Tag Archives: Lihir

Academic Urges Govt To Revisit Tax Regime

Post Courier | May 28, 2019

The recent political tussle in PNG has emerged due to inconsistent resource development policies, mainly the disagreements on local fiscal contents associated with the extractive sector, explains an academic.

Senior Lecturer Dr Ken Ail Kaepai of PNG University of Technology said from Lae that PNG needs to critically revise the minerals taxation regimes to develop sound policies and innovative ways of capturing a significant share of the mineral wealth without placing tax burdens on the industry.

“The political tussle between the government and opposition is not new. During the mineral boom periods, Australia had its share of high political turnovers due to arguments over resource rent tax and royalty policies.”

“The idea of national ownership of resources has been People Progress Party’s (PPP) policy platform for maximizing the mineral wealth for PNG.

However, PPP has not pursued it for a policy shift. Currently, the political mindset thinks that equity participation is one way to accommodate national interests com- pared to allowing 100 per cent foreign ownership of PNG’s mineral resources,” he said.

He said that the lack of capital for exploration and project developments restrict the national ownership of mining, oil and gas. The State and landowners do not have the equity capital for procuring equity interests in resource projects.

Dr Kaepai explained that given the limitation, the State has agreed to acquire 22.25 per cent interests in the Papua LNG through a deferred payment of the equity capital, which includes the landowner’s 2 per cent interest.

“The State will bear landowner’s financial burden of their equity interest through KPHL. It means that the landowners will be free-riders at the expense of the State and the society at large.”

“Under this arrangement, the dividends will be delayed over more extended periods required for allowing the State to repay the equity capital sourced from external lending institutions or will enable the investor to recoup its equivalent equity capital cost internally using future positive cash flows from the project.”

Dr Keapai said that the deferred payment of the equity capital shifts the financial burden of providing the upfront capital cost of equity to the investor.

The State’s market capitalization of equity participation in minerals, petroleum and LNG is not clear, and landowner equity participation has been problematic,” he stressed.

Dr Kaepai said that the Panguna was the only mine that consistently paid equity dividends until its premature closure in 1988.

“Local equity participation in Porgera and Lihir gold mines have been problematic and unsustainable, while free-carried interest was offered to OK Tedi landowners under exceptional circumstances associated with the riverine tailings disposal system.”

Dr Kaepai said that a former mining minister, the DMPGM and the MRA misled the GoPNG to take the 30 per cent equity in the failed Nautilus Minerals’ under-sea mining development.

“It is a significant loss of public funds that could have been used to develop the deteriorating health and education infrastructures in rural PNG.”

“It appears that the GoPNG provides tax holidays as compensation for equity participation, and at the pretence of attracting foreign direct investment. “This strategy causes a fiscal dissipation where both tax concession and equity participation could lead to wasteful resource extraction.

“The State and landowners need to critically assess the financial viability of equity participation in Papua LNG, Wafi-Golpu and Frieda projects.

This includes the renegotiation of the Porgera gold mine on a case by case basis.

Advertisements

1 Comment

Filed under Financial returns, Papua New Guinea

Gold is Stolen on a Massive Scale in PNG

Sam Jay Kaupa | PNG Blogs | 

There is a question that people need to ask. Why can’t the Central Bank of PNG buy gold to curb smuggling and also build the reserves to stabilise the plummeting Kina?

The mining sector accounts for about 9% of the GDP and the overall resources sector contributes about 26% of the GDP. This will continue to rise with the current demand for cobalt which as a by-product of the mix hydroxide precipitate from the Ramu Nickel.

Copper is on the rebound with nickel and so is gold which is now hovering above $US1,300/oz. Gold price will continue to go up according to analysts and from graphical representations from Kitco (where I get most of my data from)

Currently, gold is stolen on a massive scale in PNG Mines. Gold production from mines is under-reported. This is a massive scam. For example – 20 million ounces were mined from the giant Porgera Gold Mine and bullions shipped off-shore by helicopter to Mt Hagen and by private jet to Perth almost every few days over the last two and a half decades.

Who from the IRC, Customs, Treasury or the MRA checks the exact amount of gold that is shipped out?

NO ONE – I MEAN NO ONE.

The MRA gets a little piece of paper called Form 25 where minerals exported are recorded from the Registered Mine Manager (who are all expats for the big mines)

That information is not enough. It is criminal to accept as gospel unverifiable sales records, especially for gold shipments.

Then the Treasury department relies of this MRA record of sales to project future revenues and plug that into the budget. The same info is shared with the BoPNG and other agencies.

For God’s heavenly grace – why can’t we have some of these fat lazy public servants at the point of exits like the helipad in Porgera to physically weigh, record and sign off on all gold shipments? Guess we caught the late bus. Tough luck now. 20 million ounces out the back door.

The other mines like Lihir and Ramu Nickel are doing the same thing. The PNG government does not have people on the ground like what I used to see everywhere in Africa where I used to work. They are everywhere. They are everywhere because that’s where the money comes in from. It’s not rocket science. You don’t collect revenue for the government by sitting in air-conditioned offices and pray for God’s interventions? Get your fat bums out and get your smooth fingers dirty.

So the bottom line is gold is stolen everywhere. It’s prevalent.

Why on earth does the BoPNG even give licences for companies to export gold?

“Bank of PNG should buy the gold instead and put the money there (in gold) instead of reserving the dollars alone. They should reserve dollars and gold together to stabilise the Kina starting with the artisanal gold market.

As an example, the Tanzanian government has a prolonged spat with Barrick fully owned subsidiary Acacia over a $190 billion tax bill for its mining operations in the East African nation. Exactly the same thing they were doing in Porgera until the Government found out and back-calculated the tax owed to them. So what I’m saying here is doable if the PNG government is serious in recouping lost revenue.

In 2017, that government passed laws to reform their mining sector that the industry complained would be costly and onerous.

In PNG when such laws are proposed, the industry backed by the PNG Chamber of Mines bitterly contests because they want PNG to continue to become an impoverished nation. And this is strongly supported by PNG government agencies (you know who they are).

But I tell you, one day, one friggin day this will change and the people of PNG will take back their resources and develop it with decent developers so that the benefits will trickle down right to the doorsteps of the people whose faint cries are always ignored by greedy people.

Don’t mess with God’s people. One day they will rise and the stealing will cease.

3 Comments

Filed under Financial returns, Papua New Guinea

K660m in royalties from Lihir

“Sounds a lot, huh? But average it out – over 20 years that averages to K33m per year. And what about total revenues from the mine? Over 20 years total revenues have been K33 BILLION, or an average of K1.65 billion per year.

“Countries around the world get 8%, 12%, even ( in Canadian provinces) 18% royalties. What do we get? 2%!

“Lot of money coming out of the ground. And it is all going overseas. All we will be left with is a big hole (just look at Misima).” Bruce Harris

Loop PNG | March 20, 2018

The people of New Ireland have received K660 million in total royalties from the Lihir Gold Limited (LGL) since 1997.

Of the total royalty payments made between 1997 and December 2017 (K660m);

  • New Ireland Provincial Government (+ districts) had received K330,057,253
  • Nimamar Local Level Government had received K198,034,351
  • Special Mining Lease Block Owners had received K132,022,902

From January to December 2017, Lihir Gold Limited royalty payments to the people of New Ireland have added to a total of K75,065,077 as highlighted (in yellow) in the table below.

What are royalties?

The PNG Mining Act defines royalties as payments by a mining company to the State based on 2 percent of the value of all gold sold.

The Mining Act further states that it is up to the State to decide how it wants to redistribute the royalties.

For the Lihir operation, the State, in a Memorandum of Agreement (MOA) – signed with NIPG, NLLG and the Lihir Mining Area Landowner Association (LMALA) – agreed that the National Government shall ensure that all royalties be distributed in the following way;

  • 50 percent be paid to NIPG
  • 30 percent be paid to NLLG
  • 20 percent be paid directly to the SML block owners.

The MOA further states that the 50 percent portion for the NIPG be divided as:

  • 20 percent to the Namatanai District for infrastructure projects and programs pursuant to its district and provincial development plans. (Lihir comes under the jurisdiction of the Nimamar Local Level Government in the Namatanai district.)
  • 20 percent to the Kavieng District for infrastructure projects and programs pursuant to its districts and provincial development plans.
  • 10 percent for general administration as well as for the administration of the MOA obligations.

The MOA allocation of royalties for infrastructure projects and programs in both Namatanai and Kavieng fulfils Recital C of the MDC’s Social Impact Monitoring Plan for the Lihir operation. It therefore makes Lihir a business that is benefitting the whole of New Ireland Province.

For the 30 percent NLLG portion of total royalties, the MOA states that it be split further in the following way:

  • 20 percent to be spent on community development and programs
  • 10 percent to be spent on long term growth-driven investments

For the 20 percent royalty portion for SML block owners, an arrangement was made between the SML block executives and LMALA for Newcrest Lihir to deduct 20 percent and pay it directly to LMALA to put in a financial savings scheme for the landowners. The remaining 80 percent is paid to the SML block executive to distribute to the SML block owners.

In a statement, the mining rm said: “LGL as a corporate citizen and development partner for New Ireland and PNG honours the MOA and other agreements and complies with all laws of PNG.

“LGL pays royalties every month and reports to the Mineral Resource Authority (MRA), the Internal Revenue Commission and other stakeholder government agencies.”

Newcrest Mining Limited, owner of LGL, is a publically [sic] listed company on the PNG and Australian stock exchanges. As such it is required to regularly report its financial performance through various communications channels, including its website http://www.newcrest.com.au.

2 Comments

Filed under Financial returns

Lihir could yet be million ounce gold mine: Biswas

Newcrest Mining chief executive Sandeep Biswas says the leNewcrest chief Sandeep Biswas has stressed he is more interested in value rather than volume.

Newcrest chief Sandeep Biswas has stressed he is more interested in value rather than volume.

A million ounces of gold a year sounds great for Newcrest shareholders – but what about the poor people of New Ireland, left behind as the quasi-colonial mining companies ship their gold? 

Peter Ker | Australian Financial Review

The man leading the turn-around of Australia’s biggest gold miner, Sandeep Biswas, has not given up hope that the Lihir gold mine may yet fulfil its potential to produce a million ounces of gold in a year.

The Newcrest chief executive has in recent years improved output from the PNG mine, which Newcrest acquired for $10.5 billion of scrip in 2010.

Located in the caldera of an extinct volcano, Lihir boasts one of the world’s largest gold deposits and was supposed to be producing more than a million ounces per year by 2012.

But Lihir has never lived up to those expectations, with annual production never getting close and reliability issues prompting $5.6 billion of asset impairments over the past five years.

But improvements have been seen in the 30 months since Mr Biswas took the reins at Newcrest; mill throughput has risen at Lihir by close to 30 per cent, plant availability has risen from just over 70 per cent to more than 80 per cent while all-in sustaining costs of production have fallen from $1201 per ounce in the December half of 2013 to $830 per ounce in fiscal 2016.

Lihir produced a record 900,034 ounces of gold in fiscal 2016, and official guidance for fiscal 2017 has been set at between 880,000 ounces and 980,000 ounces.

Mr Biswas rarely speaks about gold production targets, preferring instead to guide investors towards more controllable goals such as the volumes of ore put through the processing circuit at Lihir.

But he told The Australian Financial Review that producing 1 million ounces of gold from Lihir in a year could yet be achieved.

“If you took the plant up to 15 million tonnes to 17 million tonnes grinding rate, as long as your [gold] grade was in the high 2 per cent [range] then yes, it’s possible to get over a million ounces,” he said in a recent interview.

For comparison, Newcrest was due to be grinding at about 13 million tonnes per year by the end of 2016, 14 million tonnes by December 2017 and 15 million tonnes per year within five years.

But while 1 million ounces per year would be a major milestone for Lihir, it does not appear to be a driving ambition for Mr Biswas.

The Indian-born executive stressed he was more interested in value rather than volume, and under his stewardship Newcrest is taking a lower-cost development approach to Lihir that has seen its gold production volumes rise more slowly than originally anticipated.

Plans to be producing 1 million ounces at Lihir by 2012 implied an early development of a high-grade gold deposit called Kapit, but Mr Biswas has delayed the development of Kapit and studied ways to do it more economically.

“With the work we have done on developing the Kapit ore body, we have saved $1 billion on capex minimum which they would have had to spend under that plan,” he said.

“We have pushed that back, by the time we get to Kapit it will be 2025.

“Yes it [Kapit] has better [gold] grades, but you don’t want to spend a billion and half dollars going to get it, we would rather spend $200 or $300 million, which is the current plan.” 

“When you look at how much gold you produce you also have to look at how much capex and what your operating costs are. I think we’ve got a much more sustainable model.”

Newcrest is expected to publish its December-quarter production results on  January 30, before revealing half-year financial results on February 13.

Mr Biswas is scheduled to give an address to the Melbourne Mining Club on February 9.

1 Comment

Filed under Financial returns, Papua New Guinea

MRA annual report: PNG to continue its dependence on foreign mining

Porgera mine pit

Porgera mine pit

PNG Today

Despite the slump in the world mineral commodity prices and its negative impact on investment climate, a good number of existing mining and advanced exploration projects, progressed their work programs, while a number of project acquisitions were undertaken between investors last year.

The Managing Director of the Mineral Resources Authority (MRA) Philip Samar reported in the entity’s 2015 annual report to the government, that although times were tough on the investment and commodity market fronts, projects like Simberi saw a turn-around in its production levels reaching an output of 107, 553 ounces of gold and 21,387 ounces of silver last year. This will be an increase of over 100% from previous years. It is expected that the company will maintain its production at this level due to the recent upgrades to its processing plant.

Both the Kainantu mine and Tolukuma mine are moving towards reopening under new owners K92 Holdings Ltd and Aisdokona Mining Resources respectively. Both mines are scheduled to recommence commercial production within the next 2 years.

The only new mine to commence production last year was Crater Mountain with an anticipated initial low production of 10,000 ounces of which they reported production of 59 ounces of gold in the first 4 months.

Ramu continues to ramp-up production of nickel and cobalt having reached 90% capacity after its first export shipment in 2012.

Porgera and Lihir, despite the drought, safety and landowner setbacks throughout 2015, are both increasing production.

Barrick Gold concluded its strategic partnership with Chinese (Government owned) partner, Zijin Mining and has also commenced exporting pyrite.

Nautilus is progressing with development of its key infrastructure. It held several design workshops to support the design and build contract for the pivotal mining vessel during 2015. The company is expected to conduct its wet testing of the seafloor mining tools in the Oman during 2016 with integration of the sea floor equipment into the vessel during during 2017 in preparation for commercial mining in 2018.

PanAust has confirmed their takeover by their majority Chinese (Government owned) shareholder, which is considered positive for future funding. The company has confirmed its commitment to lodge a Special Mining Lease (SML) application for the Frieda River project in the first half of 2016.

Newcrest and Harmony have settled on a two stage approach to commence development of the Wafi/Golpu deposit and expectations are that an SML application may be lodged during Q3 2016.

In terms of exploration expenditure for the year, a total of K323,453,373 million was reported by compliant exploration tenement holders (as recorded in our Flexicadastre electronic tenement management system). Of this exploration expenditure K266 million was spent by the top 10 advanced explorers. The total expenditure is in comparison to K360 million reported as spent in 2014.

Other promising prospects are:

  1. Ok Tedi’s nearby Townsville prospect potentially adding to the throughput at Ok Tedi if developed.
  2. Highlands Pacific’s (with its new partner Anglo-American) Star Mountains prospect which is indicating encouraging exploration results.
  3. Harmony’s Kili Teke prospect, with indications of ongoing and future commitment to significant exploration spending.

Some defined resources are in retention phases notably substantial nickel discoveries in Oro Province and heavy mineral sands in Morobe Province, while coal and other sand based mineral opportunities are also appearing positive.

Leave a comment

Filed under Exploration, Financial returns, Papua New Guinea

Four mining reviews complete

Gynnie Kero | The National aka The Loggers Times 

The conclusion of the Ok Tedi review brings to total four mining project memorandum of agreement (MoA) completed, the Mineral Resources Authority says.

Managing director Philip Samar said the three others included Simberi (New Ireland), Sinivit (East New Britain) and Tolukuma (Central).

He said these MoAs were completed and ready for sign off by the parties this year.

“This is indeed a milestone achievement by the MRA where never before has the government been able to achieve such an outcome with the Ramu MoA signed off last year and with another four MoAs to be signed off before the end of this year.

“We set a target of executing three MoAs this year but it looks we will be exceeding that,” Samar added.

He said the remaining agreements for Porgera and Hidden Valley were 90% completed.

He said Lihir’s agreement has been stalled due to the integrated benefits package (IBP) discussions by Lihirian parties.

The IBP is a standalone document that is not replicated in other mines within the country.

The MRA clarified yesterday’s report on the transfer of royalty split from the Ok Tedi Mine.

The authority said the Fly River Provincial Government (FRPG) will not give the 10% royalty to Mount Fubilan Resource Owners Authority (MFRA).

But, both parties have resolved for FRPG to give K2 million from its annual general budget to MFRA every year to sustain its operations.

1 Comment

Filed under Financial returns, Papua New Guinea

MRA rushing MoAs

The National aka The Loggers Times

THE Government is confident of delivering three mining project agreements (MoAs) this year.

Mineral Resources Authority (MRA) had marked 2013 as the year to review all the nine mining projects’ MoAs.

Since then, the authority with the support of other relevant government agencies, has been meeting with stakeholders of the projects’ agreements, to review the benefit packages.

The nine mining projects are Ok Tedi, Porgera, Lihir, Simberi, Ramu, Hidden Valley, Sinivit, Tolukuma and Solwara1 Project.

Acting MRA managing director Philip Samar (pictured left) said this was the first time in the mining history of Papua New Guinea that the Government had conducted this number of MoA reviews in one year.

He said out of the nine projects’ agreements, the government had at least reviewed seven, with three almost completed.

The three MoAs were that of Ramu, Simberi and Tolukuma.

The rest of the MoA reviews were either at advanced stages and nearing completion or still in progress.

Samar said he was confident that all MoAs would be signed off before the end of this year or in the first-half of next year.

He said Ramu agreement had been approved by the National Executive Council (NEC) and that it would be officially signed in two weeks’ time in Madang.

He said Tolukuma and Simberi MoAs had been agreed upon by all parties and were going through the government process, especially legal clearance by the State Solicitor before it goes to the NEC for approval.

These agreements are expected to be signed towards the end of the year.

Parties to the Sinivit mining project agreement had agreed to the primary terms as contained in the revised draft of the MoA, with only the training and employment and the business development plan yet to be concluded.

Leave a comment

Filed under Human rights, Papua New Guinea