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.