Tag Archives: Lihir gold mine

Transparency Initiative report calls for improved systems in extractive sector in Papua New Guinea

Sources of revenue from extractive sector to government. Source: EITI

Business Advantage | EMTV | 4 April 2018

The 2016 Papua New Guinea Extractive Industries Transparency Initiative report has found that improvements are being made to registry and payment systems in Papua New Guinea, but more needs to be done. It notes that budgeting for government revenues remains difficult because of the resources industry’s volatility, and the relatively small number of companies paying full tax.

The EITI report, which is produced by Ernst & Young, says that ‘in some cases, the absence of a robust system for managing government revenue payments in PNG leaves the system vulnerable to fraud, corruption, and human error.’

It found that the problem of transparency is amplified when payments to sub-national [provincial and district] governments are taken into consideration, noting that the Asian Development Bank has called for greater transparency in sub-national government resource revenue flows.

Budgeting

Budgeting for government revenues, the report says, from the extractive sector is ‘complex due to the revenue being subject to fluctuations in quantities produced and global commodity prices’.

A further issue is the high number of extractive companies that have some form of tax exemption.

‘Medium-term projections anticipate that corporate income tax (mining and petroleum tax) will come mainly from Ok Tedi, Porgera and the oil fields.

‘The Ramu Nico mine has a 10-year exemption from corporate income tax. The Lihir mine continues to undertake high capital expenditures which reduce its taxable income.

‘Low LNG prices, together with an accelerated depreciation allowance, means there may not be corporate income tax from the PNG LNG project.

‘In addition, key mines are claiming Infrastructure Tax Credits (ITCs).’

PNG oil and gas production. Source: EITI

Recommendations

The EITI report makes a number of recommendations. One was the implementation of a reliable electronic registry system to supersede the current paper ledger system.

The report noted that scanning of all documents has begun, but it will require additional resources to adhere to the EITI Standard.

‘The Department of Petroleum and Energy will need to provide information regarding licences awarded and transferred in previous reporting periods.’

Another recommendation has been that the Mineral Resources Development Company (MRDC) reports on the equity distribution and all other funds it holds in trust and invests for the landowners and for future generations.

It notes that there has been better information on payments and receipts, especially from the MRDC.

Making electronic payments, rather than using cash or cheques, is identified as a priority. The lack of a ‘robust system for managing resource payments leaves the system vulnerable to fraud, corruption and human error,’ the report says.

‘There were specific financial instructions from the Finance Minister for government agencies to heed this change and transition into electronic payments system where possible.’

Two other areas of focus are improving reporting on sub-national payments and ensuring that Memorandums of Understanding (MOAs) are made public.

Positive prospects

The EITI report says the medium-term economic outlook for PNG ‘remains positive, with foreign investments in the pipeline’.

It anticipates 2.8 per cent GDP growth in 2018, pointing to:

  • A gradual pick-up in the global economy, which is expected to boost commodity prices and stimulate activity in sectors outside resource extraction.
  • Increased output in mining.
  • Forecast growth in agriculture, forestry and fishery output of 3 per cent, with increases in both price and production.
  • PNG’s hosting of the Asia-Pacific Economic Cooperation Leaders’ Meeting in 2018.
  • Legislative changes introduced on 1 January 2017 on taxation of the extractive sector.
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Lihir Royalties on hold

Sally Pokiton | PNG Loop | November 15, 2017

temporary hold on royalty payments from Newcrest Mining Limited, has been ordered by the Waigani National Court today.

The people of Namatanai district, claim they have not received their share of royalties in the last 10 years, an amount that equates to K7 billion.

With the restraining order in place, only the Nimamar LLG and Lihir Landowners will receive their royalties this month.

Kavieng and Namatanai districts and the New Ireland Provincial governments will not receive any payments until parties present their case, on how much they should be paid, and get a clarity on the gures in court next month.

Member for Namatanai, Walter Schnaubelt and member for Kavieng Ian Ling Stucky led a case in the National court, against Sir Julius Chan as Governor for New Ireland Province Government, and Lamiller Pawut as Acting Provincial Administrator of New Island Province.

The sitting MPs are seeking clarity on all the past payments, and how much should have been paid between the New Ireland Provincial Government and the two districts as per the Lihir MOA.

They want an account of all those monies and how much should have been paid to them through the Provincial Treasury accounts.

Schnaubelt said the Provincial Government received K168 million under the governorship of Sir Julius Chan, from 2007 till now.

“I’m fighting for my people’s share. As a district, we never received our portion for the last 10 years. Hopefully the National Government can give us what we deserve initially, in accordance to the Lihir MOA, where Namanatani district is supposed to receive 20% of the Lihir royalties,” he said.

The Lihir Landowners and Nimamar LLG gets 50% payment. From the other 50%, Kavieng and Namatanai districts are to receive K20% each while the 10% is retained by the provincial government.

“The Lihir MOA was very clear, outlining the recipients but unfortunately, Namatanai district has not been receiving its share for 10 years, and that equates for K7 billion years, hence why Namatanai district is in the state its in, a total neglect.

“Hopefully all these corrective measures will now be put in place, and the challenge is now on me as member to deliver the services I promised during the election,” Schnaubelt said.

The two members believe the Lihir MOA is unfair, as royalties have been unfairly administered among the two districts, and they want an account to be given on the payments that should to be received on behalf of the two districts.

In the meantime, their royalty payments will be made to the National court trust accounts. Whether the orders will continue, that will be determined on December 4.

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Namatanai MP Schnaubelt queries Lihir Royalties

NBC News/PNG Today 

Namatanai MP Walter Schnaubelt has tasked the New Ireland Provincial Government to explain the whereabouts of his district’s share of mine royalties, as per an Agreement with the Lihir Gold Mine.

He says since the start of the mine’s operations in 2007, his District has not received its 20 per cent share of the funds.

Mr Schnaubelt told NBC Radio the New Ireland Government must furnish expenditure reports of the payments.

“The concern now is the 50% portion blong New Ireland Provincial Government which is responsible to dispatch 20% to Namatanai district and 20% to Kavieng district na 10 percent is retained by the provincial government blo administration purposes.

“Orait, the provincial government component paid to date is K264m and you know since 2007 i kam nao, Namatanai district and Kavieng district have missed out on their 20% share.”

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Large-scale Mines and Local Politics: Between New Caledonia and Papua New Guinea

Download the chapters in PDF format

  1. Large-Scale Mines and Local‑Level Politics (PDF, 0.2MB) – Colin Filer and Pierre-Yves Le Meur 
  2. From Anticipation to Practice: Social and Economic Management of a Nickel Plant’s Establishment in New Caledonia’s North Province (PDF, 0.8MB) – Jean-Michel Sourisseau, Sonia Grochain and David Poithily 
  3. Social and Environmental Transformations in the Neighbourhood of a Nickel Mining Project: A Case Study from Northern New Caledonia (PDF, 1.7MB) – Matthias Kowasch 
  4. The Boakaine Mine in New Caledonia: A Local Development Issue? (PDF, 0.1MB) – Christine Demmer 
  5. Conflict and Agreement: The Politics of Nickel in Thio, New Caledonia (PDF, 0.1MB) – Pierre-Yves Le Meur 
  6. Contesting the Goro Nickel Mining Project, New Caledonia: Indigenous Rights, Sustainable Development and the Land Issue (PDF, 0.2MB) – Claire Levacher 
  7. Dissecting Corporate Community Development in the Large-Scale Melanesian Mining Sector (PDF, 0.4MB) – Glenn Banks, Dora Kuir-Ayius, David Kombako and Bill F. Sagir 
  8. Negotiating Community Support for Closure or Continuation of the Ok Tedi Mine in Papua New Guinea (PDF, 0.3MB) – Colin Filer and Phillipa Jenkins 
  9. Disconnected Development Worlds: Responsibility towards Local Communities in Papua New Guinea (PDF, 0.3MB) – John Burton and Joyce Onguglo 
  10. Gender Mainstreaming and Local Politics: Women, Women’s Associations and Mining in Lihir (PDF, 0.1MB) – Susan R. Hemer 
  11. Migrants, Labourers and Landowners at the Lihir Gold Mine, Papua New Guinea (PDF, 1.4MB) – Nicholas A. Bainton 
  12. Bougainville: Origins of the Conflict, and Debating the Future of Large-Scale Mining (PDF, 0.2MB) – Anthony J. Regan 
  13. Between New Caledonia and Papua New Guinea (PDF, 0.1MB) – Colin Filer and Pierre-Yves Le Meur 

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Mining industry to extract K11 billion from PNG in 2017

K11 billion mining revenue for 2017
Cedric Patjole | PNG Loop | October 4, 2017

K11 billion in mineral revenue is expected to be generated from both large and small scale mining in 2017.

This is based on gures reported from January to August, according to the Mineral Resources Authority (MRA).

The MRA says this revenue is the result of continued overall increases in mineral commodity prices, production and ore exports.

In a statement, the MRA says the estimated K11 billion revenue represents an increase of 13.4 percent against 2016 mineral revenue, underpinning an ongoing upward trend in mineral receipts which will boost the economy.

Based on gures from operating mines in the country, major projects expect to surpass results from 2016.

Ok Tedi Mine forecasts indicate a 2017 end of year outturn of an additional K700 million, with revenue potentially exceeding K2.7 billion.

Lihir is also turning in another solid performance and revenue forecasts indicate an increase in 2016 of around K200 million, exceeding K3.7 billion for the full year.

Ramu operations still continue to suffer from regulatory and compliance issues, however 2017 production has improved and could exceed 2016’s disruptive year by K300 million.

Revenue from the newly re-opened Kainantu mine is estimated at over K8 million from the first two shipments. Unfortunately the mine suffered a significant setback with illegal damage caused by landowners and this will take some months to recover from.

Simberi mine continues to generate revenue despite moving towards closure next year, coincident with the expiry of their mining lease.

Porgera and the alluvial sector are maintaining reasonably steady positions, while Hidden Valley mine has entered its temporary closure phase. Loss of revenue during this period will hopefully be made up by Kainantu once they return to production.

The Tolukuma mine remains problematic as they struggle with tenement and regulatory issues as well as funding, all of which is hindering a return to production under new owners, Asidokona.

Crater Mountain mine is also a icted by nancial di culties with the failure of a capital raising, but it is hoped that the board and management changes will nally see some positive results from this small operation shortly.

The MRA says while gold still represents an ‘unhealthy’ 68.75 percent of PNG mineral revenue, this percentage has been whittled away by the increase in copper, nickel and cobalt providing that widening of the mineral base’.

The gold price has again uctuated wildly with a recent spike on the back of international tensions surrounding North Korea’s nuclear ambitions, hitting over $USD1340 early in September, only to have now dropped back below $USD1290.

Copper, nickel and cobalt have also continued to rise erratically in recent months with copper hitting a 52 week high of $USD3.13/lb in September.

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Lihir to get Newcrest on target

An overall view of the Cadia mine in Orange, NSW.

Paul Garvey | The Australian | 25 July 2017

For much of its recent history, Newcrest Mining has been relying on its Cadia mine in NSW to make up for the problems at its Lihir mine in Papua New Guinea. Now, the roles are being reversed.

With Cadia out of action ­following an earthquake earlier this year, it was a record quarter from the oft-maligned Lihir that helped the Melbourne-based miner reach its annual production guidance.

Lihir produced 276,230 ounces of gold during the June quarter, up 20.3 per cent for the period in what was a record quarter for the operation.

The strong performance of Lihir — which had historically been the cause of several operational headaches during its early years under Newcrest ownership — helped make up for the sharp decrease in output at Cadia, which was hit by an earthquake in mid-April.

One of two panel caves at Cadia has since restarted production, with the outstanding panel scheduled to come back into operation during the ­September quarter.

The unexpected outage and the cost of remediation work at Cadia will likely weigh on Newcrest’s earnings when it posts it full-year result next month, with the costs associated with the ­incident likely to show up as an exceptional item in its accounts.

Newcrest managing director Sandeep Biswas said the record numbers out of Lihir reflected the “relentless drive for improvement” at the mine.

“Given the disruption to ­production at Cadia due to the seismic event, the overall ­performance this quarter was ­remarkable and demonstrates the resilience of Newcrest’s ­assets,” Mr Biswas said.

Newcrest’s total output for the quarter came in at 551,815 ounces of gold and 12,968 tonnes of ­copper, down from 598,602 ­ounces of gold and 22,074 tonnes of ­copper in the March quarter.

The outage at Cadia, which has historically been Newcrest’s highest-margin mine, meant the company’s all-in sustaining cost margin fell to $US360 an ounce during the June quarter, down from $US521 per ounce in the ­previous three months.

RBC Capital Markets analyst Paul Hissey said that while he ­expected the Cadia incident to affect Newcrest’s upcoming results, the company had been able to limit the damage with improved output from its other key mines.

“While events at Cadia appear largely beyond Newcrest’s control, this result shows that the company has been able to move other levers to broadly mitigate the impact,” he said.

Brokerage Goldman Sachs says the cost guidance in the full year results will be a key driver of sentiment towards Newcrest.

On the exploration front, Newcrest revealed it had applied for 40 exploration tenements in Ecuador, which is emerging as a new gold exploration hotspot. Newcrest has already entered Ecuador through its investment in SolGold, whose Cascabel copper-gold discovery is shaping up as particularly promising.

Newcrest spent another $US40 million on a further 4.5 per cent stake in SolGold during the quarter, taking its interest in the London and Canadian-listed group to 14.54 per cent.

Shares in Newcrest closed 18c, or 0.9 per cent, higher at $19.76.

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Compensation demand for Lihir airport land use

Landowners on Lihir in Papua New Guinea’s New Ireland province are threatening to close the island’s airport if their demand for compensation is not met.

Operation of the Lihir gold mine, which is run by Australian company Newcrest, are dependent on the small Kunaye airport, known also as Londolovit.

Nimarmar Local Level Government Council Media Officer, Tony Sapan said that landowners were frustrated that the mine had operated for over twenty years without any formal compensation for use of their land.

He said the landowners wanted $US900 million or $K3 billion, in compensation.

“They’ve played around with their calculations and they think that’s what the compensation outstanding is worth. And then they can come up with a future for the continued use of that land where the Kunaye airport stands,” said Tony Sapan.

Despite the existence of memorandums of agreement between the provincial government and various local stakeholders for operation of the mine, there is no formal agreement between landowners for use of the airport.

“The airport physically supplies the mine. And there is no such agreement. That is what the landowners are up in arms about,” he said.

The landowners earlier gave notice of their demands in April and have been in discussions with the mine owners, the government and the Mineral Resources Authority.

According to Mr Sapan, the landowners were planning for a meeting next Wednesday, where it was hoped a representative of the mining company could be present for discusssions.

He said the landowners were trying to exhaust negotiation options before carrying out their threat.

“At the last resort, I’m sure, they would want to do that,” Mr Sapan explained.

“But they are talking to the mine, they are talking to the government, they are talking to the Mineral Resources Authority that handles mines in Papua New Guinea. So they are trying their best to do this under the law.”

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