PM hands over mine roadmap

Barrick (Niugini) Ltd (BNL) expects to resume operation at Porgera gold mine in Enga before the end of the year, following its closure last April. Prime Minister James Marape was in Porgera Valley last week to hand over the mine’s  “framework agreement”, or the roadmap, to BNL. It will cost more than K1 billion to reopen the mine. Below is a commentary by News Editor GYNNIE KERO.

WHILE the road to restarting the Porgera mine is long, and the implementation details of the deal still need to be finalised, Barrick expects the mine to resume operations later this year. President and chief executive officer Mark Bristow says the sooner the mine reopens, the lower the cost. The Porgera mine will also have to compete with the world’s mining industry which is in a “boom”. The mine operator is inclined towards giving preference to competitive local contractors and suppliers, and to employ locals first. Barrick Niugini Ltd says it has already begun work on restarting the gold mine in Enga.Care and maintenance has cost the miner K421 million (US$120 million). It estimates another K1.05 billion (US$300 million) to be spent to reopen the mine later this year. Last week, Prime Minister James Marape and a Government team visited people in the Porgera Valley to hand over the framework agreement. To put it simply, it is a roadmap. It is the first step, or first of several agreements, needed before the “smoke rises from the mine” again. There are 800 employees currently working onsite. Bristow says the number will gradually increase to around 3,000. “We want to employ Porgera people first, and other Papua New Guineans second,” he said. Bristow stressed that the responsibility for ensuring the success of the “new Porgera mine” also rests with the national and provincial governments and landowners.  He warned, however, that illegal mining and lawlessness must be addressed before the mine is reopened towards the end of this
year. “I have no doubt that as owners and partners, we can all work together to deliver the potential of this world asset for the benefit of all.” Bristow commended the framework agreement saying “it sets a new paradigm for arrangements between PNG and the world’s leading resource companies based on a fair and equitable sharing of benefits and responsibilities”. Under the terms of the agreement, PNG stakeholders will own a 51 per cent equity stake in the mine, with Barrick Niugini Ltd (BNL) remaining as the operator. Bristow explained that over the next 20 years, the overall economic benefits derived from the mine would be shared as such: 53 per cent for PNG and 47 per cent for BNL. He add that at the end of the first 10 years, PNG stakeholders would have the option to purchase BNL’s 49 per cent equity.
“The first step is,of course, to share the framework agreement with everyone and allow people to ask questions,” he said. “The process of deciding how the equity works is the responsibility of the National Government, provincial government and the stakeholders. “The 800 workers are tasked on care and maintenance and are getting ready for the prestart. “What we and the Government are committed to is more focus on benefits arriving with Papua New Guineans, and not in some other country. “The thing that struck me when I came here in 2019 was the illegal mining issue and the total disregard for social justice. “(And there is) the exploitation by illegal miners. “They just climb over the fence. “They disregard everything. “They drag children and women and put them at risks. “They put them as barriers. “One of things we have agreed to with the State is the responsibility for society generally. “We have got to stop that. “We have all experienced the importance of Porgera. “We lost the benefits of Porgera for a year. “What we don’t want to do is to hold (up) Porgera. “The actual mine plan is 10 years. “But indications from our geology work and modelling, we could see the mine go for 20 years, or longer. “After mine was closed last April, we still drilled some holes to finish the job.” The PNG Extractive Industries Transparency Initiative (PNGEITI) has also praised the open dialogue culminating in reaching consensus to re-open the mine. Parties in April this year sanctioned a “framework agreement for the New Porgera Project” which spells out the roadmap to reopen the mine. Head of secretariat Lucas Alkan said: “PNGEITI congratulates the Government and the project lead, Barrick Gold, and other stakeholders for reaching a consensus to reopen the mine. “Porgera has been an economic powerhouse for many years and people in the country have been waiting for the outcome. “PNG Extractive Industries Transparency encourages such openness in the negotiating process for resources benefits and importantly the responsibilities that each stakeholder must take on to ensure smooth flow of proceeds.”

The Porgera mine site.

On April 9, Barrick Niugini Ltd (BNL) signed a framework agreement with the Government and Kumul Minerals Holdings Ltd at Government House.
The agreement provides a path to reopening the Porgera Mine in the Porgera Valley of Enga. Under the agreement, PNG stakeholders will own 51 per cent and BNL 49 per cent. BNL remains the operator of the mine. Other conditions include:

  • PNG stakeholders and BNL to share the economic benefits generated over the life of mine on a 53 per cent PNG stakeholders and 47 per cent BNL;
  • BNL to finance the up-front capital required to restart the mine;
  • STATE to reserve the right to acquire BNL’s 49 per cent equity in the mine at fair market value after 10 years;
  • OF the 51 per cent for PNG stakeholders, 36 per cent is allocated to Kumul Minerals Holdings Limited.

Mineral Resources Enga, an entity held in equal parts by Enga province and the Porgera landowners, will continue to hold a 5 per cent interest in the mine. The additional 10 per cent nterest will be held in the manner to be determined by the landowners in the context of discussions launched at the equity forum on June 3, 2021, in Porgera.

  • IN addition to equity, the landowners and communities will draw benefits and responsibilities from the operation of the mine through the conclusion of a multi-party memorandum of agreement which remains to be negotiated.
    Among others, this MoA will establish the adequate distribution of benefits arising from royalties payable on account of gold extracted from the Porgera mine. The landowners, Government, provincial government and the project company will be parties to the agreement;
  • THE framework agreement states that once all conditions for the start of mining operations at New Porgera have been satisfied, the project company will make a US$15 million (K40.62mil) onetime contribution to the mining tenement landowners in return for the social license they deliver that is necessary for the mine to operate successfully.
  • IN addition to US$15 million, the project company will also contribute US$3 million (K8.12mil) per year for up to 10 years to a new Porgera sustainable development fund that will be managed by a Porgera development committee, which will include the project company, the Enga government, landowners and community representatives; and,
  • THE equity forum recently held at Paiam was convened by the Government and BNL to facilitate discussions between Enga government and Porgera mining tenement landowners to discuss the holding of the 10 per cent protected equity.

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