PRESIDENT JOHN MOMIS
4.00p.m., Friday 1st July 2016
Edgewood Hotel East Boroko
Rio Tinto's Withdrawal from Panguna and
Abdication of its Corporate Social Responsibilities:
Opportunities from This Evil Move?
Ladies and Gentlemen,
Thank you for coming to discuss issues arising from Rio Tinto’s decision about its withdrawal from involvement in the Panguna copper and gold mine, by transferring its majority 53.8 per cent shareholding in Bougainville Copper Ltd (BCL) to a trust which is required to offer the shares to the Autonomous Bougainville Government (ABG) and the PNG National Government.
The importance of BCL is that although it no longer owns the Special Mining Lease (SML) that allowed it to mine at Panguna, the Bougainville Mining Act passed by the Autonomous Bougainville Government (ABG) in March 2015 granted BCL an exploration licence of the area of the former SML. The Act gives BCL the right to negotiate for the grant of a new mining lease under the new Bougainville law. Because BCL still has the drilling data for the ore body that was being excavated between 1972 and 1989, its right to negotiate could have considerable value.
The Rio Tinto decision to divest of its shares in BCL is a remarkably unprincipled, shameful, and evil decision. Yet this is a decision by an international mining giant, a company that holds itself out internationally as bound by quite different standards from those that it has demonstrated through this decision.
The shame and evil does of Rio Tinto’s decision does NOT lie in the withdrawal from BCL. Rather, it relates to two key aspects of the way in which Rio has withdrawn from BCL.
First, Rio has directed that of its 53.8 per cent equity, 36.4 per cent should be offered to the ABG and 17.4 per cent to the National Government. When that 17.4 is added to the National Government’s existing minority shareholding in BCL, it too will have 36.4 per cent. So the ABG and the National Government would be equal minority shareholders in BCL, each with 36.4 per cent. The remaining 27 per cent shares would still be held by small shareholders all over the world.
The evil involved here is that it constitutes completely unwarranted Rio Tinto interference in Bougainville’s affairs, and in the complex relationships between the National Government and Bougainville.
All issues about the Panguna mine are deeply sensitive for Bougainvilleans. The mine was imposed on Bougainville for the benefit of PNG as a whole. But it was Panguna landowners, as well as other Bougainvilleans, who bore the cost, and received very little in the way of benefits. It was resentment about the unfairness of the mine that led to the terrible loss of life and destruction of the Bougainville conflict.
Because of that background, Bougainvilleans are determined that they must control all future decision-making about not only Panguna but also all other mining in Bougainville. That is why, from the time that the ABG was established in 2005, it has insisted that all powers over mining must be transferred to Bougainville control. So we cannot accept the unilateral Rio Tinto decision to make the ABG and the National Government equal shareholders in BCL.
In two long meetings with senior Rio officials, in July 2015 and February 2016, I made it clear to them that National Government control of Panguna is unacceptable. I insisted that if Rio Tinto was to divest its majority shareholding in BCL, it must transfer the shares to the ABG, at no cost.
But in their arrogance and ignorance, Rio decided that they knew better. They made their decision without ever once discussing with us what they unilaterally decided to do. What they decided imposes their wishes on Bougainville. But joint control of Panguna with the National Government can never be accepted by Bougainville. Already, I am hearing from Bougainville of deep anger amongst my people about the BCL decision.
The second shameful and evil aspect of the Rio decision is its determination to walk away from the Panguna mine without in any way recognising the company’s contribution to the terrible environmental and social impacts of the mine. It is clear now that the conditions for mining agreed in the 1960s largely ignored the environment. They also largely ignored the impacts on landowners, especially the many hundreds who were relocated away from their land. Those people now number thousands. They live in terrible and squalid conditions in houses made from scrap materials, without proper water supplies or gardening land.
Yet Rio Tinto, which largely as a result of its Bougainville experience, now says it subscribes to the highest standards of social responsibility and sustainable development, says those standards don’t apply to its involvement in the very mine where their poor operating standards caused the conflict that pushed them into adopting new standards.
This is hypocrisy!
Bougainville cannot accept this. I am writing to the International Council of Metals and Minerals asking them to end Rio Tinto’s membership for failure to adhere to its principles.
In addition, the ABG is seeking legal advice about possible court proceedings against BCL for the environmental and social impacts of the mine.
At the same time, it is, I believe, possible that in cooperation with the National Government, we can find ways to turn Rio’s shameful and evil decision into something that offers positive outcomes for all major stakeholders. Here I include Panguna mine-affected landowners, other Bougainvilleans, the ABG, the National Government, and BCL.
The opportunity for a positive outcome arises if the National Government is prepared NOT to take up the transfer of Rio shares in BCL that is now on offer through the Rio Tinto appointed trustee. If it refused the shares, then they would be offered for transfer to the ABG in two months. The ABG would then be able to become the 53.8 per cent owner of BCL. The National Government could continue to be the main minority shareholder, with its existing 19 per cent shareholding.
If the National Government agrees to cooperate with Bougainville in this way, it would go a very long way to consolidating change in attitudes of Bougainvilleans to the National Government. It would also change the thinking of many Bougainvilleans who have until now opposed the re-opening of the Panguna mine. For if the mine is owned by Bougainville, the choices about mining will be very different.
So since being informed of the Rio Tinto decision, I have been seeking a meeting with the Prime Minister where we can discuss this proposed way forward. Between us, we are now presented with a unique and historic opportunity to finally end the conflict over the Panguna mine, and the conflict between Bougainville and PNG.
What I propose is fully consistent with the Bougainville Peace Agreement. Under the Agreement, the two governments have committed themselves to resolving our differences and working together cooperatively.
It is also consistent with the provisions of that Agreement about the main purposes of the autonomy arrangements. Those purposes include giving Bougainvilleans the ability to solve their own problems and achieve their own aspirations.
A key source of Bougainville’s problems has long been the Panguna mine. That is why the ABG has pursued transfer of mining powers. If the National Government were to have equal control of the Panguna mine, that would be contrary to the ABG gaining control of mining in Bougainville. It would be contrary to the aims of autonomy.
We seek the understanding of the National Government, and of Papua New Guineans generally, of the burning desire of Bougainvilleans to control this, the most sensitive of areas of economic activity in Bougainville.