Sarah Danckert and Ben Bohane | Sydney Morning Herald | November 15, 2019
Iron ore magnate Andrew “Twiggy” Forrest has joined the race with an unruly bunch of small, struggling mining companies, all with links to Australia and share prices of 10c or less, for access to some of the world’s biggest copper and gold deposits on the Pacific island of Bougainville.
The manoeuvring over the gigantic, mothballed Panguna mine comes ahead of an independence referendum later this month that could turn Bougainville into the world’s newest nation after disputes over foreign mining prompted a bloody, 10-year war that killed perhaps 15,000 people.
However, China is also sniffing around opportunities in Bougainville, although not necessarily the Panguna mine itself, which was valued recently at a staggering $US58 billion ($84 billion).
Previously run by Rio Tinto, the mine was at the centre of a decade-long conflict over allegations that locals were being ripped off and the environment damaged by foreign mining companies. The war continued well after the mine closed as a battle of control for the country raged between the Bougainville Revolutionary Army and the Papua New Guinea Defence Force. It was the most serious conflict in the south Pacific since World War II.
The Age and The Sydney Morning Herald have confirmed that representatives of Mr Forrest’s mining company, Fortescue, travelled in recent months to the island and were exploring growth opportunities there.
“As a leading mining company with world-class expertise, we constantly assess opportunities to build on our operational reputation to drive future growth through product diversification and asset development,” chief executive Elizabeth Gaines said. “Consistent with business development activities, representatives from Fortescue have visited Bougainville Island to learn about the region and potential opportunities.”
Other companies – including one chaired by a former Liberal defence minister David Johnston and another by Arabian horse breeder and luxury goods dealer Jeff McGlinn – have also been striving to gain local support on the island to reopen the mine, which was shuttered in 1989.
Meanwhile, a Chinese delegation is rumoured to have offered substantial funds in late 2018 to help finance a transition to Bougainville independence, along with offers to invest in mining, tourism and agriculture, with a figure of $US1 billion cited. A new port was also reportedly proposed.
A new nation to our north?
On November 23, Bougainvilleans will go to the polls and are expected to vote overwhelmingly for independence from Papua New Guinea. But in the wake of that expected vote, there is a real risk of new disputes between landowner groups as miners, many with links to Australia, could reignite the crisis that engulfed the island 30 years ago.
“Are they f—king mad?” asks one former Rio Tinto executive who worked at the company when it was the majority owner of Bougainville. “Re-opening Panguna would be a disaster.”
In its heyday, the mine, which would take an estimated $US5 billion in infrastructure spending to restart, was a productive asset for Rio Tinto, then known as Conzinc Rio Tinto. During the final year of production in 1988 and 1989, Rio’s subsidiary Bougainville Copper (BCL) extracted 550,000 tonnes of copper concentrate and a whopping 450,000 ounces of gold.
Already the tussle for Panguna has sparked a race to promise the best deal and the highest royalties to landowners while stemming the environmental degradation that has ravaged Bougainville. But that race has also already sparked intense political disagreement between rival groups on the island.
Rio’s former subsidiary BCL is still in the race for a mining licence, though Rio divested its shares and walked away in 2016. But a number of new entrants are also in the game.
Among them is Toronto and ASX-listed RTG Mining Inc – which has links to the Philippines and counts the son of billionaire Australian stock picker David Hains, Richard, as the largest shareholder of its Toronto-issued shares.
Another ASX-listed company, Kalia Limited, has been given two permits to explore in the northern tip of Bougainville. Kalia counts former Defence Minister David Johnston as its chairman and Perth-based mining entrepreneur Nick Zuks as its top shareholder. Johnston’s biggest claims to fame at home are a controversy over his lavish spending on entertainment as minister and comments that South Australians couldn’t build a canoe, much less a submarine.
Kalia’s bid is financially supported by a company run by Australian polo patriarch Peter Yunghanns. Another significant shareholder, Graeme Kirke, is the founder of Kirke Securities where Mr Forrest previously worked.
More recently a new player, Caballus Mining, has arrived in Bougainville. It sparked fears, rumours and intrigue when it emerged the Autonomous Government of Bougainville had drafted new laws that would assign the responsibility for issuing mining licences to a new entity – Bougainville Advance Mining and a foreign partner. Many believed that partner would be Caballus.
Caballus Mining was set up only in August 2018. Its sole director is Arabian horse breeder and luxury goods dealer Jeff McGlinn – a man who posted a flashy social media video of Saudi royalty at a luxury event, and another of him giving one of his fine equines to classical crossover singer Andrea Bocelli.
The entry of Caballus sparked fears among Bougainville locals – specifically those linked to rival miners – that a three-way fight for Panguna would erupt.
Slugging it out
Already, former Rio subsidiary BCL and Australian-Toronto based RTG Mining have been slugging it out via statements on their websites or on the Australian Securities Exchange. RTG claims BCL has lost its local goodwill and cannot operate in Bougainville, and that RTG has the support of a landowner group the Special Mining Lease Osikaiyang Landowners Association – one of the groups who say they represent landowners in the Panguna area.
BCL hit back saying the landowners’ association (known as SMLOLA) is a new invention and points to recent statements disputing its provenance. In turn, the landowner groups supporting BCL’s plans to reopen Panguna have also come under fire.
The one thing both have in common is their respective share prices are in the gutter, with BCL trading at 10 cents a share and RTG trading at 6.5 Canadian cents (7.4 cents). Kalia’s share price is just one-tenth of a cent.
The disputes between miners have been reflected in intense politicking among local landowner groups and political players on Bougainville. Bougainville’s president John Momis has copped much criticism for entertaining the Caballus deal, and the Autonomous Bougainville Government has given mixed signals on its position on mining.
Momis initially supported a moratorium on mining at Panguna to avoid reigniting old conflicts between landowner groups. The moratorium was put in place in early 2018, but the government now appears to favour mining across the island as a means to generate income and underwrite independence.
Landowners are guaranteed rights under the 2015 Mining Act, but in an urgent bid in January 2019 to raise funds for the referendum, the government proposed to abolish those rights, at the same time allocating “near monopoly” rights to Caballus’s Bougainville Advance Mining. That legislation was later rejected by the government’s legislative committee, illustrating how politically contentious this issue will be in an independent Bougainville.
In recent months, the mudslinging by supporters of both groups has died down. Several sources linked to the company and NGOs operating on the island said this was due to the request by the government that the miners are not seen to be influencing the independence vote.
There was no answer from Caballus in response to a series of questions, including regarding its links to Bougainville Advance Mining and how it achieved such a prime position. McGlinn was last week travelling in Europe.
Calls to the Perth offices of another suitor, Kalia Limited, which is now led by Michael Johnston, the former boss of failed PNG miner Nautilus Mining, went unreturned. David Johnston (no relation to Michael) and Kalia shareholder Nick Zuks also did not return calls.
RTG chairman Michael Carrick was also loath to talk about the issue.
“Politics is played extremely robustly in PNG and the facts/truth are often amongst the first casualties,” Carrick said via email from his Perth office. However, he added that mining would be part of Bougainville’s future.
“There can be no independence without first setting the country on a pathway to fiscal self-reliance and Panguna is the only asset which can assist this fundamental objective.”
BCL company secretary Mark Hitchcock said from his office in Port Moresby that the company retained strong support among landowners and rejected suggestions the company had lost its social licence to operate.
“There is at times frustration when some purporting to speak on behalf of all landowners are in fact representing a narrower interest. Regardless, all views are to be respected.”
Luke Fletcher, a long-time Bougainville watcher and executive director of think tank Jubilee Australia warns of the “resources curse” that has plagued PNG.
“This is one of the problems of the resource curse, you have these big revenues sitting in bank accounts that can be misappropriated quite easily,” he said.
It’s a curse that many think is worth risking.