PNG Finance Minister Pundari Explains Government's Deal on Porgera Gold Mine

 Statement by PNG Finance Minister John Pundari 

There is a lot of misinformation and assumptions being spread on the Framework Agreement (FA) presented to the landowners by the Prime Minister last week in Porgera.

I want to make it clear to the people that the actual legal document or Contract as per the Mining Act is the Mining Development Contract or MDC. The Framework Agreement (FA) presented in Pogera is not the finished product of the negotiations. 

Porgera Mine
PNG PM Marape talking to Porgera Mine workers. Photo Supplied 

In the context of such negotiations, a framework agreement is an agreement reached between parties that recognizes an understanding between the concerned partie(s)  to move forward and advance into more detailed discussions, forums and agreements.

Thus, the actual MDC with all the details and specifics is yet to be drafted and signed between the parties. The FA only captures the Headlines. By law, as and when the MDC is duly executed between the parties, there and then, the Mining Development Forum will proceed.

The details of the Framework Agreement that need to be understood are as follows:

1) The Tenement (Licence) for what is being called now the New Porgera; is the Special Mining Lease or SML 11 (SML 1 has expired). The most valuable assest to the mine, is the SML and that is now 100% owned by PNG Stakeholders through Kumul Mineral Holdings Limited.

2) Resettlement of affected landowners relating to the New Porgera will be fully funded at the cost of Barrick Niugini, subject to a  Resettlement Plan discussed during the Development Forum.

* PNG Stakeholders will not bear any cost in relation to the Resettlement of the thousands of affected landowners within and around the vicinity of the mine. This is one of the key issues of the Old Porgera which has been addressed.

3) The vehicle to operate the New Porgera is to be an Incorporated Joint Venture (IJV) with eight  Board Members (4 each from PNG Stakeholders and BNL).

* The right of the Chairmanship will be rotated annually, with PNG Stakeholders to occupy the chairmanship for the first year.

* Unlike in the past operation where PNG had zero visibility, now we will have an equal voice and participation at the Board.

4) PNG Stakeholders (State, Enga Provincial Govt, and Landowners) will have 51% Equity in the mine while BNL will have 49% Equity. 

* Barrick will meet 100% of the Capital Expenditure (Capex) to start up the mine. The State's 36% is to be repaid interest free.

* Unlike in the past, PNG Stakeholders through the Board will know exactly how much the cost of the 36% is in real value.

* It is important to note that Porgera is an existing mine or brown field; thus the cost will be minimal.

* The other 15% from the 51% is "free carry" for the Landowners and EPG.

5) Royalty has been agreed at 3%, an increase of 1% from the usual 2%.

6) 30% Corporate Income Tax. 

* Concessions are usually given on this but through strong negotiations, PNG SNT held its grounds and parties finally agreed on it. 

7) Personal Income Tax was excluded from the project economics of the New Porgera.

2% Fiscal Stability Tax. 

* Again through strong negotiations by the SMT, this was not given concession. 

9) Economic Benefits. Which are the Net Benefit of New Porgera including tax, etc.

* This is estimated to be around 65%/45% in favour of PNG Stakeholders for the first 5 years. 

10) Long Term Economic Benefit of New Porgera is locked in at 53%/47% in favour of PNG.

11) BNL shares are to be sold to PNG Stakeholders after 10 years of operation. 

*As per clause 3, the Board will decide on the key operational aspects including mine plan, blastings and new drilling.

* Unlike in the past, the PNG Stakeholders will know exactly its geological date or reserves thus will manage and plan accordingly.

* All key decisions of the New Porgera, including the mine plan will be approved by the Board. 

13) US$ 15 million is agreed to be made available as a community facility grant during the first year of operations of New Porgera.

14) US$ 3 million will be made available annually as community facility grants, to be called The Porgera Sustainable Development Fund.

These important aspects of the signed Framework Agreement needs to be understood.

The Old Porgera is gone, and a new era has begun. The New Porgera seeks to addresse legacy issues and problems fairly; with priority consideration for the most important people - the landowners. All these issues will be addressed at the Mining Development Forum.

I commend the Prime Minister and the SNT (State Negotiating Team). A bold stand was made and we entered uncharted waters. The outcome is one that will stand as a testament for future mines in this country. I also thank Barrick for being an example of a responsible global citizen, for other operators in this country to follow.

Furthermore, I call on all stakeholders to embrace the New Porgera and work together genuinely. We are all aware of the specific issues that need to be addressed before we proceed.

Hon Governor Ipata [Left] and Sir John Pundari [Right] talking to mine workers. photo supplied

As a Minister in Government, responsible for a key economic portfolio, and as a leader in Enga, with majority of my people of Wagge, and Porgera starting from Tipinini all the way to Yairik, Yuyan, the people of lower Porgera all the way to Paiala and Mt Kare, I have every confidence and fully support the Framework Agreement that has been signed. This is a good outcome and my people of Ipili Porgera and Enga must understand that.

We will realise the fruits of this Agreement when we do our part to ensure that everything is in order. THE MINERAL RESOURCES AUTHORITY TO WILl CONDUCT AN INDEPENDENT EVALUATION OF THE RESERVES IN PORGERA."

We will have a state sponsored evaluation team that will confirm in due time exactly how many millions of ounces are in reserve. This will put all uncertainties to rest. The framework agreement hangs on the simple fact that New Porgera will be mined for more than 10 years. Thus, we will ensure that this will happen by confirming the reserves in Porgera.

All this issues will be tabled and addressed at the Mining Development Forum.

So I appeal to our people to be responsible and support our Prime Minster with solutions and sound advise. 

Under very difficult circumstances, and against all odds, the Prime Minister who has grown up in the Valley of Valley, has committed so much and has led the team that has delivered a good Framework for New Porgera. We need all hands on deck to get Porgera opened again.

I call on our very own hard working mining engineers, Geologists, Economists and Lawyers in this country to give solutions and sound advice. 

Let us move forward as a nation - don't be negative. Arise sons and daughters of this land, our Prime Minister has bravely fought to secure us a very good ground. 

Take courage and let's all join hands together and advance forward into the unknown. Our Great God will always be with us.

Next : Stakeholders support plan to extend St Barbara Simberi mine life

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