State hoping to seal project deal

By DALE LUMA
THE State is hopeful it will finalise agreements for the US$5.4 billion (K18.5 billion) Wafi-Golpu mining project in Morobe in the first quarter of the year, Mineral Resources Authority (MRA) managing director Jerry Garry says.
He said the State negotiation team (SNT) had been engaged in discussions for a mining development agreement with many of the items in the term sheet agreed on.
Garry told The National that there were some outstanding issues that needed to be agreed on with stakeholders which were royalty payments and benefits which the state wanted to be set at eight per cent.
“Basically, many of the items in the term sheets were agreed to in principal,” Garry said.
“There were one or two outstanding things, particularly the royalties.
“The state has a National Executive Council decision at eight per cent and the company is saying no and is offering 3.5 per cent, so that’s where the negotiations are.
“Negotiations were suspended last Friday, and was to reconvene either on Monday or today to deal with the royalty issue. The State is embarking on getting higher royalties because it comes at no cost to the state.
“It’s a certainty, a certain stream of revenue that can be collected by the state.
“When we talk about equity and corporate income tax, they are profit based, meaning that state will only realise any of these payments when the company or project declares profit, the payback period is about 10 years. So to enter the state going forward with assurance that there will be definite money coming regardless of profitability or not, the state team has been very strong in getting a decent rate on royalties so that they can be sure of its revenue from the project.”
Garry said they had not decided on a rate yet.
“We have looked at the financial modelling and the internal rate of return is very healthy for the project as well as the investor’s internal rate of return,” he said