Papua New Guinea falls in global mining rankings survey


Papua New Guinea’s mining sector recorded its lowest result for five years in the Fraser Institute’s annual Investment Attractiveness Index. We consider the possible reasons, and the impact on PNG’s global competitiveness.

Kainantu mine operations. Credit: K92 Mining

The annual Survey of Mining Companies by the Fraser Institute, an independent Canadian research company, asks mining executives worldwide for their assessments of mining jurisdictions with which they are familiar. The executives rate against 15 different criteria, ranging from a country’s tax and legal regime, to infrastructure, political stability and available skills.

Papua New Guinea dropped to 54th out of 76 mining jurisdictions globally in the survey’s Investment Attractiveness Index, down from 41st out of 83 jurisdictions in the 2018 survey.

‘The country is ranked just 63rd out of 76 jurisdictions as a place to do business if you’re a mining company’

Fraser Institute’s Investment Attractiveness Index is a composite index that combines a view of both the policy strength of a jurisdiction and its mineral potential.

‘Respondents consistently indicate that while 40 per cent of their investment decision is determined by policy factors, 60 per cent is based on their assessment of a jurisdiction’s mineral potential,’ say the report’s authors. ‘To get a true sense of which global jurisdictions are attracting investment, both mineral potential and policy perception must be considered.’

In its latest ranking PNG places 54th out of 76 jurisdictions – on a par with Santa Cruz Province in Argentina and Namibia in south-west Africa.

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Why the drop?

‘In today’s globally competitive economy, where mining companies may be examining properties located on different continents, a region’s policy climate has taken on increased importance in attracting and winning investment,’ notes the report.

PNG’s policy perception is markedly lower than its mineral potential, according to the survey.

The country is ranked just 63rd out of 76 jurisdictions as a place to do business if you’re a mining company, placing it on a par with Indonesia and Ecuador. PNG has not improved its position in this ranking in the past five years.

By contrast, the survey ranked PNG as 38th out of 76 countries for mineral potential, on a par with Venezuela and Burkina Faso.

However, while PNG’s mineral potential was ranked much higher than its policy perception, this year’s ranking for mineral potential is its lowest for five years. Combined with the lack of improvement in its business environment for mining, PNG’s declining mineral potential is the major reason for the country’s fall in the overall global rankings this year.

Five years ago, PNG was ranked 12th out of 109 countries for mineral potential. The fall may be explained by the lack of major new ‘greenfield’ discoveries in PNG over the past decade, combined with a decline in investment in exploration.

‘40% of PNG-focused respondents suggested that country’s mineral potential “encourages investment”.’

According to a PNG Chamber of Mines and Petroleum statement in 2019, ‘global mineral exploration expenditure has risen sharply since 2016 while exploration expenditure in PNG shrank to its lowest point in almost a decade as a result of investors’ concerns regarding the country’s fiscal and regulatory climate.’

A revised Mining Act is long overdue in PNG, and Business Advantage PNG understands a draft bill could be presented in the next sitting of Parliament, in May.

In September 2019, it also described a ‘declining exploration expenditure’ as ‘a strong indicator that investor confidence has dropped on the back of recent political changes.’

More on PNG

Papua New Guinea remains the lowest-ranking country for mining investment attractiveness in the Australia/Oceania region (which includes Indonesia for the purposes of this survey).

Noting the lack of policy improvement, the survey’s authors note that ‘respondents expressed increased concern over the availability of labour/skills, uncertainty concerning protected areas, and socioeconomic agreements and community development conditions.’

It did note, however, that 40% of PNG-focused respondents suggested that country’s mineral potential ‘encourages investment’.

According to the survey, the top jurisdiction in the world for investment based on the Investment Attractiveness Index is Western Australia and the lowest-ranked is Tanzania.

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