Legal changes to mining sector must concern stakeholders

THE mining industry in Papua New Guinea is enjoying a period of boom with conditions unparalleled in our history.
Much of this is being driven by China to secure supplies of raw materials for the Chinese industrial expansion.
One of the key factors of the PNG mining industry will be the systematic development of a reformed legal framework which will aim to protect the miners and secure their interests; especially when moving from exploration to development and operational stages.
The state agreements should be used as a legal foundation to facilitate development of major mineral and energy resource projects, and it should be negotiated between the State, the indigenous resource owners and the developer.
This agreement should set out the rights and obligations of all parties throughout the life of a significant development project.
The Land Groups Incorporation Act 2009 only does recognise and protect the native title rights against damages (royalty and compensation payments) to the land but does not give them the right to negotiate the terms and conditions of any future dealing on the land, including all mining operations.
In this regard, there should be scope for some uncertainty where miners are required to regulate arrangements with traditional landowners.
Mining revenue grew by 38 per cent to K9.9bn ($3.1bn) last year, according to data from the Mineral Resources Authority (MRA).
The increase was led by the Lihir gold mine, which posted annual income of K3.57bn ($1.1bn).
Despite closure due to drought conditions experienced in the first two months of the year, the Ok Tedi copper mine was the second-highest contributor with K2.1bn ($661.5m) in output, followed by
the Porgera gold mine at K2bn ($630m).
Together, these facilities accounted for 78.6 per cent of sector revenue.
While prospects for the country’s extractive industry are improving, there remains a degree of uncertainty over the legal terms of new mining tenements.
The industry is currently regulated by the Mining Act of 1992, which grants the government ownership of all minerals within the country.
However, the legal framework is set to undergo an extensive overhaul intended to better reflect the sector’s changing conditions and increased importance to the economy.
The reforms are ready for implementation, according to Mining Minister Byron Chan, and are reportedly censured to go into effect after the general elections in June.
While a complete draft has yet to be made public, the updated legislation contains some contentious conditions, including the amount of equity the state holds in mining projects, as stated by Chan at the beginning of the year.
Other amendments include doubling the production levy to 0.5 per cent and shortening the term of mining leases from 40 to 25 years.
Despite some legal uncertainties, international investors remain largely bullish on PNG’s mining sector.
Upcoming mining projects are slated to tap this raw potential in the medium term.
Regardless of the legal changes and the size of operation, the land and its people are there to stay and suffer the consequences.

Nicks Rambe
Wabag