Prime Minister James Marape and Barrick Gold have offered two competing visions for the reopening of the Porgera gold mine. With the mine closed and court cases ongoing, the latter is also highlighting the impact on business and the community.

Porgera gold mine. Credit: Barrick

Papua New Guinea’s Prime Minister James Marape has said the government ‘is doing everything within its mandate to reopen Porgera Gold mine’, notwithstanding the ongoing case before the country’s National Court, which he said was delaying the reopening.

The case is being pursed by the partners in the Porgera Joint Venture, Barrick Gold and Zijin Mining, who are appealing the government’s decision not to renew the JV’s special mining lease for the Porgera mine. The partners have also initiated conciliation proceedings with the International Centre for Settlement of Investment Disputes.

‘We have been ready to run the mine but the recent past lease holder in Barrick Ltd and their court cases has been the impediment,’ Marape said in a statement late last week. ‘If they (Barrick) withdraw the court cases, we can talk commercial with them.’

‘”The solution sits right in front of us,” Bristow told Marape.’

‘When [the] Mining Advisory Council (MAC) refused the lease application by Barrick, the State in compliance to Mining Act has given notice, to procure Barrick’s asset with a view to reopen and operate the mine at the earliest. That notice was given to BNL within the 30 days required yet Barrick Ltd chose to go to court,’ he elaborated.

However, he warned the government would be seeking a dramatically different resource-sharing arrangement when the mine reopens:

‘Look at Ok Tedi mine’s [sic] ownership structure, the one-third, two-thirds equity/ownership principle is the starting base in which National Government will talk with the Province and Landowners.’

Barrick’s offer

The government’s vision for Porgera is a long way from the deal proposed by Barrick, which was outlined by Mark Bristow, President and Chief Executive Officer of Barrick in a widely circulated letter to the Prime Minister last week.

As I have said previously, the solution sits right in front of us,’ Bristow told Marape. ‘It is the current proposal that would deliver 58 per cent of overall economic benefits to PNG, totalling some US$4.5 billion over 20 years, representing the best deal by far that PNG has ever negotiated with a foreign investor.’

‘At the national level, the PNG Treasury is forfeiting K2.3 million per day and K68 million per month in lost tax revenues, levies and other duties and fees’

Bristow reminded the Prime Minister that Barrick has submitted this offer at his invitation last year.

‘We honoured this request and, in two meetings with the State Negotiating Team the following month, presented a 20-year plan that would have delivered 52 per cent of overall benefits to PNG stakeholders,’ says Bristow in the letter. ‘For the following ten months, we waited patiently for the start of the formal negotiations that you [James Marape] promised on multiple occasions both verbally and in writing, but which never occurred.

‘Then, without the slightest forewarning to us or to the legitimate Porgera landowners, you announced on 24 April that BNL’s application had been rejected.’

Impact of closure

The end of the special mining lease has resulted in the cessation of gold exports from the mine, mass lay-offs, significant losses to local businesses and disruption to the local community.

‘Without revenue, the company was forced to lay off 2,650 valued Papua New Guinean employees,’ said a Porgera Joint Venture media statement released last Friday. ‘Over 200 Porgera enterprises have been forced to close, and contracting companies lost K140 million in the first two months of the shutdown alone.

‘Landowners and the Enga Provincial Government are losing K179,000 each day (K5.4 million each month) that would have flowed from royalty payments and dividends. At the national level, the PNG Treasury is forfeiting K2.3 million per day and K68 million per month in lost tax revenues, levies and other duties and fees, adding up to more than K140 million since PM Marape’s decision forced mining operations to cease.’

Barrick has also announced power cuts to nearby Porgera townships ‘due to necessary cost reductions’. Since 17 June, the communities are only being supplied energy between 6.00 pm and 6.00 am, and the company has stated that more cuts are to be expected in the coming months.

Barrick has acknowledged this as a major inconvenience to the community, but has said it has ‘no other option than to continue to reduce costs in light of the Government decision not to extend the Porgera special mining lease’.