Balancing interests: OBG talks to Peter Aitsi, Country Manager, Newcrest Mining

  • How successful do you feel the mining laws are at balancing the competing interests of the state and private sector developers?

    AITSI: The current laws provide certainty for developers and investors, which is evidenced by the fact several major mining developments have been completed in recent years following a long period of stagnation. Given our experience in other countries, Newcrest is aware that uncertainty or major changes such as those recently proposed by some parliamentarians are likely to result in reduced appetite of both developers and investors in future mining developments. We are mainly concerned by suggestions that resource ownership be handed over to landowners from the state. Such a move would result in great uncertainty, extend significantly the time needed to develop a mine and would further concentrate the benefits and wealth of future developments in only a few individual landowning clans at the expense of the provinces, the state and the people of Papua New Guinea. We therefore would advise the incoming government to establish a transparency protocol to make visible what developers pay in royalties, taxes and other benefits, and, how the government spends the funds it receives.

    All in all, we believe the existing mining laws, along with greater transparency, should allow for a more equitable and efficient distribution of state resources, however, state machinery will also need to be improved to translate the country’s wealth into essential services and development benefits for communities.

    What progress has been made to date on PNG’s offshore mining development?

    AITSI: At this stage the developers are exploring to establish the resources within the approved area, between East New Britain and New Ireland. Based on what I have read in terms of the quality of the minerals, there are good concentrations of the elements, but it is a very costly exercise to prove these resources and bring in the technologies that are required to start production and extraction. There is tremendous potential, but the developer has long way to go before we realise the profitability and demonstrable production efficiencies. There is also a substantial cost for the development of the technology. Some technology and equipment can be brought over from the decade’s long experience of the offshore petroleum industry and be adapted to offshore mining, but in terms of extraction equipment we require a whole new technology. What we need to be aware of is that there is a lot of work to be done to develop these offshore techniques. In terms of its wider impact, both the developer and other mining companies have secured offshore exploration licences in other parts of the Pacific region, which demonstrates the growing interest in offshore mining.

    How can mining projects serve local communities as well as foreign and local investors?

    AITSI: Our own activities as well as those of other major developers in the sector have considerable engagement on several levels with local communities. This ranges from business contracts with landowner groups to directly contracting the work that is required for the operation of the mine. There are also compensation arrangements with local communities, so there is a direct financial relationship as well. Lastly, there is an employment relationship via preferential employment that is given to landowners and affected communities.

    To what extent are land-related issues constraining the flow of foreign investment into PNG?

    AITSI: It is a big constraint. It is the first issue faced by any developer coming to PNG. Land tenure and the ability to establish ownership of land are both critical factors. The land process should be better managed so that ownership can be clearly determined under a regulatory framework. Establishment of a mediation and arbitration process could assist local communities to negotiate and determine ownership, thus allowing all parties to operate with a better level of security.