A lone copper dump truck burned out during the crisis. Photo: Ian Booth.
Rowan Callick | The Australian
Rio Tinto’s review of its controlling stake in Bougainville Copper, now in its ninth month, is considering the options not only of a trade sale but also of giving its shares away, possibly to a charitable trust.
A year ago the mining giant gave away its 19.1 per cent shareholding in Northern Dynasty, owner of the Pebble copper-gold project in Alaska, to two Alaskan charitable foundations.
Rio owns 53.38 per cent of the Papua New Guinea mine, closed by conflict in 1989, that still contains copper and gold worth more than $50 billion, as well as possessing a recently reconfirmed exploration licence.
The mine, which would cost an estimated $6.5bn or more to reopen, is also owned 19.06 per cent by the Papua New Guinea national government, and 27.36 per cent by other shareholders through its ASX listing.
In the current commodity environment, even the largest miners are not contemplating starting — or restarting — a massively expensive project at a stroke, preferring instead to work green-fields sites less ambitiously, gradually building up output.
Rio has waited patiently for its social licence to mine to be restored but despite the desire of the Bougainville Autonomous Government, under its president John Momis, to restore mining revenues — with no clear income alternative in sight — landowner issues have not been fully resolved.
And under new mining legislation passed by the Bougainville parliament recently, all resources are owned by traditional landowners, while the national government based in Port Moresby continues to insist that geological resources remain the property of the state.
Apart from Rio, there are few potential alternatives with the capacity to rebuild the mine, except for a handful of other international miners and some large Chinese corporations.
But the window of opportunity for an exit is looking reasonably favourable now, while the prospect for the medium to longer term appears more shaded.
The prospect of a change of leadership on Bougainville, with an election due there at the end of May, injects a note of potential uncertainty.
At the Port Moresby end, Prime Minister Peter O’Neill is leading a government with rare political strength — and has the appetite for the state to run mines. But PNG’s history shows this may not last forever.
Mr Momis has warned Mr O’Neill to reveal any dealings with Rio.
The PNG Prime Minister confirmed that “we have had discussions with other shareholders of on a range of issues including the reopening of the mine and the disposal of shares by existing shareholders including Rio Tinto”. But, he added, “there are no secret deals”.
The Bougainville government’s concern was aroused by information it had received that law firm Norton Rose Fulbright, which works for Rio internationally, had received instructions to handle the sale of Rio’s shares. A Norton Rose spokesman decline to comment.