Tag Archives: Wafi-Golpu

Papua New Guinea treasurer calls for more benefits from LNG, mining projects

Sonali Paul | Reuters | June 26, 2019

Papua New Guinea’s new treasurer on Wednesday put Total SA, Exxon Mobil Corp , Newcrest Mining and their partners on notice that the country wants to extract more benefits from their gas and mining projects.

Treasurer Sam Basil said the country also needs better forecasts from Exxon and Total on the expected income flow from a $13 billion plan to double the country’s liquefied natural gas (LNG) exports. Basil was appointed earlier this month by Prime Minister James Marape, who led a revolt against former prime minister Peter O’Neill in May.

France’s Total is leading the Papua LNG project, which will develop the Elk-Antelope gas fields to feed two new LNG production units to be sited at the PNG LNG plant, run by Exxon.

At the same time, Exxon and its partners plan to add a third new unit at PNG LNG, which will partly be fed by another new field, P’nyang.

Total recently reached an agreement with the government setting terms for its Papua LNG project, while Exxon is in the process of negotiating a separate agreement with the government for P’nyang.

Treasurer Basil said the projects should all be treated as one, rather than “under the cloak of separate joint ventures”.

“I am putting each of the project partners in all of these projects on notice that the concerns of our people must be addressed through dialogue and negotiations with the state and that we expect all parties to contribute to a fair and equitable outcome,” he said.

Exxon’s original $19 billion PNG LNG project is the biggest foreign investment in the country and crucial to the economy, but the plant has been a disappointing contributor since it started exporting LNG in 2014.

Last year’s earthquake which forced a shutdown of PNG LNG dented the government’s take from the project more than Exxon had expected it would. The 2019 budget had assumed that oil and gas sector revenue would fall by 9.4 pct from 2018, but it actually fell by 16.4 percent, Basil said.

He plans to ask the Treasury and Exxon to come up with new detailed forecasts of future cash flows from the project to the national and provincial governments and local landowners.

He also said the government would put on hold talks with the owners of the Wafi Golpu gold project, Newcrest and South Africa’s Harmony Gold, until the state negotiating team has talked to the Morobe provincial government about its aspirations for the project.

“Our future prosperity depends on delivering these projects and delivering them well. But we must now find a way to ensure that these major resource project agreements capture enough value to the state and to our people,” he said.

Exxon and Total were not immediately available to comment. Newcrest had no immediate comment.

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Govt To Review FIFO: Minister

Gorethy Kenneth | Post Courier | June 25, 2019

The government will review the fly in-fly out (FIFO) workforce arrangements for foreign workers. This may now put an end to K91 million spent annually on this exercise. Minister for Immigration and Border Security Petrus Thomas announced this yesterday.

Mr Thomas said the Immigration and Citizen Authority (ICA) is now looking at issuing long-term working residence visas by next year which is in line with its organisational reform and improvement of service delivery under its Five-year Corporate Development Plan (2018-22).

The Minister referred to the study carried out by National Research Institute in 1997 on the effects of fly in-fly out on the Porgera mining project which revealed that the PNG economy was losing between K36 million and K91 million annually on direct national income.

He said the Bougainville Copper Mine had successfully maintained a small satellite mining town with classic facilities that were built to accommodate workers for the Bougainville Copper Mine.

“There was sufficient cash flow injected directly into the local communities with high returns gained from the capital investments, he said.

Mr Thomas said these changes to the frequent abuse of the 60-day multiple entry visa by foreigners had prompted him to suspend it last year.

“The multiple entry visa category had been reviewed and will be introduced again once cabinet approves the new conditions, fees and guidelines,” he said.

Similarly, Mr Thomas was of the view that the fly in-fly out practice has also been abused by many foreign em-ployers and contractors after receiving criticisms lately from MPs and concerned landowners of resource project areas.

“The fly in-fly out practice may have worked in some short-lived projects, but the impact of FIFO and contribution to host communities, their social welfare and economy has never been truly assessed in long-term projects,” he said.

Mr Thomas said part of the issue lies in the distant lack of national data. “Various agencies supposed to be integrated to streamline these processes had not succeeded,” he said.

“There was no viable data or studies carried out in the past to justify foreign workers’ fly in-fly outs continuous practice.

“It appears that PNG has been under the notion that the FIFO system works in every particular way and no one bothered to review it.”

Mr Thomas said while the government is embarking on developing few new resource projects like Wafi-Golpu and the Papua LNG Project, it should also be mindful of such fly in-fly out arrangements that could potentially suck opportunities during this thriving economic situation.

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Harmony admits PNG political instability raises risk of MoU change on Wafi-Golpu

Wafi-Golpu mine site

David McKay | Mining MX | May 30, 2019

HARMONY Gold acknowledged the risk that political changes in Papua New Guinea (PNG) could create a situation where a memorandum of understanding (MoU) regarding its Wafi-Golpu copper/gold mining project would have to be changed.

“At this stage we are waiting to see what happens,” said Lauren Fourie, investor relations manager for Harmony on the matter of PNG politics. “The potential election of a new prime minister could potentially impact the memorandum of understanding (MoU) we signed with the government in December 2018,” said Fourie on May 28.

On May 30, PNG unveiled its new prime minister, James Marape, a former finance minister, who then said he intended to “tweak and turn” laws governing how natural resources are extracted from the South Pacific island.

“At the moment our resource laws are outdated … we will look into maximising gain from what God has given this country from our natural resources,” Marape was quoted by Reuters to have said in his first address to parliament as prime minister.

“I have every right to tweak and turn resource laws for my country, then it will empower my citizens as well,” Marape told the chamber to cheers and applause. “I truly want this country to be the richest black Christian nation on the planet,” he added.

The thrust of the discontent in PNG regarding the exploitation of natural resources is a gas drilling project involving French group, Total, and Chevron.

Granting of a Special Mining Permit for Wafi-Golpu have been a long-standing feature of getting the project on the road. Fourie said up until recent events various joint venture workstreams were tackling requirements of the permit which range from environmental authorisations through to the stake the PNG state will eventually hold.

The Wafi-Golpu copper-gold mine could cost Harmony Gold $2.82bn in initial capital expenditure to build to commercial levels of production as per a 2018 feasibility study. Of this, Harmony will shoulder about 50% with Newcrest Mining Limited, an Australian firm, carrying the balance. Average annual gold production was put at some 266,000 ounces.

Marape became prime minister after receiving 101 votes to eight in parliament, a day after Peter O’Neill resigned having lost the support of the house after almost eight years in power, said Reuters. Political instability is not unusual in PNG, but Marape’s resignation from cabinet in April tapped into growing concern over governance and resource benefits not reaching the poor, it said.

Harmony operates the Hidden Valley mine in PNG after taking the operation out of mothballs and buying Newcrest’s share in the business. It produced 100,000 oz at an 11% margin in the six months ended December, and was on track to achieve 200,000 oz for the full financial year, said Harmony in February.

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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.

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Locals Claim Earthquake Poses Great Threat To Wafi-Golpu Mine

“Newcrest and Harmony have never mentioned anything about earthquakes during any awareness”

See also: Magnitude 7.5 quake alongside proposed Solwara 1 mining site

Jerry Sefe | Post Courier | May 17, 2019

THE people of Yanta, Hengambu and Babwaf are concerned about the safety of their relatives who will be working at the underground Wafi-Golpu mine when it begins operations.

Their concern follows the recent 7.2 magnitude earthquake that struck Bulolo district last Tuesday. They described the quake as a wakeup call for the Wafi-Golpu underground mine developer Newcrest and Harmony.

They said the quake was disturbing to them as such natural occurrences may be hazardous in future for the Wafi-Golpu underground mine if it comes into full operation.

They said they are not representing any individual person nor its respective landowner presidents who were supposed to represent them to speak on behalf of them. “We are concerned about the lives of thousands of people including our children who will be working underground when the mine begins operation,” they said.

Provincial chairman of mines and petroleum and president of Mumeng local level government Okam Paton said he believes the resilience of these natural disasters would be captured in the mining environment impact statement.

However, he said it is in the best interest of the landowners that the responsible authorities respond to their concerns.

According to Wafi-Golpu project environmental impact statement chapter 21 of unplanned events, there is nothing mentioned about earthquakes.

“However, these events are often described as ‘low probability, high consequence’ events in reference to the position they occupy on a typical risk matrix.

“They can be broadly categorised as: natural events, significant seismic, weather or other natural events that occur infrequently but have the potential to cause significant damage.

“Accidental events, events originating from human activity that are considered unlikely due to the engineering design, operational controls and monitoring programs that are in place, but have the potential to cause significant damage if they do occur.

“Despite the low probability of occurrence of these events, the potential natural events considered most likely to affect the project are seismic events, tsunami, storm surge and flood events, bush fire and drought,” they said.

Knowing it would bring chaos to lives and properties, the landowners said they never thought of an earthquake at all, claiming the reason behind this was because they were not informed at all by the company.

“Newcrest and Harmony have never mentioned anything about earthquakes during any awareness or during the mining warden’s hearing over the years. “We were always limited to environmental destruction, compensation, royalty, and spinoff and so forth.

“Nothing was mentioned about earthquakes and its impacts on Wafi on both open cut and underground mine or how best the project can withstand the impacts during earthquakes,” they said.

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Wafi Golpu SML Grant In June, Highly Unlikely

Frankiy Kapin | Post Courier | May 14, 2019

Wafi-Golpu Joint Venture is unlikely to be granted a special mining lease (SML) by end of June. This timeline was agreed to by the WGJV mine developer and the PNG Government.

WGJV head of external a airs David Wissink said recent developments in PNG render the possibility of a SML being granted by 30 June not viable. Mr Wissink said this as a main hindrance to the developer achieving set goals that contribute to the achievement of the project.

Wissink said WGJV is aware of the recent issuance of a stay order in the matter of Morobe Governor Ginson Saonu and others against Minister for Mining and others.

“The matter is a judicial review application made by the Governor concerning the actions of the Minister for Mining in regard to the execution of the Memorandum of Understanding entered into between the developers of the Wafi-Golpu project and the State of Papua New Guinea.

“The WGJV hopes that this matter is resolved soon, and stands ready to continue to participate constructively in all negotiations to take the project forward when it is appropriate to do so.”

Mr Wissink added that WGJV has been working constructively with the PNG Government; the Morobe provincial government; and the landowners to take forward the negotiation of various agreements necessary for the permitting of the project.

In relation to progressive proceedings including reaching the Memorandum of Agreement (MOA) by parties to the Wafi-Golpu project, Mr Wissink said the MOA is one of a number of agreements necessary to be finalized to enable the permitting of the project.

“The Mineral Resources Authority has convened a development forum, and is collecting position papers from all identified stakeholders.

The Morobe provincial government is an important participant in this process and we are very pleased that it has recently submitted its position paper,” Mr Wissink said. He said the WGJV is yet to be given a copy of the MPG position paper and looks forward to going through the paper at an appropriate time to progress the project.

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Morobe’s Interest In Wafi-Golpu Legal, Says Judge

Frankiy Kapin | Post Courier | May 13, 2019

A ruling of the national court in Lae affirms that Morobe Governor Ginson Saonu (plaintiff /applicant) is a party of interest to the Wafi-Golpu project as host province.

Acting Judge John Numapo granted leave for judicial review to the signing of the Wafi-Golpu memorandum of understanding (MoU) between the State and the developer without the host province’s governor.

Justice Numapo ordered a directional hearing set for May 24, followed by a pre-hearing conference on June 6 to set a date for a full hearing of the substantive matter.

Justice Numapo ruled that Mr Saonu, in his capacity as mandated representative of Morobe Province and its people, is granted the review on two decisions pertaining to the letter constituting the legal clearance issued by state solicitor Daniel Rolpagarea (second defendant) on December 10, 2018, for the execution of the MoU between Mr Saonu, Wafi Mining Limited and Newcrest PNG 2 Limited.

The second decision for the review, as set in the originating summons, pertains to the MoU signed on December 11, 2018, between Mining Minister Johnson Tuke (first defendant) and developers Wafi Mining Limited (fourth defendant) and Newcrest PNG 2 Limited (fifth defendant).

The independent State of Papua New Guinea is the third defendant in the originating summons (OS-JR No 18 of 2019).

Justice Numapo ruled that Mr Saonu, as duly-elected Morobe Governor, has sufficient interest in the Wafi-Golpu project located in his province, therefore has standing (locus standi) seeking review through submission of the proceedings.

“One of his responsibilities is to make sure that the province generates and raises sufficient revenue from various sources within the province to maintain government services and one such revenue source is from the mining activities carried out in the province such has the Wafi-Golpu mine,” Justice Numapo said.

He said the plaintiff has taken into consideration the potential of the mine changing the economic outlook of the province and the country once operational and wants to make sure the province is well-positioned to benefit through revenue generation, employment opportunities and other spin off benefits.

Justice Numapo said the province is mindful of the environmental impact and other social issues that may arise as a direct result of the mining project and wants to ensure these concerns are properly addressed.

“I am satisfied, therefore, that a prima facie (accepted as correct until proven otherwise) case on sufficient interest has been made out in favor of granting leave for review.,” he said.

“I am satisfied that the plaintiff has sufficient interest in the matter and therefore, has the locus standi to bring this proceedings seeking leave for judicial review.”

Justice Numapo also ruled for the review after being satisfied that the Mining Minister Tuke and the state solicitor, as holders of public offices, acted in respective capacities constituting a decision or act in clearing the MoU signing through discharge of their statutory duties.

Justice Numapo granted the plaintiff, Mr Saonu, leave on May 7 to seek a judicial review of the agreement.

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