Foreign ‘wealth extractors’ not happy about revised Mining Act

Mining companies extract Papua New Guinea’s mineral wealth and ship it overseas while leaving communities to suffer the environmental and social costs

Papua New Guinea’s mining sector concerned about revised Mining Act

David James | Business Advantage | 3 July 2018

There are concerns in Papua New Guinea’s mining industry that proposed changes to the Mining Act may discourage investment in the sector. The Executive Director of the PNG Chamber of Mines and Petroleum, Professor Albert Mellam, has said the mining sector is ‘strongly opposed’ to the revised Act.

Since 1992, Papua New Guinea’s Mining Act has provided the main regulatory framework for the mining sector. While a revision of the Act has been mooted for several years, the industry is expressing concerns at current proposed revisions.

Speaking in Brisbane recently at a business event, the PNG Chamber of Mines’ Executive Director Albert Mellam pointed to several ‘issues’ with the proposed revision.

One is that the maximum term of a mining lease be reduced from 40 years to 25 years and the renewal period for a mining licence be reduced from a maximum of 20 years to 10 years.

He questioned proposals that the state be given the right to compulsorily acquire the mine upon expiry of the first term of the mining lease. He described this as ‘expropriation’.

Mellam further queried proposals to limit the state’s exposure to sunk costs (expenses that cannot be recovered).

‘There are also no grandfathering provisions (phasing in of the new laws),’ he said.

‘Existing mines would be required to comply within 12 months, and any changes to government policy take precedence over the mining development contract (MDC).’

Fly in, fly out

Mellam also targeted proposals to regulate fly-in-fly-out (FIFO) activities undertaken by mining companies.

‘The powers of authorising officers are excessive and in some cases open to abuse.

‘The definition of “offshore” will lead to confusion with existing projects.’

‘Penalties are excessive and punitive. For example, a person engaging in FIFO—which is not defined—could be locked up for 15 years.’

He added that failing to provide information to the authorities could lead to a jail term of two years.

‘The definition of “offshore” will lead to confusion with existing projects that are onshore/offshore,’ he added.

Mellam did find some positives with the proposed revisions, however, pointing to the extension of exploration leases from two years to five years.

Also beneficial would be improvements to documentation, with plans required for community engagement, employment and training and rehabilitation. Feasibility studies and waste management methods would also be required.

Mellam was also critical of a proposal in the MRA Act to increase the production levy from 0.25 per cent to 0.5 per cent of gross production.

He pointed to the removal of any ‘direct or indirect representation’ for the industry on the Mineral Resource Authority’s (MRA’s) board.

Choice

Craig Jones, Executive General Manager for the proposed Wafi-Golpu gold-copper mine in Morobe Province, also speaking in Brisbane, said the PNG authorities must embrace one of two choices in revising the legislation.

‘The first is to ensure the continuation of stable fiscal and regulatory policies which have underwritten past successes of the resources sector in Papua New Guinea.

‘There is a great deal of uncertainty and nervousness created by the proposed amendments.’

‘(The second is) to grasp at legislative and taxation changes that will shake investor confidence and repel further investment in PNG.

‘But there is a great deal of uncertainty and nervousness created by the proposed amendments to the new Mining Act—the changes recently made to the MRA and changes to the taxation regime introduced in the 2017 Budget.’

Gas

Mellam was more positive on proposed natural gas policy, arguing for an investment framework that ‘properly supports a third party access regime for gas pipelines and related infrastructure’.

He regarded in a favourable light the requirement to meet domestic market obligations by providing up to 15 per cent of production for local use.

The requirement to use locally sourced labour he likewise considered to be a positive.

But he remained concerned about the future of the Mining Act, which he described as ‘critical to future investments in mineral exploration and development.’

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Mellam joins Chamber as new executive director

Professor Albert Mellam has been appointed as the new executive director of the PNG Chamber of Mines and Petroleum, replacing Greg Anderson.

LOOP PNG | 1 June 2017

The Chamber Council announced today the appointment of the former University of Papua New Guinea Vice Chancellor to replace Anderson, who has been at the helm of the resource industry association for 28 years.

President of the PNG Chamber of Mines and Petroleum, Gerea Aopi, welcomed Prof. Mellam’s appointment and thanked Anderson for his tireless service to the Chamber and the PNG resource industry.

Mellam brings to the Chamber a wealth of experience, having worked as a senior academic and vice chancellor for more than 29 years at the University of Papua New Guinea.

He also holds adjunct professorial positions in a number of Australasian Universities. As well as having a vast public sector experience, he is also well placed to draw on his private sector exposure as a director of Nambawan Super Limited, Credit Corporation (PNG), Brian Bell & Co Ltd and the Investment Promotion Authority Board.

His distinguished career includes serving as a key advisor to the PNG Vision 2050 and other Government projects such as the PNG LNG project. His applied research areas have included the extractive industry, for example, research on mine closure arrangements and involvement in the Misima Mines Closure project.

“The Board is confident Prof. Mellam will continue the good work Mr Anderson has done in developing the Chamber into a highly respected peak industry body that has served the interest of its members with distinction,” Aopi said.

“We would also like to sincerely thank Mr Anderson for his contribution, not only to the industry but to the country as a whole.”   

Anderson was first appointed as executive director of the Chamber in 1989 and since then, he has been involved in numerous consultations on Government policies and legislation, which have underwritten PNG’s world-class resource industry.

“Through his role at the Chamber, Mr Anderson was also instrumental in fostering investment and growth in the mining and petroleum sectors through Chamber-organised international and domestic investment conferences, and the commissioning of a wide range of studies and reports that have benefited many projects and industry stakeholders.

“He also played a pivotal role in advancing developments in the areas of taxation, education and training, health and community development,” Aopi said.   

Anderson first arrived in PNG in 1975 to work with the Geological Survey of PNG. He held a number of positions in the PNG Geological Survey and was appointed director of the survey in 1986 and was responsible for the overall management of mining and petroleum exploration in PNG during a period of intense activity.

In 1989, he was appointed to the position of executive director of the newly-established PNG Chamber of Mines and Petroleum.