We’re talking about a business which is one of the 10 biggest gold mines in the world producing up to 570,000 ounces of gold a year and as much as 95,000 ounces of silver.

PJV is 47.5% owned by Canadian miner Barrick with an equal percentage belonging to Zijin mining of China.

The remaining 5% is controlled by Enga Provincial Government and Porgera landowners.

In June 2017 PJV applied for a 20 year renewal of its lease, but when the lease expired in August 2018 the then O’Neill government had not made a decision. PJV was allowed to continue operating the mine while the request was considered.

Porgera is both an open pit and underground mine. It employs 3,300 Papua New Guineans and contributes about 10% of the nation’s exports.

Mining operations have not gone smoothly over the past 20 years, with many illegal small-scale miners trespassing on the mining area, at times as many as 400 a day.

Some of these miners have been treated harshly by PNG police and company security personnel while others have lost their lives engaging in the risky practice of working the now steep sides of the mine.

In 2013 and again in 2019 illegal miners fell into the mine pit and died. Most of them were relatives or friends of the landowners.

The disposal of the mine tailings has also been a sore point. The tailings have been dumped into the Porgera River with the extent of damage to the environment unknown although PJV maintains it is certified for proper cyanide control.

On 27 April James Marape, without communicating with Zijin or Barrick in advance, announced in the PNG newspapers that the lease would not be extended.

Marape also stated he wanted PJV to continue operations while he spoke with mine executives about an exit plan.

Shocked at the government’s decision, PJV shut down operations and appealed to the PNG courts to reverse the decision.

From Barrick’s perspective, the PNG government is illegally taking control of a gold mine that Barrick spent over $1 billion to develop.

Construction is by far the most difficult and expensive part of developing a mine. Continued operation of the mine once it’s up and running is relatively easy. 

The Financial Times described the prime minister’s action as a “seizure” of a privately owned business.

Marape’s action is being closely watched by the business community in PNG, which is very concerned that the same thing could happen to them. 

It may also likely scare off outside businesses exploring the possibility of investing in PNG. A unilateral decision on such a momentous issue does not square with maintaining investor confidence.

Zijin Mining also strongly opposed the PNG government taking over the mine. Zijin invested a huge amount of money into this project and states it hasn’t come close to getting its investment back.

Countries such as Zimbabwe and Venezuela have tried to brazenly take control of privately held businesses with disastrous results.

In the 1970s Zimbabwe enjoyed an abundance of natural resources, a rapidly growing agricultural sector and vigorous human capital.

Then in 1980 Robert Mugabe was elected president and for the next 37 years managed to wreck the national economy.  Since he relinquished power in 2017 his successors have struggled.

According to the international Monetary Fund, Zimbabwe is facing an “economic and humanitarian crisis” – and that was before coronavirus struck.

Forty years ago Venezuela was one of the healthiest economies in Latin America and a major producer of oil.  In the late 1970s and early 1980s it enjoyed the highest standard of living in South  America.

Then the government cut the price of fuel to 20 cents a gallon. For a few years the decision seemed to pan out well, then the Venezuelan oil companies starting recording big losses. Because of this and other missteps the Venezuelan economy is struggling and in March this year the inflation rate was above 3,000%.

So it is a tricky business to nationalise gold mines, oil companies and other private sector business. Often the industry becomes unproductive.

It seems that what Mr Marape really wants is for the PNG government to become part owner of the mine.

He doesn’t like the current arrangement of Barrick and Zijin having 95% ownership. He wants the PNG government to be a 20% owner of the mine which would provide a significant revenue flow for the country.

I was encouraged at the quick response of the PNG courts on this issue.  The national court ordered the PNG government to enter into negotiations with Barrick and Zijin with respect to the lease extension.

It further stated that all involved parties are to return to the court at the end of this week to report progress.

Great leadership by the PNG courts. In the discussions the prime minister may present his desire for a 20% ownership. Perhaps he will be willing to pay fair-market-value for that.

Hopefully through intense and respectful discussion, the matter can be resolved.