To remain impartial, the Papua New Guinea Government should not be a shareholder, but only maintain regulatory oversight of mining projects, according to geologist and mining consultant, Jerry Nombri Garry. He tells Business Advantage PNG there are other ways for the country to derive healthy revenues from mining projects.
Mining consultant Jerry Garry (centre) on site in Sierra Leone. Source: Jerry Garry
Simbu-born Jerry Garry has worked in some of the toughest mining environments in the world: Indonesia, Sierra Leone, Tanzania, Afghanistan—and PNG.
After returning home in 2013 to work as Country Manager for Crater Gold, he describes the PNG mining industry as ‘mature and operates upon a very stable regulatory framework and friendlier tax regime compared to other jurisdictions.’
But he believes some regulatory processes and legal requirements require fine-tuning to ensure that projects are established quickly and provide fair and equitable revenues.
He argues that in the interests of impartiality, the government should only play a regulatory role.
‘Government participation underpins confidence in the developer and financiers.’
‘Whenever the state exercises its option to acquire a portion of the allowable 30 per cent equity in any mining project, it automatically becomes a player.
‘Government participation underpins confidence in the developer and financiers; [adopting a] dual role as operator/regulator can compromise enforcement of the laws and regulations.’
Revenues
The aim, he says, is to maintain healthy revenues for the country.
Solutions could include negotiating increased royalties on a sliding scale at different benchmarks; introducing the compulsory participation of state-owned enterprises (SOE) in mining projects (e.g. PNG Power); or reserving a reduced equity percentage for PNG-based entities (such as super funds and investment companies).
‘The benefits of extinguishing equity participation, will not only promote impartiality, but safeguard the state from unnecessary debts and debt financing, and commit itself fully to the service delivery obligations.’
He points out there have been many missed opportunities associated with the extractive industries.
‘For example, PNG Power/Elcom [the former PNG Electricity Commission] missed out completely on power generation and the distribution business in mining projects.’
PNG Power could now have double its installed capacity of 300MW, if it had been involved at mines like Bougainville (135MW), Ok Tedi (110MW), Porgera (75MW) and Lihir, (56MW), he observes.
Opportunities
Mining operations in Sierra Leone. Source: Jerry Garry
Some new opportunities are emerging, he says, listing Frieda River (estimated at about 150MW) and Wafi-Golpu (estimated at more than 100MW).
‘SOEs must re-think their business model, by expanding their capacities through direct participation in the extractive industries, rather than increasing tariffs as a business profitability norm.
‘The onus is on the government to draw a national master plan for infrastructure (e.g. roads, power) that meaningfully connects all major natural resource areas.’
In doing so, shared-use infrastructures can be jointly funded by mining project and Government under Public-Private-Partnership (PPP) arrangements and foster sustainable economic growth.
Simbu born
Born in 1967 in the Gumine District of Simbu Province, Garry was raised in a rural setting. He completed high school at Kabiufa SDA in Eastern Highlands Province.
What attracted Garry to geology were stories from an older student about his helicopter adventures and the job potential associated with the course.
After graduating in 1990, the Ok Tedi mine employed him under their Graduate Development Scheme and sponsored him to complete his Honours degree at the University of Ballarat, near Melbourne, Australia.
‘Field geology is fun, because you always get to see new places, people, rocks and minerals.’
Negotiation skills
One of those places was Sierra Leone. When he arrived, in 2001, the country was going through a disarmament phase after a 10-year civil war. It is there he nurtured his negotiation skills.
‘Crafting the right balance in our negotiations for access, and to re-gain trust from each chiefdom, were crucially vital survival skills.
‘The country was devoid of its experienced and skilled mining workforce.
‘Mentoring young national graduates, from basic survival skills, to exploration and mining techniques, gave me a sense of usefulness.’
He was excited by the challenge to understand West African mineral potentials including diamonds, banded iron ore formations, rare earth elements and Archean gold deposits.
From Sierra Leone, Garry moved onto Tanzania, where, as General Manager for Savannah Diamonds, he commissioned a dense media separation plant and ‘x-rays flowsort’ to recover macro-diamonds.
In 2009, he went to Afghanistan, where he was involved in nation-building and restoration programs, including rewriting the country’s mining laws.
‘We trained the entire geological survey staff and guided more than 20 intelligent, young Afghans for post-graduate studies in Japan, India, the UK and US.’
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Well articltaed GJ. The Govt should relinguish its equity option (30%) in any mining venture because Govt has been loan-financing the 30% equity incurring unnecessary debts. It should allow for PNG investors (Superfunds, loans societies, Prov Govts etc) up to 15% to particpate subjected to each investor meeting its cost of entry per the Developer’s schedule (FID). The remaining 15% equity option be converted to Royalties (or 15%:85% production sharing in favor of the deveoper).
Mr Nombri’s inserts on government participation in the countrys mining industries is true in every word.
These can be directed to the countrys state owned enterprises like PNG Power Limited, Postal Telecommunication Corporation, Housing Commission, Air Nuigini to acquire shares and of course the Provincial Government.
They can only be as regulator.
The Provincial Governments tend to get lesser roles in service delivery in mining areas, especially in building infrastructures such as roads, schools, hospitals, etc. These roles are undertaken by the National government and the National Government tend to fail to deliver these services, resulting in less developments in mining areas. The National Government cannot be held accountable for its failures to deliver these services because there are no authorities higher than the National Government to enforce the Law. The 30% equity participation should be given back to Provincial Governments and their roles in service delivery should be increased. The National Government should be the regulator, as implied by Mr. Garry, and they can hold provincial governments accountable for service deliveries.
My Bro Jerry Garry speaks from years of hands on experience in some of the harshest environments in the world to work in. Apart from the obvious, in that Governments are meant to be regulators of industry, and should be empowering Landowners to have significant shareholding in resource projects, right now the Government will not have the capacity to fund its shareholding in any of the major resource projects.
The Government should focus on service delivery and all SOEs to partner developers in large scale resource projects, as KPHL is venturing into now.
JNG is actually highlighted some of the agendas which could be of importance in the MDCs and the government participating in equity is not a bad idea as it does not affect the regulatory operations. Mr.Garry’s proposals are as good as it is..The challenge is , how to convince the decision making body to ensure new agendas are taken on board during assessment or negotiations for new mining projects or review of MOAs for operating mining projects..
Why then the Government went ahead and does this. Such experienced person like Garry must be employed within the Government as advisor in my view after I read this post
Perfect! What you (J.N.Garry) stated is totally right because the government must be a regulator and not a shareholder in mining projects. For instance, in every game, you cannot be a player and a referee at the same time. This is a concern every citizen is doubt of.
And what I think so is that the developer must not have a share in the mining projects but must be a contractor to develop the project and the citizen must own the project and the PNG government only come in to regulate.
Garry, i believe it is so important to separate both tasks as mentioned above.You have seen well and lets hope by sharing this story, it can make a difference in our nation. Congratulations on your bold assessments.
Garry is exactly right. Which makes the Oil Search share purchase via loans an idiotic move.