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.

The Lessons of Panguna

The construction, operation and closure of the Panguna copper mine on the island of Bougainville, in the period from 1967 to 1989, provides a clear illustration of the process of modernisation and its political repercussions. But, in this case, the illustration also served to inform the new model of stakeholder politics that was applied to the large-scale mining industry at a global scale.

The Panguna mine exemplified the technical innovations that were typical of the new generation of open-cut mining projects. However, because it was commissioned at the very start of the process of modernisation, no environmental conditions were attached to the licences granted by the Australian colonial administration, so the mine was designed to discharge its waste material directly into the Jaba River. The construction of this most modern mine was also accompanied by the construction of a modern mining town to accommodate the families of a workforce with multiple technical skills. Long-distance commuting was not yet thought to be an economic option for the employment of this type of workforce.

In the short period of time between self-government in 1973 and full independence from Australia in 1975, representatives of the new nation state renegotiated the Bougainville Copper Agreement that it inherited from the colonial administration and, in so doing, made PNG look like a very smart young Third World country. But the resulting increase in the national share of the incomes generated by the new mining project was just one aspect of a longer policy process that also established a set of rules to govern the distribution of these incomes between different groups of national stakeholders. These groups included national members of the mining workforce, the customary owners of land leased to the mining company and the people of Bougainville (or North Solomons) Province. Representatives of the national government and the mining company thought that this process had been completed by 1980.

The outbreak of the Bougainville rebellion in 1989 was the start of an entirely new policy process that was not confined by national borders. It was the first in a sequence of ‘bad events’ that eventually forced the captains of the global mining industry to articulate new standards of corporate social responsibility. But the lessons of the rebellion were not easy to learn, since it was not clear whether and how it might have been caused by the negligence of Bougainville Copper Ltd (BCL). Some observers blamed the Australian colonial administration for approving the development of the mine without regard for what Bougainvilleans wanted. Others blamed the national government for failing to share enough of the benefits of the renegotiated mining agreement with the provincial government or local landowners. Since the first phase of the rebellion was organised by a local landowner association, much attention was paid to the grievances that its leaders held against the mine itself. Were they upset about the influx of outsiders taking jobs or doing business with the mine; about the damage being caused to their own land or physical environment; or about the inability of their own social institutions to cope with a rapid process of social, economic and environmental change?

The reason that these questions are so hard to answer, even with the benefit of hindsight, is that the rebellion was not a single ‘event’ with a discrete set of causes. It was a local and provincial political process with deep historical roots that continued to evolve for years after it had triggered a set of national and global policy responses within the mining sector. If all the local and provincial actors who were involved in this process at one time or another had shared a common set of interests and motivations, then the process would not have lasted for as long as it did.

So what lessons were to be drawn from the events that forced the closure of the mine if the allocation of responsibility or blame is still contestable? The first lesson was that a disaffected mine-affected community had the power to close down a large-scale mining project if government forces were too weak to stop this from happening. The second was that a mining company could not always rely on a Third World government to police and enforce the compensation and benefit-sharing agreements under which it operated. From which followed a third lesson, that mining companies operating in fragile or chaotic political environments had to develop new strategies to manage relationships between all three groups of stakeholders in the triangle.

There may have been a fourth lesson, but it was not quite so obvious to external observers. It could be drawn from the fact that Francis Ona, the rebel leader, emerged from the ranks of BCL’s own workforce. He and some of his fellow mineworkers were not only members of the landowner association that demanded huge amounts of monetary compensation from the company in 1988; they were also responsible for escalating acts of sabotage against the infrastructure of the mine that culminated in the outbreak of armed conflict at the end of that year. In this respect, the first phase of the rebellion was an ‘inside job’. In the second phase, the company was forced to close the mine because it could not guarantee the safety of its workforce; however, by that time, the rebellious landowners in the workforce were already on the other side of the fence. Nearly all of the workers who lost their jobs in 1989, including many Bougainvilleans, left Bougainville to look for work elsewhere. The rebellion did not serve their economic interests at all, but nor was it inspired by rational economic calculations on the part of the rebels, and that is one reason why the government and the company were unable to contain it. So the lesson would be that recruitment of more workers from a mine-affected community is not necessarily sufficient to compensate for the negative impact of a mining project on their society and their environment.

Ramu Nickel Project

The US$2.1bn Ramu nickel project near Madang, on the north coast of PNG, is one of the largest and most ambitious mining and processing projects to have been successfully brought into production in PNG during the past decade. Construction was largely completed by 2012 and the plant has since been progressively brought into production.

The production figures until the end of 2015 are shown in the table below, demonstrating the consistent improvement in operating performance.

Ore Processed (dry kilotonnes)6471,2532,2732,7842,2703,400
MHP Produced (dry tonnes)13,77729,73657,36065,28657,82478,000
Contained Nickel (tonnes)5,28311,36920,98725,58222,26932,600
Contained Cobalt (tonnes)4691,0132,1342,5052,1913,300
% Nameplate Capacity16%35%64%78%68%100%
MHP Shipped (dry tonnes)57639,47257,21653,29164,30778,000
Contained Nickel (tonnes)21715,12321,10020,74724,19931,150
Contained Nickel (tonnes)191,3382,1642,0042,3763,300

The Kurumbukari nickel and cobalt laterite mine is connected by a 135km pipeline from the Kurumbukari plateau, to the Basamuk process plant which is 75km east of the provincial capital of Madang, along the Rai Coast of the Vitiaz Basin.


First discovered in 1962, Highlands Gold Limited in 1992 assumed the management of the current joint venture. An intensive period of geological exploration and engineering led to a prefeasibility study and in 1996 the establishment of the Ramu Nickel Joint Venture to prepare a bankable feasibility study. In 2000 the project was granted its Special Mining License and in 2005 Metallurgical Corporation of China Limited (MCC) joined the joint venture and was responsible for financing and construction of the project.

1962Ramu laterite ore was discovered by the Australian Bureau of Mineral Resources. Extensive exploration, sampling and testing follows.
Late 1990sHighlands Pacific Ltd. commenced Feasibility Study and permitting applications.
2000Ramu Nickel Project was sanctioned by PNG Government with the signing of Ramu Project Mining Development Contract (“MDC”) and the issuing of Special Mining Lease 8.
2003MCC commenced technical and economic due diligence on the Ramu Nickel Project.
2004 February, the Framework Agreement for the joint development of the Ramu Nickel Project was signed between MCC, the PNG parties and the PNG State.
2005March, Project Master Agreement was signed between MCC and the PNG parties. October, Ramu Nickel Joint Venture Agreement was signed, Ramu NiCo becoming the Project Manager.
2006April, Project Financing Agreements were concluded. August, Amending MDC was signed with the PNG State. November, Project Foundation Ceremony was held.
2007July, Amended Project Development Proposal was approved by the Mineral Resources Authority; MCC-JJJ Mining Development Company was formed.
December, Project Environmental Permit for construction and operation stages was granted from the Department of Environment Conversation.
2008The Project moves into full-scale construction.
2010The Project construction substantially completes and commissioning starts.
Since 2012The Project production is ramping up as scheduled.


In PNG, the Project is an unincorporated joint venture between MCC Ramu (85%); MRML (2.5%) and MRRL (with 3.94%) two subsidiaries of Mineral Resource Development Corporation (MRDC) on behalf of PNG government and landowner interests; and RNL (8.56%), a subsidiary of former developer Highland Pacific Ltd.  Ramu NiCo Management (MCC) Limited, as the Manager of the Project appointed by all joint venture parties, is fully responsible for construction, development and operation of the Project.

In China, MCC Ramu NiCo Limited is wholly owned by MCC-JJJ Mining, whose shareholders include China Metallurgical Group Corporation (MCC), a Fortune 500 company and three of the largest enterprises in the Chinese nickel and stainless steel industry, namely Jinchuan Group Limited, Jilin Jien Nickel Industry Limited, and Jiuquan Iron & Steel (Group) Limited. These four giants give the Project strong supports on financing, technology and operation, and furthermore form a strategic alliance in developing and consuming nickel and cobalt.


MCC is the project’s operator.


Mining and Beneficiation Plant

The Kurumbukari Mine is located on the Kurumbukari plateau, 600m to 800m above sea level and 75km to the southwest of Madang. It consists of 19 unit projects in total, including  open-pit mine, de-agglomeration plant, beneficiation plant and supporting facilities such as water plant and power plant. The Kurumbukari nickel deposit is a low strip ratio, free digging open pit mine. Face shovels and backhoe configured excavators mine the average 12 metre thick ore-body and load into trucks for delivery to the beneficiation plant. The plant removes the chromite and creates a correctly sized and consistent slurry feed for overland pipeline transport to the Basamuk process plant.

Slurry Pipeline

A 135km slurry pipeline runs from the Kurumbukari mine/beneficiation plant to the Basamuk refinery, with a drop in elevation of about 680m. Being the first long distance transportation pipeline in the world for nickel laterite projects, it is specially designed and constructed to make full use of the potential energy difference between the Krumbukari plateau and the coast, as well as the rheology of the slurry. The majority of the pipeline has been buried and has road access for ease of checking and maintenance.

Basamuk Process Plant

The Basamuk Process Plant is on the coast of Basamuk bay, 5m to 60m above the sea level and 55km to the southeast of Madang. It has 28 unit projects, including slurry treatment, high pressure acid leaching, CCD washing, neutralization ,Fe/Al removal and precipitation as well as supporting components such as limestone preparation, sulfuric acid plant, water plant, power plant and wharf. The Basamuk process plant incorporates three High Pressure Acid Leach (HPAL) trains (autoclaves) and is designed to produce 78,000 tonnes (dry) of mixed hydroxide product containing 32,600 tonnes of nickel and 3,300 tonnes of cobalt per annum. The plant has a two train acid making facility as well as a limestone processing plant for making the key reagents used in the making of the mixed hydroxide product.

Exports and Sales

Since production started in 2012 mixed nickel cobalt hydroxide intermediate product has been exported to China where contracts are in place to receive the product. Up until the end of 2016 a total of 81,385 t of nickel and 7,901 t of cobalt in an intermediate form has been sold

Environment and Deep Sea Tailings

Based on advice from international experts received during the study and permitting stages it was decided to dispose of the tailings from the operation into the 1500 metre deep sea canyons as this represented the most appropriate and safe method of disposal. Reasons for this decision include the fact that the area has among the highest rainfalls in the region and land based tailing storage could be disturbed in a highly active volcanic and high-rainfall region while impinging on agriculture and landholder customary land.



Frieda River Copper-Gold

Frieda River represents one of the largest undeveloped copper-gold deposits in the world. The Horse-Ivaal-Trukai, Ekwai and Koki (HITEK) global Mineral Resource is estimated at over 2.7 billion tonnes of mineralisation at an average grade of 0.42% copper and 0.23g/t gold and contains 13 million tonnes of copper and 20 million ounces of gold.


The Frieda River project is 70km south of the Sepik River on the border of the Sanduan and East Sepik Provinces of Papua New Guinea some 500km upriver from the coast.


Highlands Pacific holds a 20% interest in the project, with 80% held by PanAust Ltd, which is a wholly owned subsidiary of Guangdong Rising Assets Management Co. Ltd. of China.

The PNG Government has a right to acquire up to a 30% interest. If the Government exercises its right to its full extent, Highland’s holding would reduce to 15% and PanAust’s to 55%.

Development Concept

PanAust has prepared a Frieda River Feasibility Study, which was delivered to Highlands in May 2016. The Study contemplates a project comprised of a large-scale, open-pit mining operation feeding ore to a conventional process plant with nominal throughput capacity of 40 million tonnes per annum. Average annual production of metal in concentrate is 175,000 tonnes of copper and 250,000 ounces of gold, with an initial mine life of 17 years. The project will have an average life of mine C1 cash cost of US$0.69/lb of copper and an all in sustaining cost of US$1.23/lb of copper.

The Study concludes that the project will have an estimated initial pre-production capital cost of US$3.6 billion, excluding mobile mining fleet and an oil fired power generation facility. An additional US$2.3 billion will be spent over the life of the mine on development and sustaining capital.

The project capital cost compares with the US$1.7 billion estimate of an earlier development concept announced by PanAust in September 2014. The higher capex of the updated development concept reflects the larger annual production capacity of the project, additional spending on waste and tailings management solutions and increased construction costs.

PanAust has estimated the updated project will generate a net present value (NPV) of US$820 million, using a discount rate of 7.8%, a copper price of US$3.30/lb, a gold price of US$1,455/oz and a silver price of US$23/oz. The Internal Rate of Return for the project based on those parameters is 10.8%. This NPV is calculated from a start date of June 2018 when the project may commence construction. The NPV as of June 2016 is US$705m and assumes there is no expenditure until June 2018.

PanAust on behalf of the Frieda River Joint Venture has submitted an application for a Special Mining Lease. The application process and associated community consultation and environmental studies are anticipated to take approximately two years. Following permitting, construction would take approximately six years, leading to potential production in 2024-25.

Joint venture partner commitment to development of the project remains subject to a range of challenges, including debt and equity funding, commodity prices, design refinement, environmental and community approvals. The future development of the project ultimately would be subject to a final investment decision by the project proponents, the grant of an SML and all necessary permits, approvals and agreements required from the PNG Government, landowners and other stakeholders. It also will be affected by such matters as government infrastructure support and the level of ownership that the national government elects to acquire in the project.

Licence Status

The Frieda River Joint Venture has several exploration licences with the main resource area being covered by EL58 which is current until November 2015. Environmental studies are significantly advanced but are yet to be finalized as an Environment Impact Statement.  This will occur in the coming months.



Highlands Pacific Limited

For more than 20 years Highlands Pacific Limited has been successfully operating in Papua New Guinea (PNG). It is now arguably PNG’s premier minerals explorer, developer and producer, advancing some of the country’s most important copper, gold and nickel assets. The PNG incorporated company, listed on the ASX and POMSoX Exchanges (under the code HIG) provides investors with leverage to the country’s significant mineral resource endowment. Approximately 30% of Highlands Pacific share register is held by the PNG Government and PNG based funds with the rest by international investors. Highlands Pacific is a joint venture partner in the massive Frieda River Copper-Gold project in the East Sepik Province, holds exploration ground 20km north of the Ok Tedi mine in the Star Mountains which is prospective for copper-gold, has an investment in the producing US$2b Ramu Nickel-Cobalt Mine near Madang, and exploration ground on Normanby Island targeting nickel laterites.
The Company’s current share of the resource base reported for its projects and joint ventures is:

  • 4.1 million ounces of gold
  • 2.6 million tonnes of copper
  • 238 million pounds of nickel; and
  • 24 million pounds of cobalt

Frieda River Copper/Gold Project

The Frieda River Copper-Gold project is located 175km north-west of the Porgera gold mine and 75km north-east of the Ok Tedi mine. The project owners are PanAust Limited (manager) 80% and Highlands Pacific 20%. The Frieda River Copper-Gold project is PNG’s largest undeveloped copper-gold project and one of the top 10 undeveloped open pit copper mines in the world. The resource inventory of the project consists of 11.5Mt of copper, 20Moz of gold and 49Moz of silver.

Ramu Nickel Cobalt Mine

The Ramu Nickel-Cobalt mine is located 75km west of the provincial capital of Madang, PNG. Highlands 8.56% interest in Ramu will increase to 11.3% at no cost to Highlands after repayment of its share of the project debt. From commissioning, Highlands has access to its pro-rata 8.56% share of Ramu’s post-debt servicing, net cash flow. Highlands also has an option to acquire an additional 9.25% interest in Ramu at fair market value, which could increase the company’s interest in the mine to 20.55%, if the option is exercised.

Star Mountains Copper-Gold Project

The Star Mountains exploration tenements, which include Nong River EL1312, Mt Scorpion EL1781, Munbil EL2001 and Tifalmin EL1392 have been expanded to include EL2467, are located approximately 20km north of the Ok Tedi mine, in the West Sepik Province, PNG. They lie within the highly prospective New Guinean Orogenic Belt, which hosts the Grasberg, Ok Tedi, Porgera and Hidden Valley mines, as well as the Frieda River deposit.

Nenatec Process

The Nenatec Process, co-owned with Glencore Xstrata is a patented process designed to treat concentrates produced from refractory base metal and precious metal ores. The process offers Highlands potential access to new projects and/or royalty streams.

Bougainville Copper Limited

Bougainville Copper Limited (BCL) is a subsidiary of Conzinc Riotinto Australia (CRA) which discovered a major copper deposit at Panguna. on Bougainville Island in the North Solomons, in 1964. In 1967 CRA signed an agreement with the Australian Administration to set up Bougainville Copper Mining Company. Some 53.6 percent of the shares were to be held by CRA, 26.4 percent by public shareholders and 20 percent by the Australian Administration on behalf of the colony of PNG. Mining operations began in 1969 and copper was first exported in 1972. In 1973 the Bougainville Mining Company was renamed Bougainville Copper Ltd (BCL).

Some Bougainvilleans opposed the project and others, particularly owners of the land which had been taken over by BCL, wanted more than the token compensation which they had been offered. In 1974 the BCL Agreement was renegotiated on what were, by world standards, terms very generous to PNG. However, many Bougainvilleans believed that they were being inadequately compensated.

Concern about the effect of mining on the physical and social environment, and resentment over inadequate compensation, led in 1979 to the establishment of the Panguna Landowners Association (PLA). BCL reluctantly responded by establishing a Road Mine Tailings Lease Trust Fund (RMTLTF) to review the situation. The dispute was complicated by the emergence of a younger, educated group of Bougainvilleans, whose members claimed that compensation to the landowners had been inequitably distributed and questioned the authority of the PLA. In 1987 this group formed the New Panguna Landowners Association (NPLA) which, in 1988, demanded K 10 billion compensation, many times the mine’s total gross earnings between 1972 and 1987. When BCL failed to meet this unrealistic claim, some members of the NPLA, led by Francis Ona, resorted to sabotage and terrorism and formed the Bougainville Revolutionary Army (BRA). BRA activities forced the closure of the mine in May 1989. In December BCL announced that the mine would remain closed indefinitely.

Between 1972 and 1989 BCL contributed K 1.17 billion (67 percent of the total BCL income of K 1. 175 billion) to the PNG economy. Of this amount, 61.5 percent went to the national government, 4.3 percent to the North Solomons provincial government, and 1.4 percent to those who had been recognized as owners of the land occupied by the mine. In 1989 BCL provided 30 percent of PNG export earnings, 11 percent of GDP and 15 percent of national government revenue.