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Derelict mine caused a bloody war. Now Aussie companies are fighting over it again

Heavy trucks sit rusting on the edges of Panguna copper mine, closed in 1989 as a result of sabotage.

Sarah Danckert and Ben Bohane | Sydney Morning Herald | November 15, 2019

Iron ore magnate Andrew “Twiggy” Forrest has joined the race with an unruly bunch of small, struggling mining companies, all with links to Australia and share prices of 10c or less, for access to some of the world’s biggest copper and gold deposits on the Pacific island of Bougainville.

The manoeuvring over the gigantic, mothballed Panguna mine comes ahead of an independence referendum later this month that could turn Bougainville into the world’s newest nation after disputes over foreign mining prompted a bloody, 10-year war that killed perhaps 15,000 people.

However, China is also sniffing around opportunities in Bougainville, although not necessarily the Panguna mine itself, which was valued recently at a staggering $US58 billion ($84 billion).

Previously run by Rio Tinto, the mine was at the centre of a decade-long conflict over allegations that locals were being ripped off and the environment damaged by foreign mining companies. The war continued well after the mine closed as a battle of control for the country raged between the Bougainville Revolutionary Army and the Papua New Guinea Defence Force. It was the most serious conflict in the south Pacific since World War II.

The Age and The Sydney Morning Herald have confirmed that representatives of Mr Forrest’s mining company, Fortescue, travelled in recent months to the island and were exploring growth opportunities there.

“As a leading mining company with world-class expertise, we constantly assess opportunities to build on our operational reputation to drive future growth through product diversification and asset development,” chief executive Elizabeth Gaines said. “Consistent with business development activities, representatives from Fortescue have visited Bougainville Island to learn about the region and potential opportunities.”

Other companies – including one chaired by a former Liberal defence minister David Johnston and another by Arabian horse breeder and luxury goods dealer Jeff McGlinn – have also been striving to gain local support on the island to reopen the mine, which was shuttered in 1989.

Meanwhile, a Chinese delegation is rumoured to have offered substantial funds in late 2018 to help finance a transition to Bougainville independence, along with offers to invest in mining, tourism and agriculture, with a figure of $US1 billion cited. A new port was also reportedly proposed.

A new nation to our north?

On November 23, Bougainvilleans will go to the polls and are expected to vote overwhelmingly for independence from Papua New Guinea. But in the wake of that expected vote, there is a real risk of new disputes between landowner groups as miners, many with links to Australia, could reignite the crisis that engulfed the island 30 years ago.

“Are they f—king mad?” asks one former Rio Tinto executive who worked at the company when it was the majority owner of Bougainville. “Re-opening Panguna would be a disaster.”

In its heyday, the mine, which would take an estimated $US5 billion in infrastructure spending to restart, was a productive asset for Rio Tinto, then known as Conzinc Rio Tinto. During the final year of production in 1988 and 1989, Rio’s subsidiary Bougainville Copper (BCL) extracted 550,000 tonnes of copper concentrate and a whopping 450,000 ounces of gold.

Already the tussle for Panguna has sparked a race to promise the best deal and the highest royalties to landowners while stemming the environmental degradation that has ravaged Bougainville. But that race has also already sparked intense political disagreement between rival groups on the island.

Rio’s former subsidiary BCL is still in the race for a mining licence, though Rio divested its shares and walked away in 2016. But a number of new entrants are also in the game.

Among them is Toronto and ASX-listed RTG Mining Inc – which has links to the Philippines and counts the son of billionaire Australian stock picker David Hains, Richard, as the largest shareholder of its Toronto-issued shares.

Another ASX-listed company, Kalia Limited, has been given two permits to explore in the northern tip of Bougainville. Kalia counts former Defence Minister David Johnston as its chairman and Perth-based mining entrepreneur Nick Zuks as its top shareholder. Johnston’s biggest claims to fame at home are a controversy over his lavish spending on entertainment as minister and comments that South Australians couldn’t build a canoe, much less a submarine.

Kalia’s bid is financially supported by a company run by Australian polo patriarch Peter Yunghanns. Another significant shareholder, Graeme Kirke, is the founder of Kirke Securities where Mr Forrest previously worked.

More recently a new player, Caballus Mining, has arrived in Bougainville. It sparked fears, rumours and intrigue when it emerged the Autonomous Government of Bougainville had drafted new laws that would assign the responsibility for issuing mining licences to a new entity – Bougainville Advance Mining and a foreign partner. Many believed that partner would be Caballus.

Caballus Mining was set up only in August 2018. Its sole director is Arabian horse breeder and luxury goods dealer Jeff McGlinn – a man who posted a flashy social media video of Saudi royalty at a luxury event, and another of him giving one of his fine equines to classical crossover singer Andrea Bocelli.

The entry of Caballus sparked fears among Bougainville locals – specifically those linked to rival miners – that a three-way fight for Panguna would erupt.

Slugging it out

Already, former Rio subsidiary BCL and Australian-Toronto based RTG Mining have been slugging it out via statements on their websites or on the Australian Securities Exchange. RTG claims BCL has lost its local goodwill and cannot operate in Bougainville, and that RTG has the support of a landowner group the Special Mining Lease Osikaiyang Landowners Association – one of the groups who say they represent landowners in the Panguna area.

BCL hit back saying the landowners’ association (known as SMLOLA) is a new invention and points to recent statements disputing its provenance. In turn, the landowner groups supporting BCL’s plans to reopen Panguna have also come under fire.

The one thing both have in common is their respective share prices are in the gutter, with BCL trading at 10 cents a share and RTG trading at 6.5 Canadian cents (7.4 cents). Kalia’s share price is just one-tenth of a cent.

The disputes between miners have been reflected in intense politicking among local landowner groups and political players on Bougainville. Bougainville’s president John Momis has copped much criticism for entertaining the Caballus deal, and the Autonomous Bougainville Government has given mixed signals on its position on mining.

Momis initially supported a moratorium on mining at Panguna to avoid reigniting old conflicts between landowner groups. The moratorium was put in place in early 2018, but the government now appears to favour mining across the island as a means to generate income and underwrite independence.

Autonomous Bougainville Government President John Momis.

Landowners are guaranteed rights under the 2015 Mining Act, but in an urgent bid in January 2019 to raise funds for the referendum, the government proposed to abolish those rights, at the same time allocating “near monopoly” rights to Caballus’s Bougainville Advance Mining. That legislation was later rejected by the government’s legislative committee, illustrating how politically contentious this issue will be in an independent Bougainville.

Fiscal self-reliance

In recent months, the mudslinging by supporters of both groups has died down. Several sources linked to the company and NGOs operating on the island said this was due to the request by the government that the miners are not seen to be influencing the independence vote.

There was no answer from Caballus in response to a series of questions, including regarding its links to Bougainville Advance Mining and how it achieved such a prime position. McGlinn was last week travelling in Europe.

Calls to the Perth offices of another suitor, Kalia Limited, which is now led by Michael Johnston, the former boss of failed PNG miner Nautilus Mining, went unreturned. David Johnston (no relation to Michael) and Kalia shareholder Nick Zuks also did not return calls.

RTG chairman Michael Carrick was also loath to talk about the issue.

“Politics is played extremely robustly in PNG and the facts/truth are often amongst the first casualties,” Carrick said via email from his Perth office. However, he added that mining would be part of Bougainville’s future.

“There can be no independence without first setting the country on a pathway to fiscal self-reliance and Panguna is the only asset which can assist this fundamental objective.”

BCL company secretary Mark Hitchcock said from his office in Port Moresby that the company retained strong support among landowners and rejected suggestions the company had lost its social licence to operate.

“There is at times frustration when some purporting to speak on behalf of all landowners are in fact representing a narrower interest. Regardless, all views are to be respected.”

Luke Fletcher, a long-time Bougainville watcher and executive director of think tank Jubilee Australia warns of the “resources curse” that has plagued PNG.

“This is one of the problems of the resource curse, you have these big revenues sitting in bank accounts that can be misappropriated quite easily,” he said.

It’s a curse that many think is worth risking.

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Rival questions authority of Bougainville’s Osikaiyang landowners

“The original divisions from the beginning of the conflict in Panguna #Bougainville have not gone away. Foreign controlled companies continue to involve themselves and interfere which exacerbates the situation. Money continues to corrupt individuals and complicate any resolution” Stret Pasin

Radio New Zealand | 16 July 2019 

The Special Mining Lease Osikaiyang Landowners Association represents itself as the key body at the site of the Panguna mine, which various interests are looking to develop.

Osikaiyang wants to operate Panguna with an Australian company, RTG.

But the Panguna Development Company, which has links to rival prospective operator, BCL, said Osikaiyang is making misleading public statements when it has no right to do so, under the region’s mining act.

It said such statements can only be given by customary heads, who are authorised to represent the Panguna blocks, and Osikaiyang has never had this consent.

Last week Osikaiyang issued an ultimatum, suggesting the referendum on independence from Papua New Guinea could be derailed if it doesn’t get its way over Panguna.

The Development Company called this threat unfortunate.

Meanwhile, government moves to change the Mining Act to allow a third foreign company to take charge of the mine have been put on hold until after the referendum.

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Mining Hopes for Independence

An aerial view of the Panguna mine located in the autonomous region of Bougainville on July 20, 2015, in Papua New Guinea.(USGS/NASA LANDSAT/GETTY IMAGES)

A copper quarry helps fuel Bougainville’s hopes for separation from Papua New Guinea, a move that would resonate across the Pacific.

By Geoff Hiscock | U.S. News | July 1, 2019

THE Pacific island of Bougainville is moving a step closer to potential independence from Papua New Guinea as preparations begin for a long-promised referendum later this year.

Whether it can survive as a stand-alone nation is a key question for its 250,000 inhabitants, and for other separatist movements in the Pacific. The future course of the island could ripple across the region, as the question of Bougainville’s independence will touch on a complicated mixture of business concerns, environmental worries and geopolitical interests stretching from Australia and New Zealand to ChinaJapan and the United States.

It’s an outsized international role for Bougainville, which lies 900 kilometers (560 miles) east of the Papua New Guinea mainland. The roots of the referendum stem from a bitter inter-clan and separatist conflict that ran from 1988 to 1997, fighting that claimed between 10,000 and 20,000 lives through a combination of violence, disease, poverty and dislocation.

A truce brokered and maintained by regional neighbors that included Australia, New Zealand and Fiji helped restore order, and a comprehensive peace agreement was signed between Papua New Guinea and Bougainville in 2001. The island has had its own autonomous government since 2005.

Bougainville’s people are expected to vote decisively for independence in the Oct. 17 referendum, according to Jonathan Pryke, Pacific Islands program director at the Lowy Institute, a Sydney-based policy think tank. The vote is not binding and any move toward independence will require agreement from the central government of Papua New Guinea, commonly referred to as PNG.

Most people hope the two sides can find a “Melanesian solution” that will deliver a workable form of autonomy for Bougainville, says Pryke, using the term that describes the region of the South Pacific that includes PNG, Fiji, the Solomon Islands and other island nations and territories.

James Marape, who took over as Papua New Guinea’s prime minister in late May, said on June 14 he would prefer Bougainville to remain part of a unified nation, but would listen to the people’s voice and then consult over future options.

Papua New Guinea’s new prime minister, James Marape, arrives at the house of Governor-General Bob Dadae to be sworn in as the new leader in Port Moresby on May 30, 2019.(GORETHY KENNETH/AFP/GETTY IMAGES)

Peter Jennings, executive director of the Australian Strategic Policy Institute in Sydney, says the desire for independence in Bougainville remains strong, but from a regional perspective it will be best if the Bougainville people decided to stay in Papua New Guinea. “We don’t need another microstate emerging in the Pacific.”

Australian Foreign Minister Marise Payne, who visited Bougainville on June 19 with PNG’s new minister for Bougainville Affairs, Sir Puka Temu, said Australia will work to ensure the integrity of the referendum and will not pass judgment on the result. Australia is by far the biggest aid donor in the Pacific region, giving $6.5 billion between 2011 and 2017, according to research last year by the Lowy Institute. Most of Australia’s aid goes to Papua New Guinea.

Scars Remain From a Civil War

The Bougainville conflict, in which rival clans on the island fought among themselves and with the Papua New Guinea Defence Force, evolved from multiple issues, including land rights, customary ownership, “outsider” interference and migration, mineral resource exploitation, and perceived inequities and environmental damage associated with the rich Panguna copper mine.

Under the terms of the 2001 peace agreement, a vote on independence within 20 years was promised.

A reconciliation ceremony will be held on July 2 between the central PNG government, the national defence force, the Autonomous Bougainville Government and the Bougainville Revolutionary Army.

Deep scars remain from the conflict, both physical and emotional. Much of the island’s public infrastructure remains in poor shape, educational opportunities are limited, and corruption is pervasive. Clan rivalry and suspicion persists, particularly in regard to land rights and resource development.

Since Panguna closed in May 1989, Bougainville’s people have led a life built around agriculture and fishing. The cocoa and copra industries ravaged by the war have been re-established, there is small-scale gold mining, and potential for hydroelectric power and a revived forestry industry. For now, a lack of accommodation inhibits tourism.

Copper Mine Underscores Doubts over Bougainville’s Economic Viability

Almost 40 years ago, Bougainville’s Panguna mine was the biggest contributor to Papua New Guinea’s export income and the largest open-cut in the world. But the mine, operated by BCL, a subsidiary of Conzinc Riotinto Australia (now Rio Tinto Ltd.), became a focal point for conflict over pollution, migrant workers, resource ownership and revenue sharing, and has been dormant since 1989.

Apart from any foreign aid it may receive, Bougainville’s future prosperity may well depend on whether it can restart the mine, which contains copper and gold worth an estimated $50 billion. But customary ownership claims – land used for generations by local communities without the need for legal title – remain unresolved and at least three mining groups are in contention, which means an early restart is unlikely. Jennings cautions against investing too much hope in Panguna, with remediation costs after 30 years of disuse likely to be high.

Likewise, Luke Fletcher, executive director of the Sydney-based Jubilee Australia Research Centre, which studies the social and environmental impacts of resources projects on Pacific communities, says reopening Panguna would be a long, expensive and difficult proposition. He says the challenge for any mine operator would be developing a project that is environmentally safe, yet still deliver an acceptable return to shareholders and to the government.

Bougainville’s leader, President John Momis, believes that large-scale mining offers the best chance for income generation and is keen both to revive Panguna and encourage other projects. That would require outside investment, which was a factor contributing to the outbreak of violence in the late 1980s. The local community perceived that it was not getting its fair share of Panguna’s wealth.

Rio Tinto gave up its share in BCL in 2016, and ownership now rests with the government of PNG and the Bougainville government, each with 36.4%. Independent shareholders own the remaining 27.2%.

At least two other groups are vying to operate Panguna. Sir Mel Togolo, the BCL chairman, told the company’s annual general meeting on May 2 that continued uncertainty about Panguna’s tenure remains a big challenge. “We will need to work cooperatively with all stakeholders to achieve our objective of bringing the Panguna mine back into production,” he said.

Regional, International Eyes on October Referendum

With doubts persisting about Bougainville’s economic viability if it cuts ties with the central government, the referendum outcome will be closely watched by other PNG provinces pushing for greater autonomy, such as East New Britain, New Ireland and Enga.

Across the region, some parts of neighboring Vanuatu and the Solomon Islands are agitating for their own separate identities. In the nearby French overseas territory of New Caledonia, voters rejected independence from France by a 56 percent to 44 percent margin in November 2018. European settlers were heavily in favor of staying part of France, while indigenous Kanak people overwhelmingly voted for independence.

At the international level, Australia will be keen to ensure that whatever the outcome of the Bougainville referendum, stability is maintained in Papua New Guinea, if only to counter China’s growing interest in offering aid and economic benefits as it builds a Pacific presence.

Along with Japan, New Zealand and the U.S., Australia has committed to a 10-year $1.7 billion electrification project in Papua New Guinea. Australia and the U.S. have agreed to help Papua New Guinea redevelop its Manus Island naval base, which sits 350 kilometers north of the mainland and commands key trade routes into the Pacific.

Jennings says Australia would be likely to give aid to an independent Bougainville to try to keep China at bay. “China is everywhere. Its destructive connections co-opt leaderships in a way that doesn’t work out well for people.”

From a strategic perspective, Jennings says it would be best if Melanesia looked to Australia as its main partner on matters of security.

While China gives most of its aid to PNG and Fiji, the region’s two biggest economies, Jubilee’s Fletcher says China giving aid to an independent Bougainville was “feasible.”

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Mining Subject To B’ville Govt

Panguna mine in operation, circa 1971 (Photo: Robert Owen Winkler/Wikimedia Commons)

Post Courier | May 7, 2019

All mining, oil, and gas powers and functions belong to the Autonomous Bougainville Government, says ABG vice president and mining minister Raymond Masono.

Mr Masono said this in response to a news article titled “Bougainville admonished by O’Neill over planned mining change” which was posted on social media through Radio New Zealand on Monday, April 29.

The ABG mining minister said the the transfer of these powers from the national government to the ABG was signed in March 2008 at Alotau between the late president, Joseph Kabui, and the then deputy prime minister, Sir Puka Temu.

“This process was in turn completed when the ABG passed its own mining law in April, 2015,” Mr Masono said.

“The ABG mining act is unique in the sense that it recognises landowners as owners of the minerals beneath the ground and not the crown or the state as in Papua New Guinea.

“The proposed amendment further consolidates this ownership rights by giving landowners and the ABG controlling interest in any major mining development project, starting with the Panguna mine through a Bougainvillean mining entity that would own 60 per cent of the shares on behalf of the landowners, ABG and the people of Bougainville.

“The Bougainville entity is not Caballus, it is the Bougainville advance mining company,” he said

Mr Masono said contrary to the Rio Tinto Group-aligned special mining lease Osikaiyang landowners association (SMOLA) that the amendments take away landowner rights, the proposed amendments give landowners more and better benefits in terms of equity and royalties than they are currently entitled to under the existing law.

“But the Panguna mine no longer belongs only to the RTG sponsored SMOLA, rather the mine belongs also to the other eight mine-affected landowners, whose land was used for mining purposes in the 17 years of operations and who support the amendment,” he said.

“It also belongs to all Bougainvilleans because the blood of 20,000 lives was spilled over the mine by Bougainvilleans, who died fighting to protect these resources.”

He said Bougainvilleans have consented that the Panguna mine must reopen, but not with Bougainville Copper Ltd and certainly not with RTG, two firms that are no doubt sponsoring those opposed the amendments. Mr Masono said relevant agencies have conducted and continued to carry out awareness to correct the misinformation, deliberate misinterpretation that are being propagated by those opposed to the proposed amendments.

The ABG is not rushing its work, it will continue to consult with landowners and the people of Bougainville before it passes the amendments.

“In addition to these consultations, the people of Panguna are now engaged in their own traditional social mapping process called ‘tangurang’ to identify the true landowners,” he said.

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Indigenous Rights Advocacy Group says ABG President Momis is not telling the truth

Prime Minister O’Neill has written to the ABG President raising concern over proposed changes to the Bougainville Mining law; concerns Momis is trying to downplay using ‘misinformation’

Chairman of a human rights organization, Bougainville Indigenous Rights Advocacy (BIRA), James Onartoo, has raised concerns that the ABG President Momis is deliberately trying to spread misinformation to push his government’s proposal to amend the Bougainville Mining Act.

Mr. Onartoo was responding to a draft letter of response by President Momis to concerns expressed by the Prime Minister in his letter to the President on the proposed amendment. The letter in which the President downplayed the Prime Minister’s concerns was posted recently on social media.

Mr. Onartoo said that the proposed amendment drew wide opposition because it removed protection of customary landowners’ rights and attempted to replace it with vague benefits and entitlements that lacked detail.

“You cannot remove and replace existing protection of the rights of customary landowners with imaginary rewards that may never materialize in the end,” he said.

Mr. Onartoo was also critical of the way ABG was handpicking people to drum up support in the mine affected areas to help push through the amendments. He said the ABG had never obtained “free, prior informed consent” (FPIC) in the mine affected areas and instead it has tried to avoid those who opposed mining, causing further divisions in the mine affected communities.

“Under FPIC the people have the right to say no to mining and the government should respect the wishes of the people and support them. Instead the government has gone abroad to make a deal and it is now trying to involved the landowners after the laws are drafted along with the proposed amendment to cater for monopolization of mining by a single mining company ”, Mr Onartoo said.

The Vice President, Raymond Masono and Finance Minister Robin Wilson left yesterday for Port Moresby to hand deliver the letter from President Momis to the Prime Minister, Peter O’Neill.

Meanwhile, ABG Parliamentary Legislative Committee’s inquiry into the amendment bill continues in Central Bougainville and according to it’s Chairman and member for Kokoda constituency, Rodney Osioco, there is a growing opposition from all stakeholders and the general public, to the proposed bill by the ABG to amend the Bougainville Mining Act.

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Bougainville President launches stinging attack on RTG

A lake in the pit of the long defunct Panguna mine in Bougainville. Photo: http://www.travelinspired.co.nz

President John Momis is stinging in his criticism of RTG Mining but the same critique surely applies equally to his own preferred option, Caballus Mining, and the previous horse he backed, BCL…

Radio New Zealand |19 March 2019 

The government in the autonomous Papua New Guinea region of Bougainville has dashed any hope it would work with the Australian miner, RTG, accusing the company of bribery.

The Bougainville government and RTG are promoting unrelated schemes to re-open the Panguna mine.

After a meeting between the two parties earlier this month, RTG’s chairman Michael Garrick felt they got a good hearing and there was a chance they’d work together in re-developing Panguna.

But Bougainville President John Momis said his government is emphatically rejecting the offer, and accuses the company of insensitivity and disregard for the customs, culture and sacrifice of all the people of Bougainville.

He said RTG’s achievements as a miner are limited and investors have no faith in its ability to deliver.

Granting a mining lease to RTG would pose an intolerable risk, Mr Momis said.

Mr Momis said payments and loans the government understands that RTG gave to members of one particular group of landowners, the Special Mining Lease Osikaiang Landowners Authority, constitute bribery, as do similar offers made to his government during the recent meeting.

Relevant agencies in PNG and Australia would be notified, he said.

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PNG minister issues warning over Panguna re-opening

Radio New Zealand | 18 March 2019

Papua New Guinea’s minister of Bougainville Affairs, William Samb, has called on the Bougainville government to forget about talking to investors in the Panguna mine until after the referendum on independence.

New Dawn FM reported Mr Samb was speaking during a Bougainville government roadshow around Bougainville that is explaining the referendum process.

His comments came after the government unveiled controversial plans to start its own company to re-open the mine, teaming up with a newly set up Australian company.

This has riled at least two other foreign investors who had been planning similar moves.

A year ago the government had declared a moratorium on opening Panguna but changed tack suddenly in January, saying it needed to open the mine to stimulate the economy ahead of the referendum vote in October.

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