Current Views on Resumption of Large-Scale Mining in Bougainville

The current (2016) relationship between local-level politics and large-scale mining in Bougainville has both similarities and differences to that which existed between 1987 and 1989, especially with respect to the extent of community opposition to Large-Scale Mining (LSM). The current situation has of course been deeply influenced by dramatic changes arising from the conflict itself. Although the Panguna mine has been closed since 1989, the possibility of reopening it ensures that LSM is a factor in political relationships between Papua New Guinea (PNG) and Bougainville, and also within Bougainville.

The differences between the two situations include a major shift in the state’s ‘corner’, largely resulting from the 2001 BPA, which made legislative authority over mining available to the ABG. There is also much greater complexity in each of the company, state and community ‘corners’ and in their mutual relationship, along with emergence of a new, multifaceted ‘fourth estate’ corner. Major differences arising from the complex post-conflict situation include: the national government’s much-reduced role in Bougainville as compared to 1988; the ABG’s limited capacity and reach in a situation where several parallel ‘governments’ claim ‘sovereignty’ over all or part of the autonomous region; armed groups remaining a factor to contend with; and numerous fringe foreign mining interests seeking to play significant roles in alliance with different local factions. A major similarity is that multiple Bougainvillean groups with considerable autonomy from one another, aware that important decisions on the future of mining may be made in the foreseeable future, all seek to ensure that their voices are heard.

There is some continuity, too, in aspects of the issues being dealt with, and even in the identity of some key individuals involved in debate. ABG President John Momis, always a strident critic of BCL, who supported Francis Ona in 1987 and 1988, now supports the reopening of Panguna or possible development of a maximum of two other large-scale mines—that limit being set by the ABG’s Bougainville Mining Act 2015. This does not involve a change in the president’s long-term position, since he demands entirely new and fair mining conditions.

New actors in the political process include some of the leaders of nine new mine lease landowner associations established since 2011 to replace the PLA and NPLA, and others associated with the Me’ekamui Government of Unity. More familiar actors include figures formerly associated with both the PLA (Michael Pariu and Lawrence Daveona) and the NPLA (Wendelinus Bitanuma, John Amuna, Philip Miriori and Philip Takaung). For the most part, their positions are similar to that of Momis and the ABG. Nevertheless, the very different social, economic and political context of Bougainville in 2016 has resulted in dramatic changes in debates on the future of mining.

The State ‘Corner’

The state ‘corner’ now involves both the PNG Government and the ABG. Although the ABG became the sole regulator from 2014 under its own mining legislation, national government roles continue. Amongst other things, the PNG Government is the second largest shareholder in BCL, and its legislation continues to cover some mining-related subjects, including occupational health and safety, land and environment. Tension between the two governments centres on the national government’s efforts to remain involved in Bougainville mining matters by taking over Rio Tinto’s equity in BCL.

Soon after it was established in mid-2005, the ABG began considering the possible resumption of LSM, which represented a significant shift from the positions of most Bougainvilleans early in the peace process, when resumption seemed unlikely. Concern about the revenue needed for either autonomy or independence led the first ABG president, Joseph Kabui, to examine this possibility from mid-2005, as did both his successors—James Tanis (2009–10) and John Momis (from 2010). The two main options under consideration have been the reopening of Panguna or the lifting of the 1971 ‘moratorium’ on mineral exploration (preserved under the ABG’s mining laws) with a view to possible developments elsewhere in Bougainville.

Kabui initially considered the first option, favouring potential developers other than BCL —initially a small Australian company called Ord River Resources Ltd. But intense pressure from former BRA commander Sam Kauona shifted Kabui and his cabinet to a second option, favouring a small Canadian company called Invincible Resources Ltd (IRL), which was established by Kauona’s close associate Lindsay Semple, a dual Australian-Canadian citizen, solely for the purpose of mining investment in Bougainville. Semple raised funds from a number of high-risk investors and used the money for a number of ‘development’ projects directed towards gaining ABG support for IRL to establish several new mines, smaller than Panguna, each in partnership with local landowners. The irresistible lure of significant revenue flows, ending the ABG’s reliance on PNG Government grants, seemed to be underwritten by IRL’s 2006 advance of a K20 million loan to the ABG to support ‘capacity building’. In 2008, the ABG signed an agreement with IRL whereby the latter would hold a 70 per cent stake in an entity called Bogenvil Resources Development Corporation (BRDC), supposedly established to implement a multisectoral Bougainville development plan using revenues generated by a virtual monopoly of mining activity beyond Panguna.

Controversies about IRL and BRDC centred on details of the K20 million loan repayment agreement, the failure of the ‘development’ projects, the opacity of the 30 per cent minority shareholding in BRDC, the near monopoly vested in IRL and the extent of indirect IRL control of the ABG. After Kabui died unexpectedly in June 2008, IRL and its ABG backers strove to ensure continued implementation of the development plan, but these efforts ended when Tanis became president in January 2009.
From early 2010, the ABG again examined the possibility of reopening Panguna. High commodity prices, proven reserves, and some existing mine-related infrastructure sustained optimism that reopening could occur within perhaps six years of negotiations commencing. By contrast, experience elsewhere in PNG showed that new mines take more than 15 years to get from exploration to operation. So, while open to other possibilities, the ABG under Tanis and Momis decided that Panguna offered the best prospect of significant revenues around the time of the referendum on independence that is due to be held in 2019. Paradoxically, reopening Panguna also offered the best prospect for meeting the expected high costs of remediating mine-related environmental damage and negative social impacts, such as those experienced by the relocated villages.

After Momis took office in June 2010, initial uncertainty about BCL as the preferred operator of a reopened Panguna mine was resolved in part because mine lease landowner community leaders argued in favour of BCL, preferring the ‘devil they knew’ to a ‘new devil’, mainly because BCL accepted some responsibility for the legacy issues. Uncertainty was also reduced as the result of a three-day ABG workshop on mining policy options, held in March 2011, that clarified the choice between the option of BCL reopening Panguna, an alternative developer doing so, and consideration of alternative prospects.

The ABG has consistently emphasised that no LSM will be permitted without landowner consent. Over three years from mid-2011, the ABG supported the establishment of nine independent associations to represent landowner communities impacted by the Panguna mine communities in considering possible resumption. Over 3,000 landowners voted for association executives at nine separate general meetings. The ABG has consulted the associations but has not sought to influence their positions on mining issues—indeed, there have been occasional tensions between the ABG and some association leaders. Five years on, in 2016, no decision had been made to even initiate negotiations with BCL or any other mining company about reopening Panguna.
Engagement with BCL has mainly been about steps preparatory to possible negotiation, inclusive of arrangements needed for a reconciliation process proposed by more than 50 mine lease landowner leaders who attended the first formal post-conflict meeting with the ABG and a senior BCL representative in July 2012. Extensive discussions have occurred within and between associations, and between them and the ABG, about possible conditions for reopening the mine, which reflects ideas about the primacy of Bougainvillean rights.

The ABG also undertook extensive public consultations about the future of mining, which included consultations about its mining policy in 2010–11, about the future of Panguna and other possible LSM activities in 2013–14, and about its draft mining legislation in 2014–15. In the absence of opinion polling, it is difficult to be certain as to whether there has been a preponderance of views one way or another. Nevertheless, those involved in organising the consultation reported broad community support for resumption of mining. That is consistent with regular feedback to the ABG from the nine Panguna landowner association executives, as well as from the elected ABG members from their own constituencies, including the mine lease areas.
From about 2014, the ABG began seriously examining options other than reopening Panguna. The reasons for this included:

  • falling commodity prices, which made it less likely that the reopening could be financed (at an estimated cost of US$6–8 billion);
  • growing realisation of the extent to which negative sovereign risk assessment could make financing even more difficult;
  • the high expectations of mine lease landowners, former combatants, and others about compensation, not just for mining impacts but also a range of conflict impacts; and
  • the increasingly disruptive activities of small foreign companies linked to different Bougainville factions.

In taking over full regulatory responsibility for mining, the ABG established its own mining department in 2007, negotiated transfer of national government powers (2006–08) and developed its own mining policy (2009–14). It developed its own mining law in two main stages. The first was the Bougainville Mining (Transitional Arrangements) Act, proposed in 2012 and enacted in 2014. This first law was based on PNG’s existing Mining Act, but with significant changes to meet Bougainville’s needs. These included:

  • vesting both the ownership of minerals and powerful veto rights over exploration in the owners of customary land;
  • divesting BCL of its mining tenements, leaving only an exploration licence over the former SML; and
  • imposing a strict prohibition on the operation of more than two very large mines (like Panguna) at one time.

The second stage involved passage of the Bougainville Mining Act in March 2015. It was the product of the policy development process initiated in 2009, incorporated many of the initiatives included in the 2014 Act, and extended landowner rights to include the power of veto over mining development tenements, as well as exploration licences.
While reluctantly accepting the validity of this ABG legislation, the national government was attempting (from 2013) to purchase Rio Tinto’s 53.8 per cent equity in BCL, thus raising its own stake in the company to 72.8 per cent. Opposing this move, the ABG argued that:

  • PNG majority ownership of the mine at the heart of the conflict was unacceptable in Bougainville;
  • the PNG Government was seeking to control Panguna despite the transfer of mining powers to the ABG; and
  • PNG would gain significant control of the Bougainville economy, which would be a sensitive issue in the lead-up to the referendum.

The ABG demanded that, if Rio Tinto divested, then its equity should be ‘gifted’ to the ABG and the landowners, and it should provide significant additional funding to meet corporate responsibilities for mine legacy issues, including extensive environmental, social and human rights impacts, especially for the thousands of relocated people who were now living in appalling conditions. These issues remain unresolved at the time of writing.

The Community ‘Corner’

Just as in 1988–89, this part of the matrix of stakeholder relationships extends well beyond the immediate vicinity of Panguna. Since the 1960s, the significant social and economic impacts of the mine have ensured that most Bougainvilleans have felt that they have some stake in Panguna’s mineral resources. These feelings grew far stronger after the conflict, in which all communities shed blood, many at Ona’s explicit request. Under customary principles applicable in most Bougainvillean cultures, if blood is shed when supporting landowners in land-related conflict, the clan whose blood is shed gains some rights over the land in question. Such principles are referred to widely in public discussions about Panguna.

The three main groups of former combatants are a significant new addition to the ‘community corner’. Theirs have become increasingly prominent voices in public debates since Momis was elected as ABG president in 2010, partly because of suspicions of his PNG Government links. Two of the most significant voices are those of the former BRA leaders Sam Kauona and Ishmael Toroama. Kauona presents as a strident critic of BCL, opposed to the reopening of Panguna and the ABG’s mining policies, despite his own close association since 2004 with foreign corporate mining interests, most notably IRL. For Toroama, a key issue in Panguna-related debate is recognition of the rights of former combatants on the basis of blood shed during the conflict.
Despite the major logistical and financial difficulties involved, the ABG has made extensive efforts to consult widely about the future of LSM, not just with mine lease landowner communities, but amongst Bougainvilleans more generally. Elected executives of the nine landowner associations, representing what could now be as many as 15,000 people in the mine lease areas, have consulted widely with their own communities as well as with the ABG. Consistent with the outcomes of the ABG’s wider process of community consultation, they report broad community support for mining resumption, but only under fair conditions, including redress for past injustices.

The Company ‘Corner’

In June 2016, Rio Tinto announced a plan to transfer its 53.8 per cent stake in BCL to an ‘independent trustee’ that would be jointly owned by the PNG Government and the ABG. Under the terms of this arrangement, Rio aimed to transfer 36.4 per cent of its equity in BCL to the ABG, and 17.4 per cent to the PNG Government. This meant that both would hold an equal proportion (36.4 per cent) of the shares in BCL, since the PNG Government already held 19 per cent. This announcement aroused a storm of protest from nearly all of the Bougainvillean actors mentioned in this chapter, most of whom demanded that the PNG Government should transfer the 17.4 per cent to the ABG so that it would become the majority shareholder. This move was opposed by PNG Prime Minister Peter O’Neill, who announced instead that the 17.4 per cent would be transferred to a trust for the benefit of all Bougainvilleans, including the Panguna landowners. This left the PNG Government with its original 19 per cent stake, the ABG with 36.4 per cent, the trust with 17.4 per cent and several thousand small shareholders with a little over 27 per cent.

An account of the details and ramifications of these developments, and the new political process engendered by this turn of events, is beyond the scope of this chapter, but it has not so far led to any significant change in the prospects of reopening the Panguna mine. What it might have done is to limit the scope for continued interference by other foreign companies in the prospective development of LSM projects in Bougainville.

In 1988 there was a small local corporate sector linked to the mine, notably the BDC and the RMTLTF, but both of these entities ceased to operate soon after the conflict began, and it is still unclear what happened to their funds and some of their other assets. By 2016, however, several other sets of corporate interests had emerged, with strong linkages to different Bougainvillean groups.

As previously mentioned, former BRA leader Sam Kauona, supported by a small group of other former combatants, has had close links to dual Australian-Canadian citizen Lindsay Semple since 2004–05. Semple and Kauona have been financially supported by a series of at least three main external investors: the Canadian company IRL from 2004 to 2010; another Canadian company, Morumbi Resources, from 2010 to 2013; and from 2015, New York investment firm Kuhns Brothers. They lost most of their influence over the ABG when Joseph Kabui died in 2008, and their cause then seemed to be lost in 2010 when the investors in IRL lost faith in Semple. However, they soon re-entered the field with Morumbi, seeking exclusive rights to exploration and development in prospective areas through agreements made between Morumbi subsidiaries and small groups of landowners, which they unsuccessfully sought to persuade the ABG to recognise. After Canadian police visited Bougainville in late 2013 to investigate the activities of both IRL and Morumbi, the latter cut its ties to Semple. Since Kuhns Brothers became involved, their activities have included the establishment of a small gold-buying and refining operation, the creation of an investment fund called Bougainville Fund Management LLC, and various proposals for funding development projects outside the mining sector in what appears to be an approach similar to that attempted by IRL.

Since Ona’s death in July 2005, one of the two main sets of self-proclaimed successors to his leadership of the ‘Me’ekamui’ groups claiming to be the legitimate Bougainville government (as alternatives to the ABG) has been the Panguna-based Me’ekamui Government of Unity (MGU). The MGU has also had extensive involvement with a succession of small foreign companies. The first was Australian registered company Tall J Foundation Pty Ltd, involving a group of American citizens who attempted mechanised extraction of gold from the Panguna riverine tailings in 2008. It was followed by Cefeida SA, a company established in 2009 by former Tall J investors, Stewart Sytner and Thomas Megas, to attract investment funds by claiming ‘that they possessed exclusive rights to develop and mine in [Bougainville] … and that such rights “were extremely valuable and rare for outsiders”’. Next was a Canadian company, Transpacific Ventures Ltd, also linked to Sytner. It produced an information memorandum for prospective investors in July 2013, claiming an agreement with the MGU ‘on an exclusive basis for 20 years renewable, to advise the customary landowners (the Me’ekamui) in developing their natural resources sector’ under a new mining law ‘expected to transfer all land and mineral rights on the island of Bougainville and its territorial waters to the Sovereign Me’ekamui Tribal Government (the Me’ekamui)’. In 2014, Transpacific was succeeded by Australian company, United Resources Management Pacific, which was succeeded in 2016 by another Australian company, Central Exploration, both of which were introduced to the MGU by an Australian, Ian Renzie Duncan, who was previously involved in Transpacific Ventures. The companies involved, from about 2012 until at least the end of 2015, paid monthly ‘salaries’ to senior MGU members.

These are just a few of the small corporate entities that have sought access to Bougainville’s mineral resources since the ABG began considering the possibility of renewed LSM. Many have sought to advance their interests with no reference to the ABG. Rather, they have used links with the leaders of local factions (some armed) or have engaged in direct dealings with small landowner groups from prospective areas. The need to control such entities provided a major impetus for the ABG to develop its initial mining legislation in 2012.

The ‘Fourth Estate’

From 1989, the Bougainville conflict attracted considerable international attention, particularly in Australia. Several NGOs and other groups supported the BRA, or Bougainvilleans suffering the impacts of the PNG Government’s air and sea blockade of Bougainville imposed from mid-1990. These supporters included existing organisations and new ones established for the purpose, such as the Independent Bougainville Information Service, Australian Humanitarian Aid for Bougainville and Bougainville Freedom Movement (BFM).

Since the conflict ended, a few additional groups and some individuals have become involved, particularly with the emergence of debate on the future of LSM. They have included ‘mediators’ offering services to the ABG, as well as some journalists, lawyers, advisers or consultants mainly seeking to advise or influence various Bougainvillean groups—especially Panguna lease landowner associations.

Since the ABG began developing its mining legislation in mid-2012, a concerted campaign against its mining policy has been mounted by a network of fourth estate actors whose central point appears to be Australian ‘activist’ academic, Kristian Lasslett. He is involved with the International State Crime Initiative, whose website includes material purporting to document the responsibility of Rio Tinto and BCL for the conflict and its impacts, and demanding that they be brought to account. This view is advanced in Lasslett’s own publications and in other publications in which he acknowledges a central role.

The main PNG node in this network is the Bismarck Ramu Group, which operates two blogs that feature stories about mining on Bougainville—‘PNGexposed’, which is intended to expose political corruption, and ‘Papua New Guinea Mine Watch’, which was established to campaign against environmental damage by the Ramu nickel mine in PNG’s Madang Province, but has since expanded its remit to other mining projects. Both blogs regularly publish strong attacks on the ABG, some under Lasslett’s name, but many anonymous, though very much in Lasslett’s style. According to Lasslett, the Bismarck Ramu Group is ‘one of Papua New Guinea’s unsung treasures, and their support over the years has been truly amazing’.

The Australian branch of the network includes Jubilee Australia, an NGO that has published two reports highly critical of the ABG’s mining policy and legislation. The research for its 2014 report was overseen by Lasslett, who has had close links with Jubilee since his student days. The two Bougainvilleans who undertook the research were close associates of Lasslett, and are known to share his views on BCL and Rio Tinto.

The Australian branch also includes a few MPs from the Greens and Labour parties. Greens Party senator Lee Rhiannon has spoken at the launches of the Jubilee reports, and has regularly asked questions of the Australian Department of Foreign Affairs and Trade in Senate Estimates Hearings about alleged Australian Government influence on ABG mining policy. Antony Loewenstein, an Australian activist journalist and author, has written articles critical of ABG mining policy, and covers such issues in his book on ‘vulture capitalism’. Loewenstein acknowledges the support and assistance of Lasslett in his writings on Bougainville.

Finally, the Australian node includes the BFM, the last of the ‘support groups’ from the 1990s that still has a public voice. It regularly attacks the ABG on the PNG Mine Watch blog, as well as in other outlets such as ‘New Dawn on Bougainville’, in pieces by written by Vikki John. Lasslett acknowledges the ‘encouragement and guidance from activists and advocates involved in the Bougainville anti-war and independence movements’ that he received while doing his PhD research on ‘state-corporate decisions and motivations that underpinned the crimes on Bougainville’, including support from key BFM figures, Vikki John amongst them.

This ‘fourth estate’ network does have some links in Bougainvillean communities, but mainly with a few people who share the views of other network members. Curiously, Lasslett’s connections include a key personal staff member of Jimmy Miringtoro, one of Bougainville’s MPs in PNG’s national parliament, who, despite being a strident critic of the ABG’s mining policies, has his own interests in the selection of companies that might redevelop the Panguna mine.

All the members of this network advance strident claims about what they believe to be the general opposition to mining on the part of either the people of Bougainville in general, or of mine lease communities in particular. The evidence offered in support of these claims is weak or flawed. For example, the basis for Jubilee’s 2014 claims that ‘the mine affected communities’ are ‘opposed to any discussion of the mine’s reopening’ was a set of ‘semi-structured’ interviews with just 65 individuals selected by a ‘snowballing’ technique, plus a single focus group discussion with 17 males in a village just outside the mine lease area who ‘refused to be interviewed separately, instead stating that they preferred to reach a consensus … and then present one common position for each question’. In a situation where there are perhaps 15,000 people in former mine lease area communities, where it is well established that a large (but unknown) proportion support the resumption of mining, subject to strict conditions, the most likely explanation for the unanimous opposition reported from this supposed ‘sample’ is the so-called ‘snowballing’ technique adopted and supervised by persons who are themselves deeply opposed to resumption.

None of the members of this supposed ‘civil society’ network has ever communicated with the ABG or the landowner associations about the issues on which they so regularly make public comment. They do not countenance the possibility that, in considering resumption, the ABG and the landowner associations find themselves with very limited options as they seek realistic means of not only providing a secure basis for Bougainville’s autonomy or possible independence, but also creating new livelihoods for the former mine lease communities.

The sustained attacks by members of the network on President Momis, the ABG, advisers to the ABG and the Australian Government (for funding such advice) are based on the assumption, unsupported by credible evidence, of a strong consensus against the reopening of Panguna or any other form of LSM. They make such assumptions in the process of projecting their own theories, ideologies or needs onto Bougainville, convinced that they are finding or providing the supporting evidence. None has the motivation to understand the facts and the complexity of Bougainville, either in 2016 or in the period from 1987 to 1989.

Their activities have had little impact in Bougainville or on Bougainvilleans, other than providing support to groups seeking control over the region’s mineral resources in partnership with foreign investors other than Rio Tinto. Their analysis has, however, influenced the positions of some donor countries, and those of some international NGOs involved in Bougainville. In these ways, they contribute to tensions, divisions and conflicts of which they have little understanding.

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