Kevin McQuillan | Business Advantage | 18 July 2017
Moves to re-open the Panguna copper mine on Bougainville are gathering momentum. Funding the re-opening is a key concern, however, says Bougainville President, John Momis. Could one of the global mining majors get involved?
Bougainville Copper Ltd (BCL) is currently advertising for a local Bougainville-based manager, and are looking at the payment of K14 million in rent and compensation that was owed to the 812 customary clan groups who own the blocks of land within the mining lease areas.
Autonomous Bougainville Government President John Momis tells Business Advantage PNG, that over the next year, he expects BCL to open an office and ‘start dealing with some of the legacy issues, demonstrating BCL’s commitment, in a just and fair way, to some of the real issues that have been bothering the land owners.’
That includes, he says, the ecological, environmental, and health damage issues caused by former owner, Rio Tinto.
‘They have walked away, so now BCL has to address that.’
Momis says the Joint Steering Committee preparing for the mine’s re-opening consists of representatives from the nine official landowner groups, BCL, the national government, and the ABG, and is to be chaired by an independent chairman.
Funding
A key challenge is the cost of reopening the mine; back in 2012, BCL estimated it would be US$5 billion.
‘BCL has to demonstrate to us they have ability to solicit funds and attract a developer and I’m sure they are thinking about this,’ says Momis, pointing out that under Bougainville’s 2014 Mining Act, BCL has first right of refusal about re-opening the mine.
‘The Panguna mine is a “high-risk, high-return” investment.’
‘We are giving BCL the opportunity to get funds and to meet the conditions as per the mining law. If they fail, then other companies will have to apply and be put through this process.’
High-risk, high-return
Mining industry analysts describe the Panguna mine as a ‘high-risk, high-return’ investment, which only global miners would be interested in.
Greg Evans, KPMG’s Perth-based Global Leader, Mining Mergers and Acquisitions, believes there will be considerable interest.
‘If you look at what the resource is, and what it can deliver to both an owner and investor—and, probably more importantly, the local economy—it would have to be a definitive “yes”.
‘The copper price is heading in the right direction, the supply metrics are working in the favour of copper broadly and I would expect that BCL are being approached reasonably regularly by a number of metals traders.’
Evans points to growing demand for copper, noting that batteries in electric vehicles are likely to use 927,000 tonnes of copper a year by 2030, according to forecasts by Bloomberg New Energy Finance. That alone equates with 5 per cent of current production.
Global
Evans believes a global miner, ‘like Glencore or similar’, is likely to become involved.
‘KPMG just completed a survey around transaction activity across a bunch of sectors. In the mining sector, the preference of the majors was particularly for joint ventures at the asset level.
‘Batteries in electric vehicles are likely to use 927,000 tonnes of copper a year by 2030.’
‘To me, that would be the form that a transaction would likely take. BCL would ensure the social licence to operate, and look after stakeholder management, political and administrative management on the ground, with perhaps a partner coming in providing financial and operational support.
‘So, it is likely to be a large industry player used to dealing in remote locations, eliciting strong local community engagement, and creating local employment as an obligation and priority. All those things are going to be required.’
Risks
Satish Chand, Professor of Finance at the University of New South Wales and based at the Australian Defence Force Academy in Canberra, says risk assessment will be crucial.
‘There has been a history of conflict where a very small number within the population has the ability to stop a very large mine. That risk remains.
‘There is a contest over the distribution of proceeds and that has not yet been settled to my understanding. There is little that is known about the magnitude of the cost involved in the clean up.’
Chand notes that the Bougainville Mining Act says 51 per cent of the mine must be locally-owned. The non-binding referendum on Bougainville’s independence from PNG scheduled for 2019 must also be considered a ‘risk’.
Greg Evans agrees the local shareholding requirement makes the financing prospect ‘more challenging’.
‘The biggest successes that the majors have had in countries such as Africa and South America, have been where they’ve engaged local communities, shared the profits, and shared the benefits. The control over how those profits flow and are allocated is equally the challenge—as it is the solution.
‘You’ve always got to come back to the quality of the resource; which will always make it attractive.’
Peruvian community take one of the world’s leading mining companies to the High Court in London claiming it is responsible for the killing and injuring of protesters near a mine in Peru in 2012
Leigh Day | 24 February 2016
Members of a local community in Peru are taking one of the world’s leading mining companies to the High Court in London claiming it is responsible for the killing, injury and unlawful detention of protestors demonstrating near the Tintaya mine in the Espinar Province of Peru during a disturbance there in May 2012.
At the time the mine was owned by Xstrata Tintaya S.A. (renamed Companía Minera Antapaccay) a subsidiary of the London-based Xstrata Limited, which became part of Glencore Xstrata plc in 2013.
Xstrata denies responsibility, saying in a statement at the time that it “deeply regretted the violent events that resulted in the loss of human lives”, and is robustly defending the legal action. In its Defence it states that whilst it paid a large fee to the Peruvian National Police (‘PNP’) and gave accommodation, food and drink to some of the 1,500 officers who were policing the protests, it nevertheless bears no responsibility for the actions of the PNP.
A preliminary hearing will take place on 25 February. The three-week trial, due to take place in June 2016, will hear claims that on 28 May 2012 following days of protest the PNP shot at protestors, killing and injuring many of them as they legally demonstrated near the mine. The Claimants say that the PNP were operating under the instruction and control of the mine company’s management, a claim denied by the company, Those injured, and the families of those killed, claim the police were paid almost half a million dollars by the company to protect the mine.
Many protestors, who were opposing the environmental impacts and social effects of the mine, claim they were also assaulted, abused and unlawfully detained inside the mine compound. The company denies that any violence took place within the compound itself.
The Tintaya mine was an open pit copper mining and processing operation located in the Yauri district of Espinar Province, Cusco region, Southern Peru. It has recently been decommissioned and production has moved to the Antapaccay mine, which is located a few miles away.
Those injured, killed or imprisoned by the police include human rights activists, students, mine workers and farmers from the rural population living in Espinar Province.
Three demonstrators were killed. The injured and relatives of those killed are represented by Leigh Day.
Clinicians from the US-based organisation ‘Physicians for Human Rights’ have assessed a number of the claimants and found that they sustained serious life-changing physical and psychiatric injuries and have significant ongoing care needs.
One of the claimants, Mr Yohel Colqque, was hospitalised for 16 months after being shot in the head. He is now unable to walk and is confined to a wheelchair.
He was a student at the time of the protests and was shot while filming a woman being abused by a police officer on his mobile telephone. Yohel is now unable to continue his studies, work, or live independently due to the severity of his injuries.
According to Physicians for Human Rights, the injured man’s family do not have the means to support him. He urgently requires rehabilitation and equipment, including a wheelchair, as well as access to medication for the epilepsy that he has developed since he was shot and for the pain that he experiences on a daily basis.
Xstrata says it conforms to international guidelines on the risk of human rights abuses such as the Voluntary Principles on Security and Human Rights, and is a signatory to the UN Global Compact.
According to the Voluntary Principles: “The primary role of public security should be to maintain the rule of law, including safeguarding human rights and deterring acts that threaten Company personnel and facilities. The type and number of public security forces deployed should be competent, appropriate and proportional to the threat.”
Gene Matthews a partner within the International and Group Claims Team at Leigh Day, who is representing the Peruvians, said:
“The population of Espinar had longstanding concerns about the environmental impact of the Tintaya mine.
“This company, whose headquarters are in the UK, must take full responsibility not only for the actions of its staff and private security forces but also for the direction and control the Claimants allege it exerted over the Peruvian National Police.
“Multinational companies must be held to account, and do more than pay lip service to international human rights principles and guidelines. Lawful protest should never result in deaths and serious injury”.
GARAWA TRADITIONAL OWNER NANCY MCDINNY IS WORRIED ABOUT WHETHER THE MCARTHUR RIVER MINE IS AFFECTING THE RIVER (ABC/JANE BARDON)
Jane Bardon | ABC | 12.02.2016
When a giant toxic waste dump spontaneously ignited at one of the world’s largest zinc mines, serious questions were asked about how it could have happened. Jane Bardon investigates how regulators allowed a mine to operate with no known solutions to its massive waste problem.
In the Northern Territory’s Gulf country, Indigenous residents fear they’re on the cusp of an environmental disaster.
They’re calling for the McArthur River Mine, the world’s largest bulk zinc-lead-silver concentrate exporter, owned by the Anglo-Swiss company Glencore, to be closed because its waste rock dump and tailings dam are leaching acid, metals and salts into the McArthur River system.
But Glencore says its operation hasn’t contaminated fish in rivers outside its mine lease. It’s hoping to find solutions to the challenges it faces managing reactive waste rock on its site so it can get approval under a federal and Northern Territory government environmental impact statement (EIS) to keep on mining.
Approved as an underground mine in 1995, the mine was allowed to go open cut in 2006. In an move that outraged the area’s four Indigenous clans, the miner Xstrata was allowed to divert five kilometres of the McArthur River to get to the ore body underneath, and plough through the Rainbow Serpent dreaming site.
That move still hurts some of the clans’ leaders, including Garawa elder and well-known Indigenous painter Jack Green.
‘The hole was hurting me a lot. It’s part of that old rainbow. A lot of old people that were fighting for it; they’re all gone now,’ he says.
‘If they were still here today I think they would be still here with me arguing about that hole. It looks like I am only one person standing up on behalf of myself and my kids and my missus.’
THE MCARTHUR RIVER MINE’S WASTE ROCK DUMP WAS BURNING FOR MORE THAN A YEAR (ABC: JANE BARDON)
In 2013 the territory government approved another expansion of the mine, to double its size, increase its production rate, produce 500 million tonnes more waste rock, and extend the mine life to 2038.
But six months later, by the end of 2013, the mine’s waste dump spontaneously started combusting. The fire sent a plume of toxic iron sulphide smoke over the pristine coastal floodplains and savannah of the Gulf Country.
Residents, including painter and Garawa traditional owner Nancy McDinny, were horrified.
‘It was really smoking. We saw smoke all around it,’ she says. ‘It made people really scared. We thought it was turning into a volcano or something, getting burst and going down to the river again.’
Pyrite iron sulphide stacked in the dump had heated up in oven-like conditions and ignited.
Glencore had misclassified its waste rock during the EIS as 12 per cent reactive potentially acid-forming rock, and the rest non-acid-forming.
When it received the results of new geotechnical studies in August 2013 it realised it actually had 90 per cent reactive rock—made up of several categories that were potentially acidic, alkaline or metals leaching.
The company had dismissed warnings from the Northern Territory Environment Centre during the expansion EIS process that there was potential for misclassification.
In its reply to the Environment Centre’s objections, the company said in its EIS Supplement: ‘ECNT’s interpretation of the basis for conducting further geochemical work on the non acid forming material is incorrect. Significant information and understanding on the geochemical properties and behaviour of the non acid forming is held.’
Former campaigner Lauren Mellor says the Environment Centre recognised problems before the expansion went ahead.
‘Our submission to the phase 3 expansion for MRM pointed out the fact that no classification for the waste rock had been done adequately to determine the sulphur content, the pyritic nature of the rock material that was on site and what we thought that might pose further down the track,’ she says.
There were also delays in the company informing the NT government it needed to deal with majority reactive rock.
The Territory Mines Department complained in a briefing paper to the chief minister, Adam Giles, that the information was buried in a mine management plan lodged in November 2013, three months after the discovery. It did not call the company in to find out what was going on until February 2014.
The Mines Department also says that although the combustion started in 2013, it was not notified until 2014.
‘The department was advised of a change in the waste rock classification in February 2014 and was alerted that on site practices were not adequately controlling combustion by a complaint from the public about smoke emanating from the wasted rock dump early in the dry season of 2014,’ the department said in a statement.
Glencore’s McArthur River mining manager Sam Strohmayr says there was no attempt by the company to hide the information.
‘That’s not the case at all,’ he says.
‘It’s very clear in the mining management plan about the changes in the classification and we’d already started to put in place changes on the actual mine site at the same time. It’s very clear in the MMP about the changes in the classification.’
The Mines Department’s chief executive, Ron Kelly, says the department has historically dealt with issues that come up on mine sites through the annual and biannual mine management plan process, and that has led to delays in tackling issues at mines.
But he says that is changing, ‘so that when a new technology, or when a new issue is uncovered, that we can move quickly to address those issues’.
‘That is something that the independent monitor has said we need, to be more reactive and ensure that we don’t allow a problem to occur, and then wait a year until a new mine management plan is put in place to address an issue. That’s how we are working into the future,’ Kelly says.
The dump problems were referred to the Environment Protection Authority, and its chairman Bill Freeland decided that the company must submit a new EIS to explain how it was going to deal with the reactive waste rock.
‘They haven’t got there yet but they have done an immense amount of work,’ Freeland says.
‘I think we have to give them a bit of credit, that after this long, long period of probably negligence, what’s happening now is they are actually actively doing things and seem to be looking for answers.’
The federal government has also realised it needs to be involved. It will assess the plan under its EPBC Act, because that act is responsible for making sure threatened species, including the freshwater sawfish, are protected from mine impacts.
Glencore plans to submit its EIS by the end of this year, two and a half years since it was called for.
In the interim, Borroloola residents including Nancy McDinny have been increasingly concerned that the dump’s reactions may have contaminated fish in the McArthur River and its tributaries.
When iron sulphide gets wet, it turns into corrosive sulphuric acid, and other reactive rocks in the dump can leach salts and metals if wet.
‘Fish, sea turtle, dugong that we eat along the sea, shells, we’re too frightened to eat all of our bush tucker now, we grew up eating that stuff,’ she says.
By May 2013 Glencore had doused the dump fire by uncovering the reactive rock and cooling it down, and it has attempted to keep it dry by covering the dump with a layer of clay. It’s also pumping seepage away from the dump into dams.
But the residents’ concerns have not been allayed, because for four years now, since 2012, testing of fish in the Barney Creek on the mine site, by the mine’s consultant, and by the Territory Department of Primary Industries, has found that small species, including rainbow fish and bony bream, have been contaminated with lead above maximum-permitted concentrations, which denote safe eating levels.
Glencore and the government-appointed independent monitor, David Browne from Erias Group, point out there are several possible sources for the Barney Creek fish contamination, including dust off haul trucks on the Barney Creek bridge, dust from the processing plant and seepage from both the waste rock dump and tailings dam.
The company says it’s addressing these problems by catching more dust and better managing seepage from the dump and tailings dams.
But in 2014 and 2015 the fish tests picked up elevated lead, zinc and mercury in fish people catch off the mine site.
Glencore has continued to deny that it has contaminated fish off its site. It has pointed to the fact that many rivers in the region are naturally heavily mineralised. And it says analysis of the isotopes of the lead in the fish caught off the mine site show that they contain non-mine derived lead.
Sam Strohmayr says the isotopes act like a kind of signature for the metals. ‘Each ore body or source of lead has an isotope, or a signature if you like, and you use that to determine where the lead is coming from. So that is the basis of our understanding so far,’ he says.
But the Territory Health Department’s Steven Skov, who works in the Centre for Communicable Diseases, says the science isn’t conclusive.
‘I couldn’t say that what we were seeing was because of the mine and I couldn’t say that it wasn’t because of the mine either,’ he says.
‘Unfortunately, there doesn’t seem to be any data or testing of fish from that area from before the mine was put in place, either when it was an underground mine or when it moved to open cut. I haven’t been able to find anything; nobody’s been able to tell me about anything. So there’s no before and after stuff to make an comparison to.’
He wants signs to be put up warning people about the risks of eating fish, particularly from Surprise or Barney Creeks, or the mine’s Bing Bong port, because he feels the current advice he’s giving to Borroloola people, to just eat a bit of fish two to three times a week, needs to be made clearer.
He is also pushing the NT government to make sure there’s a better fish testing program put in place.
Ron Kelly from the Mines Department also doesn’t believe the isotopes argument is conclusive.
‘There’s no evidence of any minerals or contaminants leaving the mine site and having an impact on fish stocks, there’s no evidence that there’s not, but if there were issues, the department of health through the public warning system would take action,’ Kelly said.
The EPA’s Bill Freeland also thinks the jury is out, but says there doesn’t appear to be a major off-site pollution problem yet.
‘They have detected isotopes in the fish downstream, which clearly come from the mine, but they are in trace levels so it’s not a significant issue in that sense,’ he says.
‘I think, though, that we need more data and better understanding and I think we just have to be patient. These things can’t be done overnight. It’s very complex.’
The NT government is still investigating the fish contamination, and the federal government is also investigating whether the fish contamination has breached the EPBC Act.
It said in a statement: ‘The independent monitor in their 2012-13 report identified that lead isotope ratios in the environment indicate that the mine could be a source of this contamination. The Department of the Environment is investigating whether identified impacts constitute a breach of the Environmental Protection and Diversity Act.’
While the Territory and federal governments wait for Glencore to submit its EIS, a series of other problems with the waste rock dump have continued to grow. The company has kept adding to the dump, even though the clay used to line its base has failed many of its moisture and compaction tests. The liner is meant to be a key barrier against leaching.
The company has also admitted that because of the waste rock classification mistake, reactive rock has been stored in the base of the dump below the one-in-100-year flood line. Bill Freeland says that’s a major problem for a mine on a floodplain.
‘It’s not acid-generating, but what happens with some rocks, say they’ve got a high level of arsenic or, or lead or whatever it might be, that will leach out and it will become soluble and it will go into the environment,’ he says.
‘It’s exactly the same as acid metalliferous drainage, but it’s not acidic—it’s alkaline. And you get the same sorts of effects.’
To tackle that in the short term, Sam Strohmayr says the company is building a clay and rock flood wall around the dump base.
‘What we’re doing there is putting in flood protection bunding so that in the case, the rare occurrence of a one-in-100-year flood, that the water can’t ingress into the base of the dump,’ he said.
Neither the Mines Department nor the company have been able to yet say whether the reactive rock will have to be taken out of the already-giant dump’s base in the long term.
The company’s key long term problem will be convincing the regulators it can it can find a solution that safely encapsulates all of the reactive rock it needs to dump, with the amount of benign rock available to do that on the site now severely limited—just 10 per cent of the waste it’s mining out. Strohmayr is confident a solution will be found, however.
‘Glencore is 100 per cent committed to McArthur River,’ he says. ‘We have invested a lot of money in McArthur River over the last years. We see McArthur River as a long-life asset. We have 20 years of resource to go.
‘We’re 100 per cent committed to doing things correctly, making sure we’re running the operation firstly in a safe manner, doing it in an environmentally safe manner, and ensuring it’s profitable into the future.’
Instead of waiting to see what Glencore proposes in the EIS, Borroloola residents have commissioned an alternative plan to close the mine.
Activist Lauren Mellor has facilitated the plan, and says residents are worried Glencore’s mine will be left leaking into the environment like many other old mines in the area.
‘They want to see a fully costed and comprehensive closure plan and so they’ve actually fundraised, through the sale of artworks, to raise their own funds to bring on a team of experts who are recognised around Australia as being experts in lead pollution and legacy mine containment and acid metalliferous drainage,’ she says.
‘These experts are coming on board to write this report to look at an option for backfilling that reactive material into the pit.
‘The job will be for the community and those experts to convince the government that this is the most sensible, this is the most cost-effective, this is the best way to deal with this problem.’
One of the closure plan’s authors is Monash University civil engineering department senior lecturer Gavin Mudd.
‘We cannot leave tens to hundreds of millions of tonnes of sulphidic mine waste above ground, and expect that it’s going to be safe forever,’ he said.
‘Sometimes you have to wait 20 years for acid mine drainage problems to really become apparent. At the former Goldsworthy iron ore mine in Western Australia, which was closed in 1994, acid mine drainage problems, like those at McArthur River, only became apparent in 2004, 10 years later.’
Worried that taxpayers could be left carrying the cost of cleaning up the mine site, the NT government last year demanded an increase in the financial bond it holds against Glencore, under the threat of ordering the mine to close.
Chief minister Adam Giles says the bond would pay for a 100 per cent clean-up. But he won’t say how big it is.
‘I don’t make comments about the level of the bond,’ he says.
‘They are commercial in nature, but we just take advice from independent experts to guide is on what the bond should be, and then it’s a negotiation process with the company themselves.’
Bill Freeland hopes the company will be able to keep mining and come up with viable solutions to deal with its problems while protecting the environment.
He says bond or no bond, the last thing Borroloola’s residents and the Australian public need is another legacy mine site. And he says it will be on the taxpayer if the mine goes bust.
‘We would much rather the miner did it and the complexity of what’s got to be done is huge,’ he said.
‘We don’t have, as yet to my mind, an adequate closure plan just for the waste rock dumps. It makes it very difficult to predict how much you’re going to need and all the rest of it.
‘The only certainty is if we’ve got someone there to pay for it, and if they stay there then it solves a lot of problems for everybody.’
On the 30th of August 2013 a deed of settlement was entered into between Pan Aust Ltd and Xstrata-Glencore Mining for the sale of EL 56 covering the Nena -Frieda Deposit. On the signing of the Deed, US$25m exchanged hands between the two with US$50m now Due and outstanding since November 2015.
The payment of the additional US$50m rides on the back of Pan Aust obtaining approval from the PNG Government to proceed with its Bastardized Version of the original Mine Development Concept first proposed by Xstrata Mining to the PNG Government in 2012.
In 2012 Xstrata Mining Ltd proposed to develop the world class Frieda Mine with a Capital Expenditure Budget of US$5.4 Billion which consist of the plan to develop a fully integrated open cut copper mine with a potential life of 40 years with a 68 MW Hydro Power Plant costing US$800m . It also Proposed a Tailings Dam to mitigate against the contamination of the Fragile Sepik River Eco System and was considering the option of building a 300km Road link from the mine to the coast at Aitape jointly with the State for the export of Copper as opposed to the strongly contested option of barging copper down the Sepik River System.
Since taking over the Frieda Exploration License, Pan Aus Ltd has been selling a revised Bastardized version of this Mine Development Plan by sponsoring a campaign to take short cuts in the development of the Frieda Mine by reducing Capital Expenditure from US$5. 4 Billion to US$1.2 Billion with a plan concentrated on taking the Gold first out of the Mine to finance the rest of the mine Development cost.
For Power Pan Aust Ltd Proposed a Diesel Generation set which will be barged up the Sepik River on a pontoon and anchored on the Frieda river to supply Power to the mine. Over the last year Pan Aust has also carried out a concerted campaign to get villages on the Banks of the Sepik River to accept their proposal to barge copper concentrate down the Sepik River System despite the total rejection of this plan by the entire Sepik Community. To date I have yet to read any environmental impact statement by Pan Aust on Frieda and in Particular its comments on Mine Tailings or its plans on the construction of a mines tailing Dam.
Building of Mines in PNG is more then just profits for shareholders. It is about opening up new opportunities and access to services by communities which but for the mine will remain unconnected to the rest of the country. It is about long term contribution in revenue streams to Provincial and Local Government Budgets. It is about building long term infrastructure that will survive long after the life of the mine. It is why the building of a road link from Frieda to Aitape must be the central piece of infrastructure that the Sepik Community and its leaders must insist from the mine developer. Frieda must add value to the two Sepik Provinces not take value and self respect out of us by buying out our leaders and compromising the integrity of the project.
My plea to Governor Amkat Mai and Governor Somare is to leave our Gold and copper in the Ground if the cost of taking it out would only cost hardship and misery to our People and the environment and by all indication Pan Aust ltd as the Potential Developer of the Frieda Mine is not the type of company and Developer with the resources to Develop a word class mine.
Members of Guangdong’s Commission for Discipline Inspection panel report ‘on last year’s anti-corruption crackdown of officials in the province.
UPDATE ON FREIDA MINE
G.Ramoi | PNG BLOGS
Officials of GRAM [Guangdong Rising Asset Management], the New Owners of Pan Aust Ltd, Charged Under Official Corruption in CHINA.
Over the week end while in Singapore I received new of grave concern regarding the arrest on corruption Charges against the Chairman and a number of leading Directors of Guangdong Asset Management Ltd.
It was reported over the week end that on Saturday the 17th of this Month the Guandong Prosecutors office arrested Mr.Xie Liang who is the Party member and Deputy General Manager of GRAM for official corruption.
It was also reported that GRAM is one of 13 Companies in Guagnadong under investigation by the Office of Public Prosecutor for stock Market manupulation. In September last year Mr.Zhong Jin Song the Former General Manager of GRAM was cited by the Party for serious disciplinary violation and in January this year , the ex Chairman of GRAM Mr.Li Jin Ming was expelled from the Party due also to serious violation and Disciplinary issues.
Now if this information is correct it should lead immediately to the Register of Mines moving quickly in protecting PNG National Interest in ensuring that any application before it by Pan Aust Ltd to extend its Exploration Licence over Frieda River and in particular any attempt by Pan Aust Ltd to extend EL 58 should be rejected out right and the matter immediately referred to Cabinet through the Ministerial Economic Ministers Committee for consideration on the way forward with respect to the development of the Frieda River Gold & Copper Mine.
The Current State of Play
In 2013 Xstrata Glencore Ltd entered into a deed of sale with Pan Aust Ltd to buy the Exploration licences over the Frieda River Deposits valued at US$125 million. PanAust Ltd deposited US25million in August 2014 nad took control of the Frieda River project . According to the terms of the deed of sale by November 2015 Pan Aust ltd must pay another US$50 million to Xstrata Glencore. Readers of this blog will note that Pan Aust earlier this year went ahead and sold the Frieda asset together with the entire company for over US$380 million to GRAM of China. GRAM of China is now for all intent and purpose the new owner of the Frieda Deposit.
Now with this grave news coming out of China regarding GRAM , t is in the best interest of the State to once and for all reign in control and sovereignty over the Frieda Deposit by putting its foot down by rejecting any attempt to extend the exploration licence over the Frieda Deposit by GRAM or any other player and for the state to take over the licences and to develop this resources itself utilising a number of Models available to it including Contract Mining or production sharing regime as opposed to the rent based regime .
Soaring worldwide demand for the minerals used in electronic devices such as smartphones and laptops has left a legacy of social conflict and human rights violations across Asia, Latin America and Africa
A 200ft deep pit gapes where three years ago stood a mountain. Fields where small farmers planted rice and grew fruit are now an industrial site, and wooden houses in the old village of Didipio have been abandoned – the community moved to make way for a large-scale gold mine owned by a New Zealand company.
The Filipino mine, guarded by high fences and bitterly contested by the indigenous Bugkalot people who fear pollution, spills and ill-health, is just one of scores of major new gold and copper mines opened in the last few years to meet soaring world demand for minerals used in electronic devices such as smartphones and laptops.
While the spot price of gold and other minerals has recently seen its greatest annual decline in more than 30 years, the legacy of the global mineral boom is social conflict, human rights violations and environmental devastation across Asia, Latin America and Africa, says a global investigation into hundreds of the world’s mineral mines.
As angry communities in Colorado last week counted the cost of a toxic spill from an old gold mine, a new atlas of 600 international mining and oil companies has identified more than 1,500 ongoing conflicts raging over water, land, spills, pollution, ill-health, relocations, waste, land grabs, floods and falling water levels.
The EU-funded report by academics at 23 universities and environmental justice groups in Africa, India and Latin America has identified 142 disputes involving gold mines, 130 at coal mines, 96 at copper mines and 73 at silver mines, with India, Colombia, Nigeria, Brazil, Ecuador, Peru and the Philippines having the most. They ranged from longstanding legal disputes to armed conflicts.
The companies whose mines have attracted the most accusations of human rights abuses and environmental conflict are some of the largest in the world, mostly listed on the London stock exchange. They include AngloGold Ashanti, Rio Tinto, Barrick Gold, BHP Billiton, Glencore Xstrata and Newmont Mining. Between them they are involved in 75 conflicts in countries ranging from Colombia, Burma and the Democratic Republic of the Congo to the US, Zambia and the Philippines, says the database.
“Across Latin America, Asia and Africa, more and more community lands, rivers and ecosystems are being despoiled and devoured by mining activities,” says Philippe Sibaud, author of two reports on the extractive industries for the Gaia Foundation.
“The rights of farming and indigenous communities are increasingly ignored in the race to grab land and water. The hunger for these materials is a growing threat to the necessities for life.”
Heavy metals discolor the water north of Durango, Colorado, following the Gold King Mine spill. An estimated one million gallons of toxic wastewater was released into the Animas River. Photograph: Jeremy Wade Shockley
In many cases, governments have had to call on the army to defend the mining companies against aggrieved local communities who have taken up arms.
“Much of the Philippines has now been militarised to defend the companies,”, says Benedictine nun Sister Stella Matutina, a community worker in Mindanao province who has been targeted by the government for opposing mining companies. In the last year she has been charged with kidnapping, human trafficking and illegal detention for opposing Canadian, Australian and British mining companies and for looking after tribal people displaced by mining.
Mining in the Philippines has exploded from only 17 operations in 1997 to nearly 50 mega-mines today.
“We have found that mining divides our people, it kills them, it does not help us. It destroys our values. Mining and militarisation are twins. Where there is big mining there is always militarisation, because the government has to ensure that foreigners can invest in our country. People are resisting, are taking up arms against the entry of these mining companies. We are killing each other over mining,” she said.
An Indonesian protester demonstrating against the presence of mining multinational PT Freeport in West Papua province in 2006. Photograph: Dita Alangkara/AP
Following his outspoken encyclical on climate change and human ecology in June, Pope Francis has also stepped into the mining debate, calling for radical change by the industry.
In a message sent last month to leaders of communities affected by mining in Latin America, India, Africa and Asia, he spoke of “the cry for justice … for their lost lands, the violence, threats, corruption, the trampled human rights, the dire working conditions, and sometimes the slavery and human trafficking as well as the pollution of water, air and soil”.
The groups, meeting at the Vatican, said that mining companies:
“regularly invaded and denuded the traditional lands of indigenous peoples and poor farmers, expropriate water used for irrigation and drinking and leave polluted land and water behind
“There have been grave human rights violations experienced: environmental destruction and contamination, health impacts, community divisions, uprooting from territories, sicknesses, loss of culture, prostitution, alcoholism and drug addiction, loss of their own economy, and the ties to organised crime that are generated by the mining industry.”
In his encyclical, the pontiff said:
“It is morally unacceptable, politically dangerous, environmentally unsustainable and economically unjustifiable for developing countries to continue to fuel the development of richer countries at the cost of their own present and future.”
Conflicts have flared in Latin America, where many countries have opened up new regions to mining. Guatemala has awarded more than 350 new licences since 2007, mostly to Canadian companies. A further 600 are under consideration by the ministry of energy and mines.
New mines in Honduras, Peru and Chile have all provoked opposition. Thousands of troops had to be deployed and anti-mining activists were shot as anger flared around the Canadian-owned Escobal silver mine in Guatemala last year.
Canadian mining companies have some of the worst records for human rights violations, according to a report submitted to the Inter-American Commission on Human Rights in 2013. It found Canadian companies were involved in more than 100 human rights and environmental disputes in Latin America.
Pierre Gratton, director of the Mining Association of Canada, said:
“We don’t deny that there is conflict everywhere but feel we are leaders in setting standards and are doing a better job than anyone else. There’s a much higher level of awareness and sensitivity now, and an ability to raise issues which in the past might have been overlooked. The industry is more active [than it used to be] in Asia, Africa and the Americas and is working in countries with weak governance. These [mines] are multibillion-dollar investments. The money flows to the capitals, and [impacted] communities say ‘what about us?’”
In the Colombian Amazon, the floodgates have opened for mining concessions, with licences being given on around 20 million hectares of land, much of it pristine rainforest , says former Colombian environment minister Martin von Hildebrand, who has been working with groups living along the lower Apaporis river.
“Yaigojé Apaporis became Colombia’s 55th, and third largest, national protected area in October 2009. And yet, just two days after the official announcement, a company was granted a mining title and began attempting to revoke the ‘protected area’ status. The same mining company is believed to be linked to a further 20 applications for mining exploration around Yaigojé Apaporis,” said Hildebrand.
Police stand next to a crater created by gold miners during a police operation to eradicate illegal mining in an area known as La Pampa, in Peru’s Madre de Dios region, in August 2015. Photograph: Rodrigo Abd/AP
The high price of gold in recent years has also attracted thousands of small-scale miners into fragile ecosystems. Yanomami Indians in northern Brazil and Venezuela whose populations were devastated in the 1980s by illegal goldmining face new invasions of gold miners, says tribal leader Davi Yanomami. “History is repeating itself,” he said on a visit to London last year. “Twenty years ago many thousands of gold miners flooded into Yanomami land and one in five of us died from the diseases and violence they brought. We were in danger of being exterminated then, but people in Europe persuaded the Brazilian government to act and they were removed.
“But now 3,000 more miners and ranchers have come back. More are coming. They are bringing in guns, rafts, machines, and destroying and polluting rivers. People are being killed. They are opening up and expanding old airstrips. They are flooding into Yanomami land.”
More than 100,000 small-scale gold miners using rudimentary methods to extract gold from hillsides and rivers are thought to be active in Peru. In many cases they are competing with mega-mines which employ far fewer people.
According to PwC, one of the world’s top four industry auditors, government intervention and conflicts have mushroomed as commodity prices slump. “The gloves are off for the industry with widespread government intervention, internal industry conflicts and rising shareholder activism,” it said in its annual report.
Earlier this month anti-mining activists from 28 countries announced they would work together to seek a binding UN treaty and international tribunal to address the destructive impact of international mining. “It will give rights to people to sue mining corporations and hold them accountable for violations and crimes,” said Clemente Bautista of the Kalikasan People’s Network for the Environment.
“With an international mechanism we can join forces and file cases in an international tribunal,” said Selcuk Kozagacli, chairman of the Progressive Lawyers Association in Turkey. “Now more than ever do we need a united struggle worldwide to defend people.”
“… be mindful of the growing disillusionment by the majority of our people and our Land owners in particular about the way we have dealt with the exploitation of our non renewable resources which continues to treat our people as mere spectators in this sector… “
Gabriel Ramoi | PNG Blogs
As the Market awaits the Decision of the International Tribunal to be handed down early next year in London in the case referred by Oil Search Ltd against Interoil on its rights as an existing Partner in the Elk LNG project to be offered the first right of refusal to purchase any shares on offer by the project developer, the States own interest relating to pre emptive rights needs to be clearly stated to avoid the situation that has landed the Prime Minister before the Leadership Tribunal with respect to the UBS K3 Billion loan from ever rising again.
All Hydro Carbon resources found beneath the surface of the earth and on our sea bed belongs to the State. Mining Exploration Licences and petroleum Retention Licences are the property of the State which reserves the right to enter into and to invest in these licences if it chooses too. While the Mining Act and the Oil and Gas Act allows the State to exercise its rights to take up to 30% Equity in Mining Projects and 22.5% in all hydro carbon Projects, these Acts do not prohibit the State from making commercial investment decisions for the National Good.
There is a misconception that the Government of PNG cannot enter into any major resource project until after the completion of the Bankable Feasibility study by the licence holder and only at the commencement of negotiations on Mine or Petroleum Development Contract between the Developer and the State. This view is not only misconceived but is dangerous as it perpetuates neo colonialism.
With respect to the case of Elk neither the State or its proxy Oil Search were made an offer to inject additional capital into the Elk LNG project and ultimately on whether Total of France should be the development Partner in the Elk and Antelope Gas Fields. While Oil Search has gone for Arbitration the Government of PNG has been forced to enter into a Commercial decision to enter into the UBS loan to participate in the Elk Project via Oil Search Ltd. The important question that will still be dealt with is the State’s 22.5% interest in Elk and the value of that interest and for the State to enter the project now and participate in the decision as to whether Exxon or Total is made the developer of the PNGs second LNG project.
On this note we also remind our own senior Bureaucrats heading down to Sydney for the biannual shopping and Mining Conference at the Sydney Hilton not to mislead the Australian Mining Community in particular on another similarly large project , the Frieda Gold and Copper Project and the intent of the Government of PNG with respect to the issue of Ownership and Control of our country’s biggest mining project. We remind our Sydney Mining Conference Participants to be aware of NEC decision 265/2014 and to take note in particular to the contents of NEC Policy Submission 242/2014 which gives rise to the said decision.
Let me again caution our leading citizens that while making the case for Foreign Direct Investment in the PNG resource sector in a foreign land that they be mindful of the growing disillusionment by the majority of our people and our Land owners in particular about the way we have dealt with the exploitation of our non renewable resources which continues to treat our people as mere spectators in this sector and not to concede too much to investors whose main driver for investment is guided only by profit motive and not the improved quality of life for our people.
It would appear that while Total has been endorsed as the preferred developer of the second LNG project no such endorsement has been given to Pan Aust Ltd to take on the responsibility of developing the Frieda Gold and Copper project on the contrary the State is desirous of owing and developing this massive deposit itself jointly with Land owners and the two Provincial Governments of East and West Sepik Province and that Pan Aust Ltd and Xstrata-Glencore would do well in accepting the offer made by the State to Xstrata Glenocre to acquire their interest in EL58 on the same terms as reached between Xstrata and Pan Aust Ltd on the 30th of September 2013 and that this is the position of the PNG Government unless overturned by Cabinet.
Why in PNG do we continually allow foreign speculators to grab our land and resources and then tout them to the highest bidder for their own profit?
PanAust Holds Promise as Target or Stand-Alone: Real M&A
Angus Whitley and David Stringer | Bloomberg News
PanAust Ltd. (PNA) shareholders may be set for a windfall with or without a takeover of the Australian copper producer.
PanAust in May rejected as too low a A$1.46 billion ($1.3 billion) approach from its biggest investor, China’s Guangdong Rising Assets Management Co. The company then opened its books to Guangdong Rising and another unidentified suitor and asked for formal offers by this month. The stock, which closed above the A$2.30-a-share proposal as recently as August, yesterday traded 23 percent below it, suggesting investors’ expectations have faded for a counterbid at a price PanAust would accept.
Even without a deal, Deutsche Bank AG expects PanAust shares to surge to A$3 in 12 months. The Brisbane-based company is weighing a 20-year development of one of the world’s largest untapped copper and gold deposits in the forested foothills of Papua New Guinea. Meantime, analysts estimate operational mines in Laos will help almost triple PanAust’s profit by 2016.
“Pessimism toward a deal getting done has been growing steadily,” Matthew Trivett, a Brisbane-based analyst at Patersons Securities Ltd., said by phone. “If a takeover doesn’t materialize, any selldown would present a pretty attractive buying opportunity.”
A representative for PanAust declined to comment on the prospects for a deal. Representatives for Guangdong Rising, a state-owned Chinese investment group known as GRAM, didn’t immediately respond to an e-mailed request for comment.
‘Good Value’
PanAust stock today fell 1.8 percent to A$1.74 at 11:14 a.m. in Sydney, cutting the company’s market value at A$1.11 billion. The stock has lost 26 percent since Aug. 21, when Managing Director Gary Stafford said a second potential buyer would complete due diligence the following month. He set an October cutoff for bids.
“The fact it has drawn out so long could suggest GRAM are unlikely to follow through,” Reg Spencer, a Sydney-based analyst at Canaccord Genuity Group Inc., said by e-mail.
The company is now cheap, whether it’s being pursued by potential acquirers or not, said Mark Taylor, an analyst at Morningstar Inc. who values the stock at A$2.50. The Laos assets, with enough reserves to last another decade, are the main draw for any new owner and the undeveloped Frieda River project in Papua New Guinea is an added bonus, he said.
“It’s good value,” Sydney-based Taylor said by phone. “The projects are up and running. Cash flow is good.”
Net income at PanAust is projected to reach $107.1 million in 2016 from $36.4 million last year, according to analysts’ estimates compiled by Bloomberg. The flagship mine in Laos is the Phu Kham copper and gold deposit, about 140 kilometers from the capital Vientiane. PanAust expects to access even better quality grades of ore at the site as soon as this year.
All Aboard
The Papua New Guinea project, which the company estimates will cost about $1.7 billion to develop, is designed to sustain earnings beyond the life of the Laos mines. Analysts have become more optimistic about its prospects since visiting the remote site this month.
Frieda River may have average annual production of 125,000 metric tons of copper concentrate and 200,000 ounces of gold concentrate, according to PanAust. PanAust plans to complete a feasibility study by November 2015 and start production in 2019.
The project is viable, Brett McKay, an analyst at Deutsche Bank in Sydney, said in a phone interview after visiting the site. “Jump on board,” he wrote on the front page of his post-tour report on Oct. 14, advising investors to buy PanAust shares.
At Credit Suisse Group AG, analyst Michael Slifirski said in his report after the trip he’s more confident a mine will be built. He expects PanAust stock to reach A$2.46 in the next 12 months.
Frieda Purchase
PanAust bought its 80 percent share of Frieda River in August from Glencore Plc, which had acquired the deposit through its 2013 purchase of Xstrata Ltd. Port Moresby, Papua New Guinea-based Highlands Pacific Ltd. (HIG) owns the rest of the project.
Compared with Xstrata’s plans for the site, PanAust has scaled back the development, shortening potential access roads and shrinking manpower estimates in a bid to make it viable. The area is similar to terrain in Laos, and PanAust plans to apply some of the same mining techniques.
Any formal offer from Guangdong Rising would now have to value PanAust’s ownership of the project, according to Canaccord’s Spencer.
“The prize is Frieda,” Spencer said. “With the acquisition of Frieda River now complete, any offer from GRAM would have to incorporate significant value for this asset.”
Copper Prices
Recent declines in commodity prices may make buyers less willing to pay up for PanAust now, and Guangdong Rising’s 23 percent stake could deter other bidders, said Tom Sartor, a Brisbane-based analyst at Morgans Financial Ltd.
The Bloomberg Commodity Index, a gauge of 22 commodities including crude oil, gold and copper, this week fell to a five-year low, partly on concern global growth is faltering. Copper, used in houses, power stations and cables and an indicator of economic health, has fallen about 10 percent this year, though it’s forecast to climb next year.
“In this environment, we haven’t seen anyone willing to try and pay a premium or get into a bidding war,” said Sartor.
A rival bidder for PanAust may yet emerge, though they might have to offer as much as A$3 a share to convince Guangdong Rising to part with its stake, according to Trivett at Patersons.
Either way, PanAust needs to settle its future in the coming weeks, Trivett said. Stafford said in August the deal process was time-consuming and acknowledged the producer would soon need to move on and focus on its operations.
“It would be in the company’s best interests to try and bring this thing to a head as quickly as possible,” Trivett said. “The fundamentals of the company are quite strong.”
PANAUST has said its majority-owned Frieda River copper-and-gold mining project in Papua New Guinea could cost $US1.7 billion to build.
PanAust — currently a takeover target for China’s Guangdong Rising Assets Management — said Frieda River could produce 125,000 tonnes of copper-in-concentrate, and 200,000 ounces of gold, annually.
Brisbane-based PanAust recently acquired an 80 per cent stake in the Frieda River project from Glencore. The remaining interest is held by Australia-listed Highlands Pacific.
“Preliminary analysis indicates that the base case development concept would be robust at a copper price of $US2.80 per pound and gold price of $US1300 a troy ounce,” PanAust said in a statement.
PanAust, which is preparing a feasibility study into the Frieda River project, said the initial construction-cost estimate didn’t include a fleet of mining trucks or a power plant.
PanAust is pleased to announce that it has exercised its option under a previous share placement agreement to subscribe for a further 64,432,990 shares in Highlands Pacific at $0.0776/share, following the placement on equivalent terms in November 2013.
This is a vote of confidence in Highlands, and in exploration projects in Papua New Guinea; notable especially because of the material premium PanAust is paying to Highland’s market price of around $0.065.
PanAust is capitalised at $1.4 billion – and could this be the beginning of a trend towards larger companies increasing stakes in mineral rich PNG?
It will take PanAust’s shareholding in Highlands to 14%, with placement scheduled to take place on 1 September 2014.
The agreement with Highlands related to PanAust’s agreement with Glencore to acquire Glencore’s interest in the Frieda River Copper‐Gold Project, a joint venture with Highlands.
The Frieda River transaction was completed today.
PanAust and Highlands will now respectively hold 80% and 20% interest in the Frieda River Joint Venture.
Under the terms of the Agreement, should the Government of PNG elect to take up its right to 30% of the project, PanAust will sell down the first 20% of its joint venture interest and thereafter the parties will sell down in equal amounts.
Where the Government of PNG elects to take up its maximum 30% of the project, the respective joint venture interests would be PanAust 55%, the Government of PNG 30% and Highlands 15%.
PanAust will be responsible for 100% of the costs incurred by the Frieda River Joint Venture to finalise the definitive feasibility study.
PanAust will also be responsible for 100% of the costs to maintain the Frieda River project site, assets and community relations programs up to the time of lodgement of the Mining Lease or Special Mining Lease application.
Papua New Guinea Mine Watch 