A major Chinese mining company has warned the Papua New Guinean Government it faces “significant negative impact” on bilateral relations with China if the company does not get a lease extension on a gold mine in the country.
- PNG is refusing to extend a lease for a Chinese mining company and its Canadian partner
- Zijin and Barrick Gold have run the Porgera mine since 2006
- Zijin’s chairman has warned PNG’s relationship with China could suffer if the lease isn’t extended
The PNG Government last week rejected an application to extend the lease on the Porgera Gold mine, which is operated by Barrick Niugini Limited — a company jointly owned by Canadian miner Barrick Gold and China’s Zijin Mining Group.
The mine in PNG’s highlands has produced almost 20 million ounces of gold in its 30 years.
The special mining lease for the site expired in August last year and discussions about a 20-year extension have been underway since 2017.
PNG’s Prime Minister, James Marape, announced late on April 24 that the extension would not be granted.
Instead he wants to start negotiations about a transitional period, after which time the state will “enter into owning and operating the mine”.
In a statement, Barrick Niugini Limited said it would be pursuing “all legal avenues” to challenge the Government’s decision, which it said “was tantamount to nationalisation without due process and in violation of the Government’s legal obligations”.
Nationalisation is a process in which a government takes control of an industry or company and becomes its owner.
Mr Marape said the decision “has been made in the best interest of our country and in full compliance to our existing laws”.
Investment one of China’s largest in PNG
Barrick Gold and Zijin Mining Group both have a 47.5 per cent stake in the operations, amounting to 95 per cent. The final 5 per cent interest is held by the local Government and landowners.
The ABC has obtained a copy of a letter sent this week to the Prime Minister from the chairman of the Zijin Mining Group, Jinghe Chen.
In it, Mr Jinghe describes the decision not to grant the lease extension as “shocking” and that he is “saddened” by the impact it will have on employees and locals.
The letter outlines that Zijin is “one of the largest metal mining companies in China, with operations in 12 countries”, where he says the company makes significant economic and social contributions.
Mr Jinghe writes that Zijin had “great confidence in PNG’s mining sector” when it invested in Barrick Niugini Limited in 2015.
“Zijin has invested hundreds of millions of dollars in Porgera mine and the investment is one of China’s largest in PNG,” the letter reads.
It goes on to say that as a Chinese enterprise, Zijin “would like to contribute to the existing good economic, trade, cultural and inter-governmental relations” between China and PNG.
Zijin is known to have links to the Chinese Communist Party and in the letter, the chairman comments that the company “is highly recognised by the governments, communities and business partners in its 30-plus large-scale mining operations in China and all through the world”.
While the letter has been sent to the Prime Minister, it has also been copied to China’s ambassador to PNG, Xue Bing, along with PNG Mining Minister Johnson Tuke and Sir Peter Ipatas, the Governor of the Enga Province, where the mine sits.
The ABC has contacted Zijin Mining Group, the Porgera Joint Venture, the PNG Prime Minister’s office and the Chinese ambassador’s office for comment.
‘Don’t fight me’
Barrick Niugini Limited temporarily suspended operations at the mine on Saturday in response to the PNG Government’s decision not to extend the lease.
“The suspension will likely be extremely costly, compounding PNG’s national debt challenges, and potentially resulting in the permanent loss of the mine,” the company said in a statement.
Mr Marape responded in a Facebook post, asking Barrick to maintain its operations, but warned “if you sabotage or close the mine, you leave me no choice but to invoke orders to take over the mine”.
“Work with me for your ease of business during this transition and exit phase [you never know, negotiations may buy you extra mine-operation time].”
Mr Marape came to power fuelled by discontent among MPs about the resources sector and promising to “take back PNG”.
He has been pushing for greater returns for the country and his Government has already walked away from negotiations with United States giant Exxon Mobil over plans to develop a gas field.
Barrick Niugini Limited said it had “proposed a benefit-sharing arrangement that would deliver more than half the economic benefits to PNG stakeholders, including the Government, for 20 years” and received no indications the lease wouldn’t be extended.
In its letter to the Prime Minister, Zijin says it is willing “to explore and discuss various possible scenarios” which leads to the lease extension and Barrick Nuigini Limited remaining as the operator.
“If the SML [special mining lease] extension is not granted, the mine will be forced to close [with the removal of the installations and facilities in the mine, later reconstruction of the operation systems would render the mine’s operation impossible for years].”
Mr Marape has said negotiations on other resources projects in the country are continuing and investors have no need to worry.
“PNG is a robust democracy that honours all agreements to the text and spirit, congruent to our mining act or other laws,” he wrote.