Project will jeopardise mines: Opponents

By FRANK SENGE KOLMA
[email protected]

PART 3

GOLD, because of its high value, is pretty much a huge secret in its trade, transportation, processing and storage.
Only those in the higher echelons of management in the gold business know the details of its transactions.
It is therefore an eye-popping wonder when the common man is faced with plans for in-country refining of PNG gold, of creating special coinage through a local minting process, of establishing a gold bank, of parking gold bullion as reserve, of marketing PNG’s gold and gold products around the world and of creating a special police force specifically to protect all these.
And all of these for a handsome profit to the State and through it to the nation.
Is it feasible?
Here, the cliché, “all that glitters is not gold” might have literal significance in the estimation of those who are already in the gold business in PNG.
That is a cacophony of voices raised in protest against the National Gold Corporation project and the time has arrived to insert their argument into this conversation.
The issues are many.
Much of the gold produced in the country is done by big mining companies which operate under binding contracts called special mining leases.
Since the start of commercial mining in the 1960s, almost all the operators (except Ramu – nickel chromite) were mining gold. Bougainville (Copper) and Ok Tedi (Copper) had mostly been copper mines with associated gold and silver.
Following the closure of Misima (2004) and Tolukuma (2010), PNG now has nine operating mines with five large-scale special mining leases (SML) and four medium scale mining leases (ML).
None of these agreements have any clause to surrender all or part of the gold or silver mined to the State for local refining processes.
To compel them by law would render all existing agreements obsolete and place in jeopardy all existing mines. This is alluded to briefly by a principal opponent to the project, the PNG Chamber of Resources and Energy (PNGCore).
President Anthony Smare recently said in a media statement: “It (the agreement) seeks to override existing project agreements for PNG’s mines which would jeopardise existing financial arrangements for these projects and undermine viability and investor financing confidence in existing and new projects.”
The specter of the Porgera gold mine closure in 2020 looms terribly large in the minds of all were this to be repeated on all existing mines.
If existing mines cannot be compelled to surrender their gold, the project is left with alluvial gold and any new mine that comes on stream. The present production of alluvial gold is put at four tonnes a year valued at K100 million.
Even if the mining companies were to be compelled to surrender their gold, much of the gold produced in the country is exported as a component in a concentrate with other metals, such as by Ok Tedi and K92, and is extracted overseas. In that form, it is not suitable as input material for a gold refinery, and therefore not accessible.
A serious question then arises: Is there sufficient gold produced in the country outside of the SMLs and MLs to warrant a refinery and mint?
The Perth Mint Refinery in South Australia processed the majority of Australia’s newly-mined gold oré in 2022-23, along with gold from the Oceania region including PNG, and Australian-owned projects in North America and Africa.
Total throughput of gold at that refinery over the year was 244 tonnes.
The website Statista notes that PNG produced an estimated 50 metric tonnes of gold in 2022, slightly down from 54 metric tonnes in the previous year.
Will a local refinery be profitable?
Non-profitability was one of the reasons that PNG’s first gold refinery, Metals Refining Operations (MRO) was not successful.
The MRO building at Gordon/Waigani is now mothballed and owned by PBF/MTSL.
One former MRO manager said: “Gold refining seems a marginal business financially with very small margins so it would become profitable only with a high throughput. That is why there are not many gold refineries in the world.”
The holding of physical gold as a store of national wealth/reserves is a function of the Bank of PNG, and of all central banks around the world. It is not the jurisdiction of private companies so the present proposal might come under fire over that.
With this then as background, we introduce the Opponents to the national gold project.
We limit the opponents in this debate to one individual gold dealer, PNG Core, and the Opposition.
Justin Parker of Golden Valley Enterprise was the first to raise a voice in protest when the project agreement was announced.
Parker, a Jiwaka man who started his gold business at an old colonial motel at Wau airstrip in Morobe, was the first to demand public disclosure of the agreement signed in October 2021.
He took the matter to court and had Deputy Chief Justice Ambeng Kandakasi order the Government to disclose all the agreements and all related documents.
The Government appealed the decision successfully and Parker is back in court fighting that appeal.
Parker wants ownership of a refinery, if it is financially and economically feasible, to remain fully in PNG hands.
“I have always said that we must own 100 per cent with no foreign partners. This will ensure we retain all the benefits in the country.
“Owning a PNG refinery and mint is nothing new. The country owned one called the Metals Refinery Operations. It was operated by the Pacific Balanced Fund.”
He said the present agreement and the bills to put it into effect contained clauses that would deprive alluvial miners off the full benefits of their gold.
Following the signing of the NGC project, Prime Minister James Marape promised that there would be industry-wide consultations with stakeholders.
The PNG Chamber of Resources and Energy is the biggest stakeholder in this project because it represents all major mining firms.
Although a parliamentary committee was formed for the expressed purpose of these consultations, PNGCore claims there have been no meaningful consultations.
Chamber president Anthony Smare claims the industry has been “blindsided” by the resurrection of the National Gold Corporation bill.
Smare warns that the “destructive Bill” would have serious negative impact on existing mining projects, PNG’s financial sector, the Bank of PNG, Mineral Resources Authority, police and other State agencies.
The Chamber’s concerns include the following:

• THE agreement and the proposed bills create a National Gold Corporation, National Gold Bank, the National Gold mint to be majority-owned by a foreign company by taking key powers from the Central Bank, Mineral Resources Authority, holding the nation’s gold reserves, with rights to issue legal tender which is a sovereign right of the State, and the regulator of gold exports;
• IT has no obligations to refine in PNG;
• IT seeks to override existing project agreements for PNG’s mines which would jeopardise existing financial arrangements for these projects and undermine viability and investor financing confidence in existing and new projects; and
• IT proposed extension to encompass all precious metals, not just gold, introduces a lawyer of complexity and broad impact that could have unforeseen consequences across the mining sector.

The Opposition vows that it will not support the two bills before Parliament.
East Sepik Governor Allan Bird, who is the Opposition’s nominee for prime minister, said the two bills would require amendments to no less than 26 existing laws.
Bird said: “We have received sufficient advice to form an opinion and it is that regardless of the debate, we will not support the bills.”
The laws to be affected cover a very broad and diverse area and include: The Central Bank Act, Customs Act, the Excise Act, Exports Act, Civil Aviation Act, The National Archives and Library Act, The National Cultural Property (Preservation) Act, The Firearms Act, The Salaries and Conditions Monitoring Committee Act, and the Quarantine Act.

Monday:
The Gold Bullion Policy