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April 21, 2021
Business Highlands News Papua New Guinea Politics Southern

Negotiations turn cold on state of Porgera mine

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In July this year, National Court Judge, Ambeng Kandakasi, ordered Porgera Mine developer, Barrick Niugini Limited and the State to negotiate the extension of the project’s Special Mining Lease (SML).

Barrick had taken the matter to the courts after the state announced that it would not be renewing the lease.

President and Chief Executive Officer of Barrick Gold Corporation, Mark Bristow, said negotiations in the two years leading up to the expiry of the 30-year SML had been consistent, until January this year, when negotiations went cold.

“We didn’t design our mining plans to stop on August 17 2019, we have lots of capital invested in that mine that still need to be redeemed. So again it’s a logical concept that we applied for the extension in 2017 for the renewal, and sure, there was a renewal of Government but it wasn’t a change of country, and that change of government happened in June 2019, and we never once got a warning or suggestion that we would not renew the mining lease.

“We put to the courts to recognise the right for us to operate, and so when we went through that. Nearly nine months later to wake up and suddenly realise that we need to tell everyone to pack up and leave, is an illogical thing. One would imagine if we (BNL) had done something wrong, to be indicted or sanctioned on any legacy issues,” Bristow said.

It has been announced publicly that the Marape Government will not settle for anything less than a 50/50 agreement with BNL and project joint venture partner, the Zijin Mining Group.

A review of the Mining Act 1995, has been ongoing for a while now, with movement only being seen recently with parliamentary amendments to the Mining, and Oil and Gas acts.



Prime Minister, James Marape, is adamant that the People of Papua New Guinea must have a fairer share of resources being removed from their land.

Prime Minister Marape, when responding to BNL statements, said they would look to stepping in and re-opening the mine after the national court’s decision. Also hinting that the reopening of the mine, would coincide with the new Mining Act amendments.

“Whilst the matter is before the courts, the State has offered to BNL equity and possible operatorship, and to discuss this “without prejudice or biases”. But BNL has refused unless the SML is granted to them.” Says Marape.

So what has been negotiated so far? Barrick says the 50/50 arrangement would be possible if state put up capital investment for the project. Current negotiation put forward by BNL is a 57% economic Benefit to the state.

A Joint letter by both Barrick and the Porgera Landowners Association, states that Last October Bristow, when meeting with the Prime Minister, offered 200 million USD prepayment of corporate tax upon the granting of the SML extension.

“We increased the economic benefit to 57% in favour of the state and PNG Stakeholders, and a reduction of 43% for the shareholders. Because this is a 20-year project and it requires capital, and we also assured the government that we don’t expect the government to put up capital, it should be using tax money and other money for developing the country,” Bristow said.

The Landowner Group and Enga Provincial Government would get 1% on top of the 2% royalty payments, and an additional 10 on top of the 5% equity share.

Bristow also stated that for Barrick, the negotiation is the extension of the SML, and not a new SML. The statement coming after BNL made it clear to government the previous 20% equity stake that was given in the previous SML deal. The 20% sold by the previous government and had signed a deal they would not take up any further equity in the future.

Prime Minister, James Marape, in his statement, said under the agreed state-negotiated term, the net earnings would be around 640 Million US Dollars.

“According to our experts, the mine has a life of 20 years, with high grade gold
reserves of 11.6 million ounces.”

“If the Mine produces 500,000 ounces of Gold a year at a gold price of$US2,000 per ounces, the annual cash flow will be $US1.0 Billion. After taking out operating costs of $US360 million, the net earnings is $US640 million.”

“The $US640 million will be shared between all the stakeholders, and if 100%
ownership by us, this money will be easily injected into the economy,” Marape stated.

But while negotiations have gone cold, small to medium enterprises are folding in the Porgera valley; as locals, former employees, and the country, awaits a start to more meaningful negotiations between BNL, and the State.

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