Legal amendments to facilitate mining in PNG

 

The Mining Act of 1992 has served as a sturdy legal guide for the industry in Papua New Guinea, albeit with a small number of gaps that policymakers are eager to close. With the ultimate goal of maintaining a legal structure that is attractive for investors while also providing adequate financial incentives for the state and protecting the benefits of landowners, a number of conflicts of interest have arisen in the revision of the law, delaying the passing of some legislation.

While a complete draft of a revised mining law was not yet made public as of mid-2017, contentious amends include changes in the rules applying to state equity back-in, the ban on international fly-in fly-out, the government’s right to compulsory acquire a project on renewal of a mining lease, and a reduction of mining lease terms from 40 to 25 years.

As it stands, the state maintains the option to enter into any mining venture and acquire up to 30% at the time a mining lease is granted.

Landowners 

With around 97% of land in PNG under customary tenure, the role of landowners is an ongoing debate. Several political groups have pushed to increase royalties to landowners and provincial governments. How this unravels in the final mining act will determine the profitability of mines and ultimately the appetite of new investors. “In comparison to the Petroleum Act, which offers an equity of 2% to landowners, the existing Mining Act of 1992 has no provisions for dividends. The current draft is proposing an equity share of 5% on a free carried basis,” John Tuaim, general manager of operations and administration at Mineral Resources Development Company, told OBG.

Identifying the appropriate landowner can also be a challenge due to a lack of title deeds. In addition, explaining that resources should be held under the state has been a difficult message to convey. “Dealing with individual communities presents a unique set of challenges, and a lack of education limits their ability to understand the risks of marginalisation,” Tuaim added.

Road Map 

Authorities have made strides in developing plans that will support the industry as a whole. To improve supervision of mining activity, the Department of Mineral Policy and Geohazards Management (DMPGM) announced two five-year plans in February 2017. The Corporate Plan and the Strategic Plan would both run from 2017 to 2022. As of mid-2017, the plans were still under review by the Cabinet. If approved, the policies are set to accompany the updated mining act once it is passed by the new administration.

Much of the sector’s future success will depend on the administration’s ability to implement and uphold any updated policies, while achieving a comprehensive legal playing field that meets the demands of investors and the needs of citizens. While the draft mining act has been put on the back burner until a new government takes office (see overview), the DMPGM’s launch of its corporate and strategic objectives are set to close gaps that the Mining Act of 1992 failed to address. This comes at an important time for PNG, as multiple new mining developments are coming on-stream.

During the launch of the department’s new plans in Port Moresby, six new policies aimed at steering mining activity were also identified. These include both onshore and offshore policies, mine rehabilitation and closure, sustainable mining development, involuntary resettlement and a geothermal resource policy. These policies were formulated via meetings and extensive reviews between the government and industry working groups, including the PNG Chamber of Mines and Petroleum and the Mineral Resources Authority.

PNG could see a new wave of investors if the revised law brings some added features to the positive characteristics of the Mining Act of 1992. However, while a competitive legal framework will ease the concerns of potential prospectors, the lack of roads and security issues still hinder project execution. For the country to truly capture its mineral potential, infrastructure gaps will need to be filled, which requires significant funding.

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The Report: Papua New Guinea 2017

Mining chapter from The Report: Papua New Guinea 2017

Cover of The Report: Papua New Guinea 2017

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