Press release: Bougainville Mining (Transitional Arrangements) Bill
In August 2014 Bougainville Copper Limited has submitted the following press release to the Australian Stock Exchange regarding the Bougainville Mining (Transitional Arrangements) Bill:
Bougainville Mining (Transitional Arrangements) Bill
The Chairman of Bougainville Copper Limited (BCL), Peter Taylor, received a letter on 12 August from the President of Bougainville, Chief John Momis, that stated the Bougainville Mining (Transitional Arrangements) Act (Act) 2014 has been passed by Autonomous Bougainville Parliament and will come into force upon notice in the Bougainville Gazette. No date was set for publication of the notice.
The letter advises as follows with respect to section 212(2) of the Act:
“(1) Prior to that Act coming into operation, BCL is the holder of an SML over the area of the current Panguna SML, primarily by virtue of the operation of the relevant provisions of the Mining (Bougainville Copper Agreement) Act concerning the SML;
(2) As a result, when the Bougainville Mining Act commences, section 212(2) will vest BCL with an Exploration Licence for the area of what will then be the previous SML;
(3) That Exploration Licence will give BCL the right to apply for a Mining Lease under the Bougainville Mining Act, while section 66(2), the grant of such a lease will depend on the outcome of negotiations in the Bougainville Mineral Resource Forum.
Peter Taylor said, “I have made BCL’s concerns about the potential adverse impact the new Act may have on the company’s asset base known to the National and Bougainville Governments. Dialogue will continue with both Governments and landowners in an effort to reach agreement on providing the company with the assurance it needs to go forward with community and study programs that are required to further assess the viability of reopening the mine.”
Interview June 2013 with BCL chairman, Peter Taylor who then remained optimistic the mine could reopen in five years.
IT is an extraordinary situation: 24 years after the world’s largest copper mine was closed due to a civil war on Australia’s doorstep, the majority Rio Tinto-owned Bougainville Copper Limited still floats on the Australian Stock Exchange.
Former combatants still occupy ground around Bougainville’s enormous open-cut Panguna mine site, which has not seen mining activity since 1989, when Papua New Guinean forces attempted to reassert control over its province and the mine, which once contributed 20 per cent of PNG’s annual income.
The civil war, which came about in part due to a demand from Bougainville rebels for higher mine royalties, and their anger at natural destruction, resulted in an estimated 10,000 to 15,000 deaths.
Since then, Bougainville has rebranded itself the Autonomous Bougainville Government, and is moving towards an independence referendum within five years.
For years, BCL has been accused of providing equipment that assisted PNG forces in attacking the rebels. BCL chairman, Peter Taylor, denies it, and remains optimistic the mine could reopen in five years.
In this edited interview, Taylor talks about the obstacles to reopening the mine and what it would mean to Australia. He warns that investors may not view Bougainville’s likely independence as a positive step for the mine.
Q: It’s been more than two decades since the mine was operational. Yet your annual ASX filings are optimistic. Why do you see hope?
TAYLOR: I get the impression that more people in Bougainville are coming onside with reopening the mine, but having said that, there are still some – in the minority – who are opposed to the mine reopening, for a range on reasons. Some are opposed to mining on principle. Some have a family history as a result of what happened when the crisis occurred. But I think more are coming on board with the idea of getting the economy going.
Q: The mine is still in the hands of rebel forces, some of who may be slowly surrendering some of their weapons. Is that your understanding?
TAYLOR: It’s all a bit muddy, this concept of rebel forces. The original group under (deceased Bougainville Revolutionary Army leader) Francis Ona has dissipated. Those who are left from the revolution days call themselves Mekamui, a local word, so they’ve changed from their title. I don’t think rebel army is the right term. They’re ex – combatants and some are simply disenfranchised. There’s nowhere for them to go. I haven’t been to the mine site for a long time, I just don’t think the time is right for people like me to go there. But a number of Australian diplomats have been there, and contractors can go there. But there’s a big difference in someone like me going there, because of the symbolism attached to that. There is a place called Morgan Junction where a group of guys extract a toll to go up the road. But I think they’re opportunists trying to extract a buck for going up the road, rather than any political philosophy.
Q: Historically, the largest royalty share from the mine went to the PNG government. It distributed a 1.25 per cent royalty payment to Bougainville (five per cent of that was distributed to land owners, the remainder going to the provincial government). Have you put an offer to Bougainville that is significantly better than that?
TAYLOR: There’s been no offers made by either side, and there are more than two sides, actually. You’ve got the Autonomous Bougainville Government, which didn’t exist in the old days, so it’s a new entity and people may or may not decide whether they want it to be independent. They are the principle party that deals with the landowners. There are six identified landowner groups, and three others, who aren’t on the mine lease but the fringes of it. One of them is supposed to represent the ex – combatants. The Bougainville Government’s idea is to get all nine groups to form a single united body that can then negotiate with the Bougainville Government and the national government (which owns 19 per cent of BCL). We really haven’t got to the stage where everyone’s put their wish – list on the table, but there is jostling. Six of the landowners groups have signed up officially. The people who aren’t onside yet are the people around the Panguna area.
Q: Do you in – principle agree with a larger royalty, or larger royalty equivalents through better education and health facilities?
TAYLOR: I do agree that the people of Bougainville should get a larger share of the proceeds than they did in the past. How they take it is a question for them rather than for me. They’ve got to decide: is the royalty the way to go? Shares in the mine? Royalties upfront? We used to pay it to the national government, which would distribute it to the provincial government. The dispute wasn’t about the quantum, but the distribution.
Q: Are you satisfied that allegations that Rio/BCL provided equipment to the PNG forces during the war have been put to rest?
TAYLOR: This is the allegation in a US court case that BCL provided helicopter gunships? It’s not true. BCL never owned a helicopter. We chartered them, we never had them. The helicopters that get most attention are ex – Australian military helicopters that were given to PNG on the condition they be used only for humanitarian purposes. My understanding is the PNG government ignored that and put guns on them.
Q: How would Bougainville’s independence affect your operations?
TAYLOR: It’s an important question for me as a potential investor. When I need to raise the money for this mine, by going to banks and investors, wanting to raise billions of dollars, they’re going to say: “Tell me about Bougainville.” If Bougainville is the world’s newest nation, with no track record of managing projects, as opposed to PNG which has a long track record, it’s going to be easier to raise the money if Bougainville doesn’t go down the independence route. I wouldn’t even go to the market at this stage, because I can’t tell the market what they’re investing in.
Q: But isn’t independence an inevitability?
TAYLOR: I don’t know. You’ll get Bougainvilleans who’ll say, “We spilt blood for independence.” There is an element that will say, “We don’t want to be part of Papua New Guinea.” But if you’re an economic rationalist, you might be better off having big brother in Port Moresby bankrolling you. And even if Bougainville votes for independence, the PNG government still has to change its constitution to allow it to happen. And there’s a question as whether they’ll do it.
Q: You’re a mine chairman with no mine. Is your daily work a constant push to restart the mine?
TAYLOR: Absolutely. On a daily basis we’re talking to PNG, Bougainville and landowners. There’s process to begin ethnographic surveys of the landowners around the mine site so we actually know who our constituents are. That hasn’t been done. That’s just one project. And we know a lot about the ore body, but it won’t be the same technology as before. We’ll modernise.
Q: Have you tried to negotiate directly with the intransigent ex – combatant group? What is their bottom line?
TAYLOR: They’re not organised. You’re dealing with individuals who have particular wants. Some want to be included in the workforce. Some want a school. A hospital. Most of what they want are not things I find unusual. If you take away the title “combatant”, it’s the sort of stuff you’d expect anybody who’s having a major operation like this moved into their area to be asking for.
Q: This long – lasting event so close to our shores was horrific. How did it feel to be part of it?
TAYLOR: I think it took not just the company but the Australian Government by surprise. I don’t think anybody saw it coming. I’ve thought about it many times: “How did it actually happen?” There’s no simple answer. A whole lot of things aligned. I don’t believe Francis Ona, the leader of the rebel group, wanted to close the mine. He wanted a bigger share. He didn’t think landowners were getting a fair cut.
Q: BCL continues to trade at around 50 cents a share when the mine has been closed 24 years. That’s unusual, isn’t it?
TAYLOR: I think there’s more justification for the BCL share price than I do a lot of other speculative companies in the mining sector who haven’t even discovered anything. We know what the value of our ore body is, based on current metal prices. The punters are saying, “Well, if we can ever commercialise that, it’ll be a good return.”
Q: Australia has taken the view since the time of Whitlam that there should be fewer smaller states in our region that could potentially fail. Is that your understanding?
TAYLOR: I’ve never heard Australia say it that way but I think it’s right. There’s this division throughout the region, of which first nation looks after which developing nation. If you look at Australia’s patch, its got some pretty terrible examples small nations: it has this dilemma with Fiji, it’s still pouring money into the Solomon Islands, it’s got Bougainville and other micro states which depend almost entirely on Australian and New Zealand aid. And at the political level, all these little states have one vote at the UN, which creates another dynamic: who is going to be the influential power, China or the West?
Q: How do you keep going, day to day, when the project is still so far off?
TAYLOR: This is not a job for someone who wants a result by Friday. In our industry, we take a long – term view. We have projects which can last 50 to 100 years. You don’t want to be in a screaming rush, you’ve to get it right. And there’s a pretty salutary lesson to be had from when we didn’t get Bougainville right.
Q: BCL is a PNG company, though listed on the ASX for historical reasons. If I was a prospective PM, such as Tony Abbott, why would I care about the success of the reopening of this mine?
TAYLOR: There’s not a cash flow to the Australian government. What there is, is PNG being closer to self-sufficiency so Australia doesn’t have to keep providing aid. The idea is to make them economically sustainable, rather than keep having to hand out money. That’s what’s in it for Australia.