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The Hour of Prayer

Marape must negotiate on Porgera

PJV gold mine west of Porgera
The Barrick-Zijin joint venture gold and silver mine situated west of Porgera


KALAMAZOO, USA – In late April, on the advice of Papua New Guinea’s national executive council, prime minister James Marape declined the request of the Porgera Joint Venture to extend its mining lease by 20 years.

The government made it clear to the Barrick-Zijin syndicate that the PNG government would take control of the mine and it was time for the partners to come up with an exit plan.

Barrick-Zijin objected strenuously, claiming that the prime minister’s action was a violation of the law.

Last week, the national court agreed and ordered the two parties to negotiate further.

The court further stipulated that within one week the two sides must report back on progress.

In my view, the court had demonstrated decisive and impartial leadership, aware that 3,600 jobs are at stake as well as significant revenue to PNG. 

The court also stated that, if the two sides couldn’t agree within a reasonable time, a mediator would be appointed to help them reach a solution. 

PNG, Barrick and Zijin now need to get something hammered out in the next week or two.

In the business section of the 1 May issue of The National newspaper and on Facebook, Marape announced to PJV employees: “Your loss of income will be compensated and none of you [employees] will lose your job.”

He told landowners: “You will sit on the table as greater free equity owners.”

And he told the joint venture partners: “We appreciate that you have been a part of us since 2006.  I am sure you made your handsome profit so be kind to us, we are doing what is within our law.”

I suspect that the prime minister is pushing his hand a little too far. In effect he is saying: “Barrick, you’ve made a handsome profit. Thanks for constructing the mine for us. You’re no longer needed.  Goodbye.” 

But he has not offered some billions of dollars or whatever the mine is worth. He’s expressed a willingness to offer some compensation but not fair market value.

The thinking seems to be: “This mine is ultimately ours. It’s our land. It’s our gold. We’re taking it back. PJV will become another state-owned enterprise.”

I am unsure where this action sits in national or international law.

It could be that a court will decide that because Barrick constructed the mine, legally it belongs to PJV.

Certainly an act of the PNG government arbitrarily acquiring the mine would give potential investors in PNG cause to reconsider the safety of doing so.

What Marape wants is part or entire ownership of the mine. He has been offered a 20% stake for PNG and declined the offer because he doesn’t want to pay fair market value. He wants it to be given to PNG without compensation.

He has said that if Barrick does not go along with the idea “the state will enter into owning and operating the mine.”   That’s talking like a dictator not the leader of a democratic nation where the rule of law is paramount.

The prime minister needs to be flexible and Barrick-Zijin need to come to the bargaining table with a give and take attitude.

Maybe offer PNG a 20% stake at a discount to fair market value. Maybe explore more satisfactory environmental obligations to better protect the Porgera River.

PNG already receives substantial income from PJV through taxation - somewhere between 25 and 30% of its revenue.

The national court has so far provided great leadership in this impasse.

The court must not waver now.  It must not cave in to the one side or the other.

If it appoints an impartial mediator, knowledgeable in business law and adept in getting the two opposed sides to work together, it will have gone a long way to get an agreement fair to both PNG and the companies.


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Pana Wiya

Does the author think he owns PNG with his biased garbage?

PNG is no longer in the 1970s, 80s and 90s and we are more than capable of making decisions for our benefit.

Bernard Corden

Dear William, it appears you are getting mixed up between Tony Benn and Aneurin Bevan, although they were both fine orators and always emptied the tearooms during questioning time.

"A healthy loyalty is not passive and complacent but active and critical" - Harold Laski

When words failed Bernadette McAliskey (nee Devlin) had a pretty useful right jab.

William Dunlop

Bernard, I am presently digesting the unexpurgated diaries of fellow Ulsterman, Sir Alan Brook CIGS, Sir Winston Churchill's sometime mentor shall we say.

A comment attributed to Brookie was 'If I become a yes man to Sir Winston then that's the day he no longer needs me'.

What I wanted to say is that Brookie thought very highly of Antony Bevins' capabilities.

Quite something from a dour staid Ulsterman. Slantie.

Bernard Corden

“We are not just here to manage capitalism but to change society and to define its finer values” - Tony Benn

Chris Overland

Eric Schering is right to point out that the PNG government needs to negotiate carefully.

An attempt to effectively confiscate the mine can only lead to an outcome in which everyone loses.

None of my comments should be interpretted as advocating outright state ownership.

The history of governments running businesses indicates that politicians and their bureaucracies should, most of the time at least, stick to the provision of key public services.

The issue for me is finding ways to curtail the excesses of international capital, not attempt to nationalise businesses. That road leads nowhere, at least most of the time.

Eric Schering

A story from Ambunti in the interior of East Sepik Province.

Pacific Island Ministries began its work in Ambunti in 1977. The locals expressed a desire for help with education.

Wapi, a major landowner in Ambunti, stated he would give us a sizeable piece of land to develop an elementary and grade school.

We moved forward, as all parties agreed this was the most constructive avenue for PIM to be involved.

We built "permanent" classrooms with concrete floors and corrugated iron roofing, as well as homes for the Papua New Guinean teachers. All went well for 28 years.

Then Mr Wapi passed away and his two sons came to visit us leaders and stated, "Papa bilong mipela i stupit. We want the land returned to us, plus we want ownership of all the buildings built by PIM (which amounted to at least K500,000 worth of property). The school will be shut down."

Okay. The sons of Mr Wapi reclaimed ownership of the land and all the infrastructure on it. We then changed our approach.

Many villages in the Sepik River Valley which had no educational opportunities for their children wanted us to come to their village to set up an elementary school.

Our reply: "You the villagers need to construct the school building, using bush materials. Plus you need to build a house for the Papua New Guinean teacher we send you. Plus build two pit toilets, one for the school, one for the teacher.

"Then come and talk to us again and we will provide tables and benches and blackboards and teachers and teachers salaries." It has led to 30 elementary schools being established in the Sepik River Valley.

Mr Wapi's sons amended the rules to their own advantage and claimed the infrastructure built by others. The prime minister would like to do the same with Porgera Joint Venture.

Yes, he can change the rules if agreed upon by Parliament. In fact for a number of years over the last decade or two the policy was the PNG government would have the option of retaining a 16.6 - 25% interest in the mining, oil, or natural gas project. Very reasonable.

The problem was the PNG government coming up with 16.6% of the money to retain their share.

So yes, rules can be amended. But when the PNG government wants 50% ownership share and plus another 20% for taxes, as in the Pnyang project, Oil Search and Exxon Mobil walk away. Plus the government often wants to be "carried along" for their 50% share. It's simply not workable.

Landowners in Ambunti can get away with pushing around a little 'ole NGO like Pacific Island Ministries. But the big corporations capable of building gold mines and oil refineries and natural gas pipelines will say, "Thanks but no thanks" for an unreasonable arrangement.

Philip Kai Morre

The national court should come up with a win-win solution that the company, government and landowners must share equally.

The landowners are an integral part of mining so their views should not be neglected.

Mining companies are transnational and profits are made to maintain living standard in other countries while we run dry.

Chris Overland

In reference to my comment about international law, I should have said that it was freely "flouted", not "flaunted, by the USA and China, although both may indeed "flaunt" it when it suits.

Chris Overland

Eric Schering has beautifully articulated the classic neo-liberal arguments about the defence of property rights and the necessity of the rule of law.

There is much of merit in these arguments but, in this case, there are major problems as well.

I think James Marape and his negotiators will be saying several things to those sitting opposite.

First, they will say, the present arrangements were unfair and exploitative from the outset, providing the owners of the Porgera mine site with grossly inadequate compensation for the loss of access to their traditional lands, not to mention the large scale pollution involved.

In effect, PNG got the equivalent of the "beads and trinkets" that were once offered by the past European invaders who took possession of the New World.

Second, the beneficial owners have made huge profits of which they have not paid a fair and reasonable share, not just to the landowners, but to the government.

They have engaged in tax minimisation schemes (legal or otherwise) whereby the true level of profitability of the mine has been obscured through the use of deliberately opaque company structures and accounting methodologies.

This is the modus operandi of international capitalism in a globalised world, where revenue can almost miraculously vanish from its point of origin to reappear in a tax haven.

Third, the expiration of the lease allows the government the lawful right to renegotiate its terms and, if necessary, to terminate the lease if it is not satisfied with those terms.

Fourth, there is no necessity for the government to purchase additional shares to secure a better return because it would, in effect, be purchasing land and resources that it already owns.

Fifth, while the national court must follow the requirements of the law, it is the government that makes those laws. Thus, if needed, the law can be amended to allow the government to secure control of the mine.

International law, so freely flaunted by both the USA and China, has no bearing on this matter.

Sixth, it is possible for the beneficial owners to continue to enjoy a large profit from the mine provided that the landowners and PNG government can enjoy an appropriately proportionate share of that revenue, not the mere "beads and trinkets" now on offer.

Eric is right about the necessity to negotiate but quite wrong to conclude that it is the PNG government that must make concessions: it holds the whip hand and should apply the whip as necessary to achieve a deal that is both legally and morally defensible.

Right now, there is certainly no morally defensible arrangement in place, even if it may be legal.

Peter Sandery

I have followed this saga since its birth - the commercialism through prime minister Marape's eyes - and have not seen a word about who, in the event of a complete takeover by the Marape government, will be responsible for environmental clean up post mine maturation.

I cannot help but remember the smile of the face of the former CEO of Tolukuma when he convinced the then government to buy out his organisation's interest in that questionable operation.

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