both its national and a regional moratorium on seabed mining.

“I ask you all to join in this ambitious venture and also support a 10 year moratorium on seabed mining from 2020 to 2030 which would allow for a decade of proper scientific research of our economic zone and territorial waters,” Mr Bainimarama said.

Sentiments supported by James Marape regarding the proven viability of deep sea mining, which he said is not yet a proven concept. “As a nation we have lost over K300 million in a concept of deep sea mining.

“Until that deep sea mining technology is environmentally sound and takes care of our environment at the same time we mine it, then at this point in time, I support the call made by the Fijian Prime Minister, we just need to have the best technology available,” Mr Marape sternly said.

When asked if it could go as far as supporting a ban, the Prime Minister left this option out adding just as the moratorium aims to prove the viability- that process will prove “on a case by case basis going into the future”.

“If there is an opportunity for deep sea mining, so long as environmentally it is friendly and the harvest of resource is done in a sustainable manner then we can give considerations to this, but right now it is a show.

“We don’t have the luxury of that informed decisional research.

“This is because that technology is not proven anywhere and PNG we burnt almost K300 million in that Nautilus (Solwara) 1 project on a concept that someone told us it can work, but it is a concept that is a total failure as I speak,” the PM said.

Apart from 15 per cent state investment in the project, Kumul Mineral Holdings is also seeking redress for the unearned revenue to the tune of US$51 million (K173m).

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Fiji calls for sea-bed mining moratorium as Nautilus restructures

Nic Maclellan | Islands Business | August 13, 2019

Fiji Prime Minister Voreqe Bainimarama has again called for a 10-year moratorium on sea-bed mining, at a time that many Pacific island nations are preparing for new frontiers of resource exploitation in the marine environment.

Speaking in Tuvalu this week before the 50th Pacific Islands Forum, Prime Minister Bainimarama called on fellow Forum island states to “support a 10-year moratorium on seabed mining from 2020 to 2030, which would allow for a decade of proper scientific research of our economic zones and territorial waters.”

There is growing pressure from French, Canadian and US corporations to advance the deep-sea mining (DSM) agenda, as well as interest from the China Ocean Mineral Resources Research and Development Association. Just as energy corporations are looking towards deep-sea oil and gas reserves, companies are developing technology to exploit mineral ore deposits found on the ocean floor, including cobalt crusts, seafloor massive sulphides and ferromanganese nodules.

Fiji’s call for a moratorium comes as community groups across the region are campaigning against potential environmental hazards of deep-sea mining, especially to ecologically sensitive hydrothermal vents. A report from the Guam-based Blue Ocean Law argues:

“There is a general failure to incorporate sufficient environmental protections, as well as the norm of free, prior, and informed consent for indigenous peoples, who are most likely to be impacted by DSM. In the 21st century, and under well-established norms of international law, these omissions represent serious violations of international legal obligations.”

Bainimarama’s call comes the same week as major restructuring of the Nautilus Minerals corporation, which has been planning to commence mining off the coast of Papua New Guinea, under a world-first licence issued by the PNG government.

Fiji and oceans policy

In recent years, Fiji has taken a leading role in ocean policy at the United Nations, working with other Forum island countries through the Pacific Small Island Developing States (PSIDS) group.

In June 2017, Fiji and Sweden co-hosted the high-level UN Conference on the Oceans and Seas in New York. This conference issued a call for action, highlighting action on ocean acidification, plastics, and overfishing. UN Secretary General Antonio Guterres appointed former Fiji UN Ambassador Peter Thomson as the UN Special Envoy on the Ocean.

This global campaigning is also translating into domestic legislation. Speaking in Tuvalu this week, Prime Minister Bainimarama said: “In addition to playing a leadership role in the global Ocean Pathway, we are also developing a National Oceans Policy, under which Fiji plans to move to a 100 per cent sustainable managed Exclusive Economic Zone, with 30 per cent of this being earmarked as a marine protected area by no later than 2030.”

Under the Forum’s “Blue Pacific” agenda, island nations are seeking to draw the links between oceans and climate policy. Bainimarama noted that Fiji was working with the Republic of the Marshall Islands in the Pacific Blue Shipping Partnership to develop “a blended and innovative finance structure to support the decarbonisation of domestic marine transportation fleets and facilities in Fiji and across the region. This means replacing inter-island ships with more efficient hybrid ships, thereby reducing fuel costs and emissions.”

Pacific DSM initiatives

Under the provisions of the UN Convention of the Law of the Sea (UNCLOS), many Forum island countries with large EEZs have been in discussions with transnational corporations to partner in deep sea exploration for maritime resources. Under UNCLOS and the authority of the International Seabed Authority (ISA), developing countries can also partner with overseas corporations to licence exploration in “The Area”, international waters that include vast arrays of minerals in Pacific Ocean areas such as the Clarion-Clipperton zone.

Nauru has long been a champion of DSM – at last year’s Forum leaders’ meeting, Nauru President Baron Waqa hosted a side even with ISA Secretary General Michael Lodge and Samantha Smith, the former Head of Environment and Social Responsibility with the deep-sea mining corporation DeepGreen.

This new frontier has drawn in regional organisations, to address legal, technical and regulatory issues around DSM. Boundary limitation is a vital concern as Pacific nations seek to increase potential revenues from fisheries and seabed mining in their Exclusive Economic Zones (EEZs). From 2010-16, the European Union funded the Pacific Community (SPC) to develop model DSM legislation for Forum member states, with many civil society groups concerned this work was promoting rather than regulating DSM.

The SPC Maritime Boundaries Division has also been engaged in technical work to clarify borders between independent island states as well as with colonial powers like France and the United States (for example, Vanuatu and France have been involved in a decades-long dispute over Matthew and Hunter islands).

There are tensions between the administering powers and territorial governments over the control of seabed minerals in the remaining colonies in the region. With an EEZ of nearly 5 million square kilometres, ocean-floor resources could be vitally important for the newest Forum member, French Polynesia. However, as the French government moved to amend French Polynesia’s autonomy statue earlier this year, France’s constitutional court ruled that rare earths can be classified as “strategic metals”, which come under the control of the French State rather than the Government of French Polynesia.  

Independence leaders have long argued against the French State’s control of strategic metals, with former Senator for French Polynesia Richard Ariihau Tuheiava telling the UN Special Committee on Decolonisation in 2017: “We have continually emphasised the critical nature of the resource question as a core issue for our future development. Whether or not these resources are considered in Paris to be ‘strategic’ is irrelevant to the applicability of international legal decisions which place the ownership of natural resources with the people of the non-self-governing territories.”

Collapse of PNG initiative

Early initiatives to begin sea-bed mining in the Pacific have not come to fruition. This week’s set-back to a major project in Papua New Guinea provides a salutary warning about the complexity and potential costs of DSM.

Under a licence issued by the PNG government, Nautilus Minerals has long planned to mine seabed minerals beneath PNG’s Bismarck Sea. However, with widespread community resistance, falling share prices and the loss of a specialised support vessel, Nautilus constantly pushed out the date for commencement of mining.

In February this year, Nautilus filed for court protection from its creditors under the Canadian Companies’ Creditors Arrangement Act (CCAA), and the Canadian-based company was later delisted from the Toronto Stock Exchange. This week, major shareholders MB Holding and Metalloinvest have moved to take control of company assets at the expense of major creditors and smaller shareholders (The PNG Government holds 15 per cent equity in Nautilus’ PNG subsidiary and the Solwara 1 project through the company Eda Kopa).

The looming collapse of the Solwara seabed mining initiative has been welcomed by civil society groups in Papua New Guinea, which have been campaigning against potential adverse impacts on ocean ecology.

Jonathan Mesulam of PNG’s Alliance of Solwara Warriors stated:

“We rejoiced when the company filed for protection from creditors in Canada. Our opposition and our court action have helped push it to that point. Communities across Papua New Guinea want to see the nightmare of deep-sea mining removed from PNG waters. We will re-double our efforts to ensure that the new Nautilus will never operate at Solwara 1.”

Fiji’s call for a moratorium on DSM will be debated in the corridors at this week’s Pacific Islands Forum, but there’s a way to go before all Forum member countries are willing to delay action on the supposed ocean El Dorado.

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Nautilus emerges, barely alive and impotent: just can’t get that deep sea mining project up

The PNG Government applied to the Canadian Court unsuccessfully to regain some of its failed investment

Deep Sea Mining Campaign | 13 August 2019

In a court appointed meeting today in Canada the creditors of Nautilus Minerals voted to effectively liquidate the company.  The two main shareholders – MB Holding and Metalloinvest – have taken control of a very much shrunken Nautilus at the expense of major creditors and hundreds of hopeful small shareholders.

Nautilus, which has been seeking to start the Solwara 1 mine off the coast of Papua New Guinea, filed for court protection from its creditors under the Canadian Companies’ Creditors Arrangement Act (CCAA) in February 2019. With its court-appointed monitors, Price Waterhouse Cooper, Nautilus has given up trying to find possible buyers of its assets.

Andy Whitmore of the Deep Sea Mining Campaign said,

“This is effectively a ‘smash and grab’ raid by the two main shareholders. But the company is essentially worthless. Its equipment is tailored to the mining of deep sea hydrothermal vents which the world now agrees are too ecologically valuable to mine. Even other DSM companies such as DeepGreen suggest mining hydrothermal vents creates an unacceptably high level of environmental impact..

In addition to this, Nautilus still faces an ever-widening community opposition over its Solwara 1 mine.

Jonathan Mesulam of the Alliance of Solwara Warriors stated,

“We rejoiced when the company filed for protection from creditors in Canada. Our opposition and our court action have helped push it to that point. Communities across Papua New Guinean (PNG) want to see the nightmare of deep sea mining removed from PNG waters. We will re-double our efforts to ensure that the new Nautilus will never operate at Solwara 1.”

Andy Whitmore continued,

“Under the deal minor creditors will be fully repaid, while major ones will get 10% of what they are owed. The biggest loser is the PNG Government which held 15% equity in Nautilus PNG and the Solwara 1 project. It has been left stranded with a debt equivalent to one third of its annual health budget for country of 9 million people.” 

“The main shareholders through Deep Sea Mining Finance (DSMF) – the vehicle lending money to Nautilus – have swapped those debts for ownership of the company. While a cheap purchase, they end up owning very littleNautilus is a company with still no capital or support vessel to realise its deep sea mining ambitions. Also, because Nautilus was delisted from the Toronto Stock Exchange as part of the insolvency proceedings, the new Nautilus will now be a private company, and not open to the same level of scrutiny.” 

The PNG Government through its company Eda Kopa applied to the Canadian Court unsuccessfully to regain some of its failed investment. Smaller shareholders are considering a class action against the new company.

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