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What next for Porgera's gold mine ?

Penny and Eric Schering
Penny and  Eric Schering and friends. The Scherings split their time working with Pacific Island Ministries in PNG and the USA


KALAMAZOO, USA - Last week was a biggie for the Porgera Joint Venture (PJV) in Papua New Guinea’s Enga Province, one of the largest gold mines in the world.

A stir has been brewing about whether prime minister James Marape is justified in refusing PJV’s request for a 20 year lease extension.

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.


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Arthur Williams

Thanks for the link Bernard. I hope many will read this disturbing true story of a struggle by indigenous Ecuadorians that began in 1993.

It is one of too many resource companies degrading the environment, getting rich and leaving the crap behind - Panguna, Misima Ok Tedi - just as they did at the infamous Aberfan colliery

Texaco, part of Chevron, will do anything to stop paying compensation.

During the many court cases John Watson, the company's CEO promised in 2014: “A ‘lifetime of litigation’ saying he would fight the case ‘until hell freezes over and then fight it out on the ice.”

Seems like one of those immaculately dressed oil men that you encounter in five-star hotels worldwide enjoying luxury all paid for on the backs of poor rural folk worldwide. In essence many are mere corporate thugs.

Bernard Corden

Well worth reading:

Arthur Williams

Why did Eric compare Zimbabwe under their homegrown president Mugabe and Venezuela, that is hated by the USA and sanctioned by seemingly megalomaniac presidents of an ilk copying the 62 year embargo of Cuba that is a mere 150km from Florida.

He could have told us about Barrick in Tanzania. Here are extracts from the Post Courier of 27/12/2017, 'Sell Off in Tanzania Deal Upsets Barrick Gold Ltd':

"A Move By Parent Company Of Porgera Gold Mine And Canadian Mining Giant Barrick Gold Corporation Has Stunned The Global Mining Community.

"Barrick Gold Corp has agreed to hand over a 16 percent stake to each of its three gold mines in Tanzania to the government and the people...given the agreement is concluded successfully.

"At the framework stage, the deal also includes awarding of a 50 per cent of consolidated mining revenue from its mining unit in the country to the host government going forward and a $US300 million one-off payment to be made by Acacia as a “show of good faith."

Now isn’t that a sign that PM Marape is perhaps on the right trajectory of wanting resource exploiting companies to make better deals than heretofore?

Alex Wapa

Why is there always comparison between Zimbabwe and Venezuela? There area states out there who have successfully run their own resource sector. Malaysia has done that with Petronas.

You have my sympathy. The Zimbabwe-Venezuela comparison is usually made by commentators trying to make a political point rather than to state a fact or explain a complexity - KJ

Dr Bal Kama


1. It wasn’t a ‘seizure’—PNG govt exercised a right provided by law to not renew after ML expiration.

2. Premature comparison to Venezuela and Zimbabwe.

3. ‘Investor confidence’ notion is interesting—in PNG, it has two face—progress and pillage so not a saint argument.

Plus the return on the original capital investment would have been well and truly recouped many years ago - KJ

Pana Wiya

Please read the MDC (mining development contract) of 1989 before commenting. The lease is over and Barrick has made billions at our expense.

Now we have a prime minister supported by the people of PNG on his vision to take back our country.

For your information, we know how to run a mine as we are no longer in 1989 when we were taken advantage of because of ignorance.

Philip Fitzpatrick

I wonder how much of this situation and the P'nyang one is James Marape channelling landowner concerns. That may sound hypocritical given his government's role in screwing over landowners in all the mining deals so far but he does seem to be trying to cast a new post-O'Neill approach.

Chris Overland

Eric Schering is right to point to Venezuela and Zimbabwe as examples of how not to achieve a better deal for the nation when dealing with powerful multinational corporations, or anyone else for that matter.

The destruction of the economies of both nations supposedly in the name of socialism merely placed valuable assets in the hands of incompetent and corrupt kleptocracies. The results are all too plainly evident today.

I assume that James Marape and his colleagues are too smart to think that they can merely seize the assets of the Porgera Joint Venture and that they are actually just sending a powerful signal to the beneficial owners that it is time to do a new deal over the distribution of profits.

The idea that the owners have not yet recovered their investment is crap. No responsibly managed company enters into an arrangement where there is no positive return on investment for more than 20 years.

Even in agricultural ventures such as orchards, vineyards or large scale irrigation, where lead times on generating any significant cash flow can be very long, most companies are looking to recover their investment well within a 10 year time frame.

So, everyone is busily posturing at the moment. I expect that the hard work of renegotiating the terms of the lease will go on in the background, with both sides seeking to get the best deal possible in the circumstances.

For the Joint Venture owners, it will be a case of deciding just how much of a better deal they need to offer to stave off the collapse of the enterprise and the total loss of their investment to date, while the PNG government needs to figure out just how far they can push before the Joint Venturers decide that the game is not worth playing.

What is certain is that the current deal is highly favourable to the majority shareholders, not PNG much less the land owners.

Giving a larger share of the profit stream is probably a necessary prerequisite for the Joint Venturers to retain access to what is literally a river of gold. This will mean diluting their shareholding to some degree.

A 5% share will not cut it anymore in my assessment. While it seems highly unlikely that the PNG government could expect to secure anything approaching majority ownership, it is not unreasonable for it to want a much larger share.

Of course, it could simply head down the road of imposing a resource rent tax or similar impost if the Joint Venturers remain obdurate. It has many options here.

It will be fascinating to see how this all plays out as it will probably set an important precedent for the future of large scale development projects in PNG. That, I would guess, is exactly what the government intends to do too.

The Bougainville disaster should loom large in everybody's minds here. Playing hard ball is all very fine but it is better for everybody if a new deal is done.

Hopefully, this thought will bring rationality and reason to the negotiating table.

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