By Kevin McQuillan of Business Advantage PNG

Two court hearings next week – one in Port Moresby and the other in Melbourne – will help determine the future of the exploration licence for the Panguna copper mine in Bougainville.

The decision to refuse an extension of Bougainville Copper Limited’s exploration licence and to impose an indefinite moratorium over the Panguna resource, followed a statutory Warden’s meeting in December 2017.

There was “a narrow divide between those supporting the mine to be opened by Bougainville Copper Ltd (BCL) and those that oppose it”, according to Bougainville President John Momis.

BCL has successfully sought leave to apply for a judicial review of the decision to refuse its licence extension, citing legal and procedural concerns.

“While the moratorium has been gazetted, it has no impact on existing exploration licences or applications for extension, lodged prior to the moratorium,” said BCL Company Secretary, Mark Hitchcock.

“BCL remains the holder of the exploration licence (EL1) until the matter is ultimately determined,” he said.

BCL has held the licence since the mine closed in 1989. The company is now owned by the PNG national government (36.4 percent), the Autonomous Bougainville Government (36.4 percent), European shareholders (four percent) and 23.2 percent through the Australian Securities Exchange (ASX).

Rio Tinto gave away its stake in 2016.

Opposing BCL
Those opposing BCL’s involvement are led by Philip Miriori, who claims chairmanship of the Special Mining Lease Osikaiyang Landowners’ Association (SMLOLA).

He has thrown his support behind a bid by Perth-based junior miner, RTG Mining, to gain the exploration licence, setting up a joint venture company, Central Exploration, of which RTG owns 24 percent.

One of RTG’s major shareholders holds another 32 percent, and the SMLOLA retains 44 percent.

Miriori’s chairmanship of the SMLOLA remains in dispute. The 367 authorised customary heads of the 510 blocks of land within the special mining lease area of Panguna say they do not recognise Miriori as the Chairman of the SMLOLA and support the extension of BCL’s exploration licence.

On the same day as the Port Moresby hearing, on May 17, BCL will be in court in Melbourne, seeking disclosure about the relationship between RTG Mining and the SMLOLA.

Miriori and other supporters admit they are being paid by RTG, but Miriori has told the ABC that the payments are legitimate salaries, not inducements.

“That is always a normal part of anything, nothing is free,” he said.

Seeking disclosure
The action seeks disclosure from RTG Mining and Central Exploration about any compensation or benefits paid to the SMLOLA.

One analyst close to the proceedings says any disclosure could determine the possibility of “unlawful interference” with BCL’s exploration licence.

For his part, Momis says his government believes it would be “untenable under current circumstances” for any developer to develop the mine.

“BCL has an extensive database of historical data and project information from the mine operations prior to closure.”

“We have some problems with RTG right now,” Momis told RNZI.

“In fact, they are causing a lot of confusion and division in the community and we are not prepared to go ahead while this situation prevails.”

Exploration data
Should RTG Mining or any other company win the exploration licence, the next battle will be over the data about the location and extent of resources.

“BCL has an extensive database of historical data and project information from the mine operations prior to closure in 1990,” said Hitchcock. “This data remains the intellectual property of the company.”

Even if that data is not protected by intellectual property law but is only considered confidential information, it will still require cooperation from BCL to access, according to Alexandra George, senior lecturer at the University of New South Wales, who specialises in international intellectual property law.

She said it might be expensive and time-consuming to obtain.

She said that under Australian copyright law, ownership of a database is not straightforward. Whether or not RTG Mining could access the data may depend on the terms of the exploration licence, any special legislation, and on the terms of any contracts or licence agreements that have been entered into.

“If [the data] was not available, having to reinvent the wheel would add significant costs,” said George.

“Perhaps the safest way of assessing value is what the market is prepared to pay.”

Hitchcock said: “We estimate it would take any other company or entity at least two-to-three years to replicate the BCL database through exploration activities and would cost in excess of A$200 million (K400 million).”

Kevin McQuillan writes for Business Advantage PNG.

By Aloysius Laukai in Buka

The President of the Autonomous Bougainville Government, Chief Dr John Momis, has announced an indefinite moratorium on exploration and mining in Panguna.

He said the Bougainville Executive Council had its meeting on Wednesday made a “thoughtful and considered” decision to impose an indefinite reservation moratorium from any exploration or mining over Panguna in the best interest of the landowners and the people of Bougainville.

The council debating the issue following advice from the Bougainville Mining Advisory Council.

“It is with much regret that the basic requirement for obtaining the landowners consent under the Bougainville Mining Act 2015 could not be met,” Momis said.

The voice of the Panguna landowners was clearly heard during the mining warden hearing that decided in a narrow split between those supporting the mine reopening by Bougainville Copper Limited (BCL) and the opponents.

Dr Momis also said that to develop the mine by any other developer would be “untenable” under current circumstances.

“We will not allow this project once again to reignite the wounds of the Bougainville crisis and distract our focus for restoring peace and our preparation for our referendum in 2019,” he said.

Continued consultations
While imposing this Panguna moratorium, Dr Momis said his government would continue to consult with Panguna landowners and the people of Bougainville over an “appropriate arrangement” or best alternative models of development of the mine if the people still had an appetite to develop the mine in the future.

The Bougainville Civil War was fought in 1988-1998 between Papua New Guinean military forces and secessionist guerrillas of the Bougainville Revolutionary Army (BRA).

The conflict led to an estimated 15,000-20,000 deaths on Bougainville before a peace agreement was brokered by New Zealand in 1998. This led to the establishment of the Bougainville Autonomous Region Government.

Bougainvilleans are due to vote in a referendum on possible independence in June 2019.

Freeport Indonesia’s Chappy Hakim … “an extraordinary commitment of time”. Image: Bernadette Christina Munthe/Jakarta Globe file

Chappy Hakim has resigned as its president director, only three months after his appointment as the mining giant’s top executive, PT Freeport Indonesia announced at the weekend.

In a media release, Freeport Indonesia did not specify when Hakim, a retired air chief marshal, would officially step down.

However, it said he would move to an advisory role with the company.

“Serving as Freeport Indonesia president director involves an extraordinary commitment of time. I have decided it is in the best interests of Freeport Indonesia and my family to step down from my duties as president director while continuing to support the company in an advisory role,” Hakim was quoted as saying.

READ MORE: Freeport seeks to dodge piling problems as stalemate shuts production

Hakim’s resignation occurred as the company, a subsidiary of United States-based Freeport-McMoRan, fights against complying with the government’s latest mining policy, which stipulates that miners must convert their current contracts of work (CoWs) into special mining permits (IUPKs) in exchange for permission to continue exporting certain mineral ores and concentrates.

Freeport, which operates the huge Grasberg mine in Papua, has repeatedly said it would not agree to the contract conversion unless the government provided assurance of long-term investment stability, consisting of fiscal and legal certainty, in accordance with its CoW signed in 1991.

Freeport-McMoRan CEO and president Richard C. Adkerson thanked Hakim for his contributions to the company.

“We understand that this was a difficult decision for Pak Chappy to make. We appreciate his service to our company and his support. We look forward to his continued advice and counsel,” he said.

Chappy Hakim, also known as an aviation industry expert and prolific writer, was appointed as Freeport Indonesia’s top executive in November.

The company previously appointed retired military officer Air Vice-Marshall (ret.) Maroef Sjamsoeddin as president-director.

A Freeport worker monitors the mineral flotation process before the mine production crisis. Image: B. Josie Susilo Hardianto

By Viriya P. Singgih and Fedina S. Sundaryani in Jakarta

Gold and copper miner PT Freeport Indonesia, the country’s largest taxpayer and oldest foreign investor, is in for another rough ride as it struggles to fight the government’s demand to divest controlling ownership and resolve allegations of legislative contempt.

Reuters reports that all work has stopped at Freeport’s Grasberg mine and its workers are planning a demonstration against the government’s move last month that halted exports of copper concentrate to boost domestic industries, a union said.

A prolonged stoppage at the world’s second-biggest copper mine would support copper prices, near 21-month highs this week, but would also deny the Indonesian government desperately needed revenue from one of its biggest taxpayers.

READ MORE: Freeport says it hasn’t agreed on new contract

Freeport’s headache intensified last week when the Energy and Mineral Resources Ministry claimed the company had agreed to convert its contract of work (CoW) to a special mining licence (IUPK), and required it to divest 51 percent of its shares and construct a smelter.

In exchange, the government allowed the company to resume its exports of copper concentrate to prevent massive layoffs in its operations in the backwater regency of Timika in Papua, where Freeport has been operating for more than five decades.

The government has claimed its recent policy to continue the relaxation of raw and partly processed mineral exports, which many analysts and politicians deemed as against the law, has profited Freeport because the company can continue with exports despite its questionable commitment to construct a smelter in Indonesia to process its products.

While Freeport has indicated it will fight against the share divestment while agreeing to other demands set out by the government, Energy and Mineral Resources Minister Ignasius Jonan has not blinked and insists the company has to comply.

“Why are they refusing the divestment rule? The shares will later be bought by the government or the government’s partners. What is exactly the reason behind the company’s reluctance?” Jonan said.

Freeport, a local unit of politically wired US mining giant Freeport McMoRan Inc. (FCX), said it would not agree to the contract conversion unless the government provided a long-term investment stability assurance, consisting of fiscal and legal certainties, in accordance to its CoW signed in 1991.

“Freeport Indonesia will keep working with the government to find the best possible solution for both sides. However, no agreement has yet to be made as of today,” Freeport Indonesia spokesperson Riza Pratama said.

Under the CoW, Freeport is required to sell 51 percent of its stake to Indonesian entities by 2011, or 45 percent if it has sold a minimum of 20 percent in the local stock market.

However, a string of regulations were issued along the way that eventually allowed Freeport to dodge the requirement to this date, where very few officials have made a fuss. FCX owns 90.64 percent of the company, while merely 9.36 percent is owned by the Indonesian government.

Full Freeport report

Chappy Hakim, chief executive of Indonesia’s local unit of US mining giant Freeport McMoRan, speaks to reporters outside Parliament in Jakarta last year. Image: Bernadette Christina Munthe/Jakarta Globe file

By Eko Praseto in Jakarta

Freeport Indonesia director Chappy Hakim has denied assaulting a lawmaker after a hearing with the House of Representatives’ Commission VII in Jakarta.

According to reports, the former Air Force chief-of-staff had assaulted Commission VII member Mukhtar Tompo after a hearing with several representatives of mining companies, including Freeport, which operates the giant Grasberg copper and gold mine in Papua, to discuss the government’s mining policies.

“There was no beating, unlike what has been reported in the media. Mukhtar also said I never assaulted him,” Chappy said in a written statement.

The Grasberg copper and gold mining complex in Indonesia’s Papua province. Image: Dadang Tri/B/JP

The Indonesian government seems set to ignore threats by United States mining giant Freeport-McMoran Inc to cut production at its Papuan copper mine – the world’s second-largest — and slash its local workforce if it does not receive a permit to continue exporting copper concentrates by the middle of the month, the Jakarta Post reports.

While ministers are rushing to revise the regulations so miners that have committed to build smelters can continue to export ore concentrates, an intermediate product used to make copper, there is no guarantee that the deadline will be met.

The rules as they stand now only permit shipments of refined metal after January 11, Bloomberg reported.

Richard Adkerson, chief executive officer of Freeport-McMoRan Inc., the owner of the massive Grasberg mine in Papua province, said he was confident the issue would be resolved.

He told a conference in the US last week that without a resolution the company would have to cut back operations and potentially curb development of the underground mine where it was spending US$1 billion a year.

CRU Group, a consultancy, says the regulations will be changed.

“CRU’s view is that the rules will be revised and Freeport McMoRan will be able to continue to export Grasberg concentrates,” said Christine Meilton, principal consultant, copper supply and raw materials.

Disruption forecast
“Our base case forecast assumes that any disruption does not continue long enough to result in a cutback in production.”

Grasberg is the world’s largest mine in terms of copper capacity after Escondida in Chile, according to the International Copper Study Group.

Freeport says the deposit has the world’s biggest reserves of gold.

Any disruption could support prices of copper, which is the best performer among its peers this quarter, as banks from Goldman Sachs Group Inc. to Citigroup Inc. take a bullish view on the metal next year.

Indonesia is seeking to build a processing industry and prevent its mineral wealth from disappearing overseas.

While the rules allowed time for producers to build smelters, the government said that after three years shipments of semi-processed ores would no longer be permitted.