Category Archives: Financial returns

‘PNG is on the cusp of a super cycle in mining investment’

Illustrator: Holly Wales

Dr Kishti Sen* | ANZ | 20 April 2018

Papua New Guinea’s real gross domestic product averaged around 2 per cent per annum in 2016 and 2017.

This is a significant step down from the previous two years when growth averaged over 10 per cent thanks mostly to the sizeable liquefied natural gas (LNG) exports. These benefits have now largely faded.

Recently released ANZ research expects growth to remain subdued in 2018 and 2019 as the benefits of the LNG expansion diminishes and as non-mining sectors struggle owing to an overvalued currency and foreign exchange shortages. 

Infrastructure investment associated with the upcoming APEC meeting and higher agriculture output should be the main drivers of activity in the short term.

The national budget is in deficit with debt already at 32 per cent of gross domestic product (just 3 per cent below the self-imposed limit of 35 per cent) and the government is limited in its ability to support the economy.

However, PNG’s longer-term prospects are more encouraging as it would appear to be on the cusp of a ‘super cycle’ in resources investment, particularly in gas, gold and copper projects.

The challenge for the government and business is to manage the next upturn so that a boom-bust cycle is minimised.

Meanwhile, the Kina remains an overvalued currency and better macro balance could be achieved if faster depreciation occurred.

The currency’s fair value on our estimate is around $US0.23-0.25.

At this level, the Kina would likely remove uncertainty in the foreign exchange market, add liquidity and help clear the backlog of import orders, maximise import substitution and assist Kina-exposed industries including agriculture and mining.

*Dr Kishti Sen is an international economist at ANZ

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Bougainville president elaborates on ‘No’ to mining

Radio New Zealand | 17 April 2018

The President of the autonomous Papua New Guinea region of Bougainville has elaborated on why his government is saying no to mining at Panguna for the foreseable future.

Panguna was the site of the Bougainville Copper Ltd mine which was at the crux of the ten year long civil war.

In recent years there has been a push to have it re-opened to help drive the Bougainville economy forward.

Two companies, Bougainville Copper Ltd and RTG have been battling for the rights to mine Panguna but last week the government announced an indefinite moratorium on mining there.

Don Wiseman asked Bougainville President John Momis why they had taken such action.

JOHN MOMIS: Because landowners themselves are split. One faction supporting another company in developing the mine and another faction supports another company. So we don’t want to cause a split amongst the landowners because we have a referendum coming. We want to make sure we unite our people.

DON WISEMAN: Yes, although the landowners you say are supporting another company – that’s the Osikaiang group and they are right at the site of the current mine so as far, I think, as they are concerned, they are the landowners at that point, therefore they are ones that make that decision.

JM: Not really. Titleholders have rejected their claim. They have said they are not the legitimate titleholders, this Osikaiang group. Titleholders, according to law, are people who are supporting another company. So there is a definite divide and until the people are united we will not proceed with any mining.

DW: So in the meantime, in terms of trying to orchestrate some sort of unity, is the ABG going to do anything? Are you going to undertake anything, or leave it up to the landowner groups themselves?

JM: No, no we have taken steps to unite them. For us you know determining Bougainville’s future is more paramount right now. It is the priority we are focussing our attention to, to make sure that the people of Bougainville are united, so we don’t want any other issues to undermine this unity.

DW: Essentially it is off the radar until after the referendum?

JM: That’s probably it. I can’t see how the landowners can unite before the referendum. If they do then that will be good and we will look at other possibilities.

DW: The ABG of course is in an invidious position because you are a significant owner of Bougainville Copper Ltd, which is this other company you talk of. If the landowners agreed and they wanted to go with RTG, the second of those companies, would you, the ABG, accept that?

JM: We have some problems with RTG right now. In fact they are causing a lot of confusion and division in the community and we are not prepared to go ahead while this situation prevails.

DW: One of the reasons for this focus on Panguna had been to get the economy cranking ahead of the referendum, if that was possible. So if the effort is now going in a different direction is there going to be this focus that’s been talked about up to now but I am not sure how much has been done, in terms of agriculture and tourism and fishing.

JM: We cannot sacrifice unity for the sake of even generating revenue at this point in time. We have the referendum coming and it’s going to be very high on our priority list, so we have made it very clear to the landowners that unless they are totally united and they are prepared to subject themselves to the rule of law and so on and so forth, the ABG will leave the reserve [moratorium] in place.

DW: But in terms of these other industries is any effort going into those?

JM: We are looking at timber development and other industries, yes.  

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Amendments Made To Ok Tedi Agreement

Post Courier | April 16, 2018

PARLIAMENT has made amendments to the Ok Tedi Agreement to allow the company access to US$35 million (K116m) to sustain its operations and growth.

Prime Minister Peter O’Neill, who introduced the Ok Tedi Continuation, Ninth Supplemental Agreement Act in Parliament last week, said Ok Tedi Mine Limited is obliged to establish a reserve account to be kept in US dollars in an account approved by the company and the State.

He said to meet that purpose a fund (referred to as the financial assurance fund, or FAF, was established. The sole purpose of the FAF is to ensure funds are set aside to meet the mine closure obligations.

“On a regular basis (every four years from the time it was first done in 2009), Ok Tedi Mining Limited reviews the mine closure liability, with such review being independently audited, and submitted to the MRA and CEPA for approval,” Mr O’Neill said

He said the most recent review and audit was completed in 2017 with the approved mine closure estimate being $196 million.

He said the FAF currently has a balance of approximately US$231 million and is therefore over funded by approximately US$35 million.

“OTML, operating as a commercial entity, has high value opportunities to better use those funds for sustainment and growth investments in the business, and would like the ability to withdraw excess funds subject to approval by the State.”

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Barrick Calls For State Intervention in Porgera

Women search for gold downstream from the Porgera mine

After more than 25 years of mining by international companies, local people are still waiting to see the promised development benefits. They are becoming increasingly frustrated and desperate…

Post Courier | April 16, 2018

Barrick (Niugini) Limited , operator of the Porgera Mine in Enga, reported that operations in the Porgera open pit were temporarily suspended last week after a violent confrontation broke out between groups of illegal miners.

The company reported that mining operations in the open pit were suspended at around midnight, after two large groups of aggressive illegal miners, including some armed with firearms, began a violent confrontation near the stage 5C area of the open pit mine.

The fighting between the groups continued until about 2:30am on Tuesday morning.

BNL executive managing director, Richmond Fenn, confirmed that while all Porgera mine employees and contractors are safe and no injuries have been reported, the confrontation was a dangerous escalation of recent violent behaviour among illegal miners, due to the use of firearms by the opposing groups.

“More than 18 shots were fired by these people over a period of about two hours,” Mr Fenn said.

“While at this stage we have not confirmed whether there have been any casualties among the illegal miners from this latest outbreak of violence, the fact that violent people are engaging in gun battles on the mine’s open pit is of critical concern, and we are calling on State authorities to provide urgent assistance in bringing this under control,” Mr Fenn said.

“It is simply unacceptable that these criminals believe they can behave in this way with impunity,” Mr Fenn said.

“Mining operations in the Open Pit have resumed, but this escalation of violence needs to be stopped before someone is killed or injured.

“We have advised the relevant authorities about the situation, and will be working closely with the police and others in responding to this latest outbreak of violence,” Mr Fenn said.

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ExxonMobil Resumes LNG Production in Papua New Guinea

Photo: Michael Nagle

EMTV | 13 April 2018 

ExxonMobil said today that production of liquefied natural gas (LNG) has safely resumed at the PNG LNG project in Papua New Guinea following a temporary shutdown of operations after a severe earthquake occurred in the region on Feb. 26. LNG exports are expected to resume soon.

One train is currently operating at the LNG plant near Port Moresby. The plant’s second train is expected to restart as production is increased over time. During the period that production was shut-in, ExxonMobil was able to complete unrelated maintenance scheduled for later in the year to allow for more efficient operations in the months ahead.

“Resuming LNG production ahead of our projected eight-week time-frame is a significant achievement for ExxonMobil, our joint-venture partners and our customers,” said Neil W. Duffin, President of ExxonMobil Production Company. “We will continue to support those communities impacted by the earthquake as we work toward fully restoring our operations. We hope our contributions and assistance will provide comfort to those in need”.

ExxonMobil is supporting multiple local and international relief agencies involved in the humanitarian response to the earthquake. In addition to the company’s previously announced $1 million contribution for humanitarian relief, ExxonMobil crews have donated and delivered more than 37 tons of food, 14 tons of drinking water, 600 tarpaulins used as emergency shelters, 1,000 solar lights for households, 20 larger solar lighting units for institutions, as well as other essential supplies including water purification tablets, cooking aids and hygiene kits.

The company is also assisting with the restoration of health care facilities and community food gardens, and is providing resources to help the government address the significant task of restoring roads in the Highlands region.

“While a lot of work remains to be done, we are confident that with the support of all our partners and stakeholders, we can help our friends and neighbors recover from this tragic natural disaster,” said Andrew Barry, managing director of ExxonMobil PNG.

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Bougainville Govt says no to Panguna indefinitely

An abandoned building at Panguna mine site in Bougainville Photo: supplied

Panguna landowners are holding the region to ransom says Momis

Radio New Zealand | 13 April 2018

The government in the autonomous Papua New Guinea region of Bougainville says it will not allow exploration or mining activities at the Panguna mine site until landowners unite.

Two companies have been battling to re-open the mine, a move the government had been touting as vital to developing Bougainville’s economy.

But at the end of last year President John Momis announced a moratorium on mining at Panguna and in a new statement he says it is ‘absolutely clear the landowners and the people of Panguna are divided over their preferred developer.

He said after debate in the ABG House of Representatives it was very clear this decision could not be avoided and has been made in the best interests of the landowners and the people of Bougainville as the region prepares for its referendum next year.

Mr Momis says landowner leadership at Panguna remains unresolved creating factional groups with opposing views and positions on how the mine should be developed.

He says as long as the landowners remain divided the moratorium will remain in place.

Mr Momis says the ABG had invested a lot of effort trying to unite the landowners but while most Bougainvilleans are in favor of reopening the mine, the Panguna landowners are holding the region to ransom.

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Royalty Issue Leads To Porgera Shoot-Out

Porgera mine. Photo: wikicommons / Richard Farbellini

Jeffrey Elapa | Post Courier | April 12, 2018

The recent incident of armed illegal miners shootout with mine security guards is a result of landowner benefits, local landowner leaders from Porgera claimed.

A chief and community leader Ekale Kangalia said the recent shootout between armed illegal miners and company securities is a result of the stop on the royalty payments since 2014.

He said the cashflow in the area was sustained by the royalties from the Porgera gold mine until infighting in the Porgera Special Purpose Authority (PDA) led to the closure of the account.

Mr Kangalia said after years of frustration, the locals resorted to accessing the mine pit to venture for gold to sell and earn money to support themselves and their families.

He said the PDA directors’ infighting has forced them to go to the courts to obtain a court order to stop the royalty payments to the landowners.

Mr Kangalia claimed the PDA is a government sectioned body that comes under the Porgera Paiala Local Level Government Council and had nothing to do with the landowner royalty.

“This is unnecessary court orders when there is nothing to do with the directorship of the board of PDA. A royalty is an undisputed benefit to the landowners. Something has to be done to allow the people to benefit from their rightful benefits to put a stop to illegal mining as the only means of cash flow has been stopped by the court.

“Their only benefit is being stopped so the people have no other option but get into the mine and look for gold,” he said.

Mr Kangalia is calling on Barrick Niugini Limited and the National Government to look at ways to allow the people to receive their benefit as matter of importance.

He said the recent incident of armed conflict must not be taken lightly.

“We must know that the landowners are entering into the mine pit armed with high powered weapons to look for gold is the first time since the start of the mine. They have been supportive of the company but they can’t wait anymore so they went in to look for money,” he said.

Barrick Niugini Limited management also confirmed shutting down of the mine pit operations after the shootout with armed men.

Porgera Landowners Association chairman Tony Mark Ekepa when contacted confirmed the incident.

He said the stop payment on the royalties is now before a three-men Supreme Court.

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