O'Neill puts squeeze on B'ville as he seeks to buy Panguna mine
23 December 2015
KEITH JACKSON
IN a letter seen by PNG Attitude, Bougainville president John Momis has told the managing director of Rio Tinto he is concerned the Papua New Guinea government is positioning to buy Rio's 53.83% equity in Bougainville Copper (BCL).
Dr Momis advised Sam Walsh this information was conveyed to him early in December by two PNG government ministers.
One of them, Ben Micah, let Dr Momis know that, following a series of meetings with Rio Tinto, PNG wished to purchase Rio’s equity and is seeking the agreement of the Autonomous Bougainville Government for the deal.
Dr Momis wrote to Mr Walsh that, in earlier meetings with Rio Tinto in July, he had been assured “in the clearest terms” that the company had not yet finalised a review of its stake in BCL and that there was no agreement between Rio Tinto and the PNG government about a sale of equity.
Dr Momis sought Mr Walsh’s “urgent assurance that, if Rio has decided to divest, it will enter into discussions with my government about the consequences of such a decision.”
Replying to Dr Momis some days later, Mr Walsh said Rio’s review had “not reached any final conclusion” but that Rio is engaging “with interested parties”.
Mr Walsh wrote that “as a listed public company [Rio is] obliged to conduct the review in full compliance with [stock exchange] listing rules and other applicable laws and are limited in what we can discuss.”
Meanwhile Dr Momis - in a speech to the Bougainville parliament yesterday - said the PNG government has been ignoring the requirements of the Bougainville Peace Agreement and its chronic underpayment of grants and taxes has left the ABG’s budget in very poor shape.
He said that, if the matter was not resolved by February, the ABG will take the PNG government to the Supreme Court.
Dr Momis concluded his speech saying that “the peace agreement was a negotiated contract to end war.
"It was given effect by PNG constitutional laws.
“If we cannot trust PNG to implement the financial arrangements of that agreement, then on what basis can we maintain an ongoing relationship?” he asked.
One commentator on Bougainville affairs told PNG Attitude that “it seems strange that in a situation where PNG is in deep fiscal crisis, it proposes to spend US$100 million on shares in BCL, but at the same time claims it cannot meet its constitutional obligations to fund the Bougainville government.”
Kristian Lasslett - I think it's time you indulged yourself in
Finnigan's Wake.
A descendant of Mac Duinnsleibhe of Ulidia. Erin Go Bragh.
Posted by: William Dunlop | 24 December 2015 at 09:43 AM
The ongoing saga of Ali Baba Oneill's merry band of thieves.
Posted by: William Dunlop | 24 December 2015 at 07:45 AM
And the few vultures and their mated await with drooling mouths and clever subcontract arrangements.
Posted by: Gary Juffa | 24 December 2015 at 05:59 AM
Good points Chris.
Realistically - not always a popular vantage point - what does a 53.83% stake in BCL give the investor, in terms of expected future revenues?
BCL has certain amounts of capital reserves, but clearly no one would buy out the Rio stake with a view to enjoying the interest accrued from these reserves.
Presumably, they would expect to have a stake in revenues generated by a new large-scale mining operation.
Panguna is an exceedingly dim prospect. Despite the ongoing efforts to pump this project, there is wide spread opposition on the ground – if all was as rosy as the constant stream of press releases suggest, surely we would see the first signs of BCL vehicles rumbling along the old pit for prefatory work, to the waves and smiles of surrounding villagers, excited by the journey ahead.
Another key issue. The commercial complexity of obtaining finance, insurance, etc, in a post-conflict environment where large-scale mining is a big bone of contention would be extremely challenging, to say the least.
They could bring on the Chinese investors. Certainly they have been looking around Bougainville for prospects - and we have seen Chinese take stakes in other natural resource developments, especially in Madang Province. But if landowners were resolutely opposed to BCL's return, add a few more layers of exclamation marks, were this to be done under Chinese auspices. Chinese investors would be doing their due diligence in this respect - at least one would hope.
If PNG are really considering this purchase, then either they have drunk the PR Kool-aid on Panguna, or alternatively, perhaps the company is in the running to acquire other industrial scale mines on Bougainville?
You could perhaps forgive PNG in either case for being overly optimistic, given the Autonomous Bougainville Government (ABG) itself has been at times euphorically pumping the potential of large-scale mining on Bougainville, primarily Panguna, without presenting a serious business case to justify its predictions. Meanwhile, the governing apparatus on Bougainville is being rotted with grand corruption (!!), really jaw dropping graft is going on, with impunity - and honest civil servants are frustrated. Those seriously attempting to build local industries are receiving little assistance.
The independence referendum is an unescapable date with reality. A yes vote in particular will force the ABG to account to the people of Bougainville, for what has happened to all the grant and aid money pumped into the island, and for the bold policy prognoses that have guided its future planning. At some stage people's charitable inclinations will run dry and the question will be asked of the ABG, ‘account to us, like any government’. And given some of the companies who are the recipient of government largesse this could get very awkward indeed.
If the people of Bougainville ask the ABG to facilitate a transition to independence, only to find the state edifice is hollow, or worse still, venal, there will be real despair. Accordingly critical questions now, are a friend for a better tomorrow. More need to be asked.
Posted by: Kristian Lasslett | 24 December 2015 at 01:59 AM
It makes logical sense for the PNG government to assume outright ownership of BCL if it believes that (a) there is a realistic prospect of reviving the mine and (b) it needs to take pre-emptive action to cover its position in the event that Bougainville secedes from PNG.
Clearly, the PNG government has no capacity whatsoever to revive the mine itself.
It must therefore take on a partner which does have the required engineering, logistic and management expertise, not to mention a huge pool of cash to fund such an effort.
The question therefore becomes: what entity has the capacity to do this?
The two biggest mining companies in the world, being Rio Tinto and BHP Billiton could do it but market conditions and past experience in PNG will probably makes their boards very reluctant to risk it.
The only companies likely to have both the expertise and the cash will almost certainly come from China. Behind them will stand the Chinese government.
Part of China's soft diplomacy effort in the region and elsewhere in the world involves this type of project, whereby profit runs second to strategic positioning.
It will be fascinating to see how this "gaming" plays out but the signs for Bougainville are not encouraging.
Posted by: Chris Overland | 23 December 2015 at 06:05 PM