28.12.2010
Source: The Australian
Rising prices boost Bougainville mine hopes.
by Rowan Callick, Asia-Pacific editor
Peter Taylor, who has been chairman of Bougainville Copper (BCL) since 2003 and
managing director since 2000 and who worked on Bougainville as company secretary
from 1985 to 1987, is a mining industry veteran whose priorities are all about
people.
He says his focus is not on the hardware or the engineering or on raising the $3
billion that the reopening is expected to cost.
He says: "We must ensure the landowners retain number one importance. And the
Bougainville government's support is also critical. All the signs are that the
leaders on Bougainville want the mine open, and as soon as possible, rather than
just some day. And the national government agrees."
Bougainville's new President, John Momis, elected for five years in June, is a
former Catholic priest and former deputy prime minister.
While campaigning for the PNG election in 1987, he famously presented a letter
to the then BCL managing director, Paul Quodling that demanded the company give
3 per cent of its gross income to the Bougainville provincial government.
The request received wide support on Bougainville, but Quodling said it was
impossible to meet, adding to tensions that soon exploded on the ground.
During the civil war, a leading rebel attempted to shoot Momis at close range
from behind, but the pistol jammed.
Momis now says: "We are keen to reopen the Panguna mine, and we are holding
talks with the landowners. Of course, Bougainville needs the mine to be reopened
under a new regime. All parties should learn lessons from the crisis, and
collaborate to build a better future."
Momis recently led a group of 34 -- including former combatants -- to China,
where he recently served as PNG ambassador. China is likely to play a role in
the rebuilt mine as leading customer, equity partner, or both.
Bougainville is an autonomous region within PNG, and under a peace accord with
PNG, it has the right to administer its own mining and land laws. The World Bank
has been funding a program to help Bougainville define its own mining regime.
Taylor hopes that this will complement the PNG mining legislation, which has
helped facilitate a boom in foreign investment there.
Besides the $16.5bn ExxonMobil LNG project, there are promising gas finds in
Western Province, and an onshore project in Gulf Province led by InterOil. The
Frieda River copper-gold project led by Xstrata is due to move soon to full
feasibility mode, and the Wafi project -- also copper-gold -- is not far behind.
These are each likely to become $4bn-$5bn ventures.
The latter is owned by Newcrest and Harmony, which are commissioning the Hidden
Valley gold-silver project.
Marengo Mining is proceeding with a feasibility study at Yandera, a copper-gold
deposit not far from the $1.4bn Ramu Nickel project being developed by China's
Metallurgical Construction Corp.
Since BCL suspended the mine, many groups have tried to control the promising
mining zone.
"The Bougainvilleans have seen them come to the island, and haven't liked them,"
Taylor says.
So they have come back to BCL -- the devil they know -- despite all their past
disagreements. The rogues have done BCL and its ultimate parent, Rio Tinto, a
favour.
The 10-year civil war on Bougainville had many complex causes, and was a
nightmare for many Rio executives.
The conflict led to big changes in how miners relate to host communities
worldwide. So the reopening of the Bougainville mine would be redemptive for
many groups, including Rio.
There is no timetable. Once an agreement is reached with the landowners, a
feasibility study is approved and finance is in place, it will take a further
two to three years to get mining under way again. The lengthiest part of that
process would be the lead-time needed to order the huge trucks and other
equipment to operate the mine.
Taylor says BCL will facilitate landowners' meetings and help ensure the
reconciliation process goes ahead, "but we're mindful that we should not be seen
to influence the proceedings.
"Everything needs to be worked out as the agreement is renegotiated -- including
environmental issues such as tailings disposal, revenue sharing, ownership. And
the landowners need to be resourced to participate effectively."
This is in marked contrast with the first incarnation of the mine, when the
company was not permitted by the Australian government to negotiate directly
with landowners.
"The situation is quite the reverse this time," Taylor says. "The landowners are
setting the agenda, although everyone will put their wish-lists on the table."
He wants to see the landowners obtain equity in the project because it makes
them "part of your business" and gives them a share of the income stream.
"The balance needs to change in favour of those who are giving up the most, and
they are the landowners. To make the project successful and saleable, they have
to be part of the company."
Raising the $3bn will be a relatively minor challenge.
Three big selling points of the project are that it already has a port at
Loloho, an access road winding up 30km of rugged terrain, and has pre-stripped
ore ready to extract, with 200 million tonnes available immediately.
"They give us a big leg-up," Taylor says.
Technology has improved since the mine was suspended, he says, and tailings can
be safely stored even in an earthquake-prone area. "The landowners have to say
which method they prefer," Taylor says. Previously, they were disposed of in the
Jaba River, a cause of controversy.
They will also discuss whether workers fly in and fly out to the island or are
based there, as they were before in the largely destroyed town of Arawa. Taylor
says that the more local workers can be recruited, the better. "We have received
numerous inquiries from ex-employees asking when we are re-opening."
The Ok Tedi mine would be an obvious source of skilled staff as it starts to
scale down as the resource declines.
The other big factor exciting interest in the reopening of the Panguna pit is
the likelihood that it will lead to the end of the moratorium on exploration
that began in 1971.
Seven exploration licences covering 20 per cent of the island are held by BCL,
and the potential to find new orebodies near the existing pit are considerable.
No one else holds any other exploration permits, even though a German-funded
aeromagnetic survey 25 years ago revealed many highly prospective zones.
Through the past 21 years, the principal owner, Rio Tinto, did not close down
BCL -- it has remained listed, playing a low-key role, waiting for the climate
to change.
Its share price has soared as the likelihood of a reopening dawned on investors.
They were rallied by Axel Sturm, the energetic German president of the European
shareholders of Bougainville Copper. The company has even made a profit most
years, from placing its remaining cash in Australian listed investment
companies.
Taylor says that since the mine closed, the BCL Foundation has continued to fund
100 scholarships a year.
In a US court case, Bougainvilleans have claimed damages from Rio over the
operation of the mine. This has become a test case for the extent of American
jurisdiction, but no decision is likely until after the mine has reopened.
Former Bougainville Revolutionary Army "general" Ishmael Toroama insists that
all the demands made by Bougainvilleans during the fighting must be met:
"Panguna -- after the war -- now belongs to all Bougainvilleans," he says,
insisting that the original claims for environmental compensation remain extant.
But the recently elected Bougainville government, and the Panguna Land Owners
Association, have begun intense discussions.
No one is publicly discussing timetables yet. But in the minds of most of the
stakeholders, the countdown has already begun.
Recent Comments