GRANT OF NEW SPECIAL MINING LEASE (SML) TO KUMUL MINERALS HOLDINGS LIMITED OVER PORGERA WILL INCREASE ECONOMIC HARDSHIPS FOR PNG: NAMAH
Papua New Guinea Leader of the Opposition, Belden Norman Namah announced today that Prime Minister James Marape has unnecessarily increased and prolonged economic hardships for PNG with his government's surprise decision last week to grant Kumul Mineral Holdings Limited (KMHL) a Special Mining Lease (SML) over the Porgera gold mine tenement.
Mr Namah described the move as "devious, ill-advised and ill-timed" and that it was a "fatal blow to investor confidence in PNG".
He said: "Let us set aside the technical questions of due process being followed, of creditworthiness and financial and technical capacity of KMHL and concentrate here on the implications of the decision alone.
"And I see so many disturbing implications and all of them are alarming. This is the worst possible decision that the government can make at this time.
"Only last week Treasurer Ian Ling Stuckey told Parliament that the economy has been hard hit by Covid-19 induced hardships. The full extent of the economic downturn will be revealed with a Supplementary budget or the Mid Year Economic and Fiscal Outlook if the government can bring out both this week.
"To issue an SML while the previous leaseholder, Barrick Niugini Limited, is fighting a protracted court battle and seeking international arbitration indicates that the first decision to refuse SML renewal was devious and ill-intentioned. This decision now pre-empts the matter in court and might be held to be subjudicial to the whole case.
"I can see what is happening. The government has just announced its long overdue amendment to the laws governing the non-renewable extractive resources sector. It is proposing to shift from the current regime to a production sharing arrangement where the state owns 100% of mineral and hydrocarbon resources through its nominee company and merely contracts a mine or hydrocarbon project operator after refunding exploration and other sunk costs.
"This may well be good law but it does little to restore investor confidence and trust in this Government and PNG as a stable investment destination, a country that respects the rule of law and that is governed by the rule of law.
"In the present scenario, if KMHL is the state nominee company for development of Porgera, where and who is the operator? Does KMHL or its 'silent' operator have the financial and technical capacity and all the information and or data required to start up and operate the mine?
"Has the government considered what happens to Barrick Niugini Ltd's assets worth in billions of Kina, its legacy issues pertaining to the environment, outstanding taxes, its nearly 3,000 employees and contractors and subcontractors?
"Who pays the billions of Kina in damages and liability exposure to the State if it came to that?
"Instead of resolving the issue with BNL over granting of a new SML, the Government has gone ahead to grant a new SML to KMHL. "By this ill-advised and ill-timed decision the hope of an early reopening of Porgera mine has now been clearly faded. How long can the economy sustain Mr Marape's 'short term pain' and how soon can we expect his 'long term gain'?"
Finally, and most importantly the grant of this new SML might well be a fatal blow to investor confidence which has been at an all-time low since James Marape came into power.
"Foreign direct investment is predicated on mere assumptions and that is why we have to be very careful with what we say and do as political leaders. "Companies invest billions of Kina in the country after weighing sovereign risk, political stability and a predictable, open and transparent legal, policy and fiscal environment. These are the gold standards of investment decisions.
"Mr Marape has lowered these standards dangerously since he took office in May 2019. Within weeks, on the back of his announcement that he would review existing Agreements he considered not beneficial to the country, Oil Search Limited announced to its shareholders that it suffered a K8.5 billion dunking of its values as a result of the uncertainties generated. In recent days the company has sold off its exploration equipment and announced it is scaling down in that area. Oil Search is the company internationally considered as PNG born and bred, having entered the hydrocarbons exploration field in the 1930s. When it takes losses like that on the Prime Minister's words alone and then moves inside a year to scale down an important element of its operations, it must raise red flags to the investment community that here is grave danger. That is very detrimental to our future. No amount of counter-talking by this Prime Minister can mend the damage he has caused.
"Already construction of Papua LNG is stalled and might never start under this government. P'Nyang LNG talks are yet to restart. Porgera is closed. Ok Tedi is shut due to Covid-19. All eyes are on Wafi-Golpu and the Prime Minister's promised September deadline has arrived.
"Where will PNG's revenue come from to fund this year's or the 2021 budgets?
"This is just not the time to go off making ill-timed, ill-advised and deviously plotted decisions.
"In the interest of the nation's socio-economic welfare, I call on the government to rescind the grant of SML to KMHL.
The Prime Minister has some serious damage control to do and I suggest he get to it quickly."
'GOD SAVE OUR COUNTRY!
HON. BELDEN NORMAN NAMAH, MP Leader of the Opposition
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