Instability all round in Australia’s near north
Photos that speak more than 1,000 words

Gold refinery proposal doesn’t add up

| Governor, East Sepik Province

Generated with AI (22 March 2024  7.49 am)
The gold refinery of our dreams (Generated with AI, 22 March 2024, 7.49 am)

WEWAK - The Marape government’s proposed legislation to establish a gold refinery in Papua New Guinea seems to be another cargo cult endeavour that will bring little or no value for money for our country.

The proponents have zero experience in refineries or gold bullion and they don't understand the refinery business or business in general.

To support their preposterous proposal, rather than argue intelligently, they have resorted to paint opponents of this marginal business as traitors to PNG.

Really? Is that the most intelligent response they have?

It seems PNG is fast becoming an easy target for any carpetbagger with a briefcase and a two kina company.

Let’s take a deep dive into the business case for the gold and precious metals refinery, based on numbers supplied by the proponents themselves.

PNG produces about 50 tons of gold (1.61 million ounces) each year valued at about K13.2 billion at current prices.

The business proposes to make a profit of K1.3 billion over 15 years with about one billion going to the PNG government, which will also collect taxes of K1.2 billion.

So from the government’s own numbers, this proposed business will generate a total free cash return of K173 million a year (1.31%).

The proponents don't tell us if this refinery will purchase all the gold and refine it or refine this gold for a processing fee.

If the refinery has to buy the gold, they will need lots of foreign exchange. Currently, PNG doesn't have the required foreign exchange, so that's a whole new set of problems.

In any case, our superannuation funds just paid 7% and 9% returns respectively. And we are pursuing a business with a 1.31% return?

Or is there another way they are making a windfall return and not telling us?

Does the PNG government have a business investment policy? If so, does that policy set out the minimum return on investment expected from the expenditure of public funds?

Does a return on investment of 1.31% qualify as an excellent deal? If not, why are we doing it?

Surely there are other investments with better returns we could be pursuing, assuming we have an investment policy.

Think of it this way, if this was your money, would you invest it in a business that paid you a 1% return?

Comment by Michael Kabuni of Academia Nomad

The Marape government is pushing through legislation to establish a domestic gold refinery.

Although the legislation once passed will make it legal to develop a refinery, the content of the deal with the foreign company that will build and operate the refinery has not being made public.

Because the government has the numbers in parliament, and with the prime minister’s control over constituency development funds, the legislation is set to be passed without much resistance from a weak opposition.

PNG prime ministers often reward MPs who support their legislation by giving them constituency development funds whilst withholding the opposition’s funds.

This amounts to K10 million a year for open electorate MPs and K5 million for each of their districts for provincial governors.


Feed You can follow this conversation by subscribing to the comment feed for this post.


There have been many views discussed, so let me clear up the present situation.

Refinery legislation was passed back in 2008 by the Somare Government and endorsed by the National Executive Committee (cabinet).

This is still legal. People have short memories when the situation does not suit their view.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)