Industry Expert: Resource Projects Should Continue
by PNG Business News - June 07, 2021
Photo Credit: PNG Chamber of Mines and Petroleum - Mr John Chambers, General Manager, PNG Santos Ltd
If Papua New Guinea wants to maintain its economy, resource projects should continue to come online, according to an industry expert. This was said by John Chambers, Santos PNG's general manager and a PNG Chamber of Mines and Petroleum council member, during the chamber's webinar series. He stressed the need for collaboration between the government and the industry in securing pipelines.
“It is also important to see that sanctioning of large projects such as the PNG LNG gives a very quick economic fill up to the economy as getting taxes, (the different taxes) and increase in employment,” he said.
The resource business accounts for 88 per cent of the country's overall export and 28 per cent of its gross domestic product (GDP) in 2019, according to a snapshot of a study from the PNG Extractive Industries Transparency Institute (PNG EITI). According to the World Bank, PNG is one of the top ten resource-dependent economies in the world.
“It’s not necessarily a great thing, but it’s something we have to work within and try to maximise,” Chambers said.
The following are some of the country's noteworthy resource projects:
- The gold mine Porgera in Enga, which is set to reopen later this year;
- The Wafi-Golpu project, worth US$5.4 billion (K154.91 billion), is located in Morobe's Huon Gulf and Wau-Bulolo districts. Harmony Gold Mining Ltd and Newcrest Mining Ltd have a 50/50 stake in this large-scale underground mining operation.
- The US$12 billion (K41.38 billion) Papua LNG project, which will be operated by Total E&P PNG Ltd;
- The US$9.2 billion (K31.67 billion) P'nyang gas project, which is jointly owned by ExxonMobil and Oil Search;
- The PASCA A Petroleum project in the Gulf;
- Others include the Frieda River copper and gold project in East and West Sepik, as well as GeoPacific Resources Ltd's K420 million Woodlark project in Milne Bay.
Prime Minister James Marape stated that the government will continue to work on the Wafi-Golpu project as well as other outstanding resource projects.
“We have already issued an environmental permit and we will progress Wafi-Golpu after Porgera is moved,” he said. “In the petroleum space, Pasca has been discussed. We thank ExxonMobil for reopening discussions on P’nyang, and we are remobilizing for Papua LNG. We have been active in business in the midst of Covid-19 as far as the mining and petroleum sector is concerned.”
According to Marape, the government welcomes and will work with all investors in the nation since they are entitled to a high return on investment while also ensuring that locals get a fair part of the resources.
Moi, Clarissa. The National (7 June 2021). “Bring in more projects: Expert”.
PNG Business News - June 23, 2021
Kainantu Resources Acquires May River Project
The May River project in West Sepik has been acquired by Kainantu Resources Ltd (KRL) under formal agreements. Chief executive officer Matthew Salthouse said, “The May River project is an exciting acquisition for KRL, given its location in an exceptionally prospective and proven district for significant copper-gold projects.” May River, according to Salthouse, will provide the Asia-Pacific gold mining business with access to a number of very promising copper-gold possibilities near the world-renowned Frieda River copper-gold project. “The deal also demonstrates KRL’s ability to execute value accretive acquisitions, in line with our broader strategy of developing a portfolio of high-quality gold and copper-gold projects in the Asia-Pacific and advancing these through the value curve. “The May River acquisitions fits KRL’s strategy and we are excited to access the ground and advance the existing data. “The KRL looks forward to continuing to work with the key stakeholders of Niuminco and Hardrock in developing both the May River project and KRL as an emerging mining company.” The May River project is located near the Frieda and Sepik rivers in West Sepik. It's less than 15 kilometres from PanAust's Frieda River project. The Project is situated on a large tenement area, with previous holders having carried out exploration and drilling that revealed considerable copper and gold prospectivity. The larger regional geology suggests that a number of highly promising zones exist across the Project. KRL entered into two agreements to buy the highly promising copper-gold mining concessions known as the May River project, indirectly through the acquisition of two holding companies. KRL will take full ownership and administration of the project once the purchases are completed. It will continue to engage with Niuminco and Hardrock management (as well as key stakeholders in PNG) to acquire the required regulatory approvals for the Acquisitions in order to complete and consolidate the Project. Under the Hardrock Agreement, KRL is presently performing the field work required for the Study. Initial fieldwork looks to be promising, and KRL will provide an update. Reference: Kero, Gynnie. The National (21 June 2021). Kainantu “Resources excited about project’s potential”. Kainanturesources.com. “Acquisition of Highly Prospective Copper-Gold Project”.
PNG Business News - July 08, 2021
Geopacific Receives K257.5M Funding
Geopacific Resources Ltd has received funding of AU$100 million (K257.5 million) for the construction of its gold and silver mine on Woodlark Island in Milne Bay, Papua New Guinea. Chairman Ian Clyne stated that the money will come from a loan facility. He expressed gratitude to the Mineral Resources Authority for assisting in the successful development of the Woodlark Island gold mine. He said that it allowed Geopacific Resources to obtain "complete finance" to begin development, with the goal of pouring the first gold next year. According to Clyne, the Kula Gold legacy of huge losses for international investors meant that there was less demand for the Woodlark Project in particular. Despite substantial marketing efforts to banks and speciality industry lenders, loan demand remained severely restricted. The international worry about PNG's political danger was a key issue. The effective and timely implementation of an agreement, according to Clyne, is a key confidence builder for foreign investors. “The professionalism of the PNG Government teams was a major factor,” he said. “This was an extremely difficult project to get funded, especially given the PNG/BSP perspective of historic international investor and lender appetite.” Jerry Garry, MRA's managing director, praised Geopacific for securing finance for the project's development. This, he added, indicated that investors have faith in the country's extractive industry. Following MRA's intervention, Garry noticed that Geopacific Resources had upgraded its dwelling plans for the relocation exercise. “To raise AU$140 million (K54.3mil) in new equity in Dec/Jan and to recently close out the AU$100 million (K257.7mil) debt facility was the result of a massive amount of extremely professional work by Tim Richards (Geopacific Resources Ltd chief executive officer) and his team and with the board’s backing, in building international financial market’s confidence,” Garry said. Reference: Pacific Mining Watch. “Geopacific secures K257 million for Gold and Silver mine project in PNG”.
PNG Business News - May 13, 2021
Mayur Resources Close to Developing PNG's First Iron and Industrial Sands Project
Mayur Resources Ltd is nearing completion on the country's first iron and industrial sands project in Orokolo Bay, Gulf, with the Mineral Resources Authority (MRA) reviewing its mining lease proposal. Mayur Resource Ltd managing director Paul Mulder said the MRA had already received the company's K60 million project and evaluation proposal, which was submitted earlier this year. He said it was not a big undertaking, but the advantages to the region would include direct and indirect job growth, as well as the fact that it was a sustainable mining operation inland from the coast. Multiple mechanised sago operations will be introduced as a post-mining activity at the mining site, replicating facilities that the International Finance Corporation (IFC) and French energy company Total had already built further up the Purari River. “We are ensuring that prior to us beginning the mining, everyone must be clear on the direct and indirect benefits as well as sustainable ongoing benefits,” Mulder said. “We can’t say when the MRA will have the project assessed. “That is their internal processes. “But if you compare projects such as Wafi-Golpu, this project is well over 100 times bigger than what we are proposing in capital construction cost and is more complex and much larger in scale. “The initial benefits will last for 15 years with follow on sustainable mechanised sago plantations to continue well after this. “We feel that this could be assessed in an expedient manner as it will benefit many parties and is not complex, involves no chemicals and can be commenced in a much shorter time frame.” Mulder clarified that the project was not to be confused with beach sand mining since it was an ancient buried paleo-geological formation deposit inland, away from the coast, where standard mining methods can be used in accordance with the Mining Act.
PNG Business News - October 26, 2021
Australia buys Digicel, PNG’s mobile monopoly
Photo credit: Devpolicy by Stephen Howes Yesterday, Telstra announced that it was buying Digicel Pacific. Telstra itself is only paying $270 million, and the Australian government $1.33 billion. Yet, Telstra is obtaining 100% ownership. The deal is certainly an attractive one for Telstra. But does it make sense for Australia, and for the Pacific? Digicel has had a transformational impact in the Pacific, but now has too much market power. As the Telstra release explains, it holds the dominant position in all the Pacific countries in which it operates, except for Fiji, where it is in second place. In Papua New Guinea, which I know best, and which is by far Digicel's biggest market, the company has a 92% share of the mobile phone market. That makes Digicel effectively a monopoly in PNG. And that is why it is so profitable: like any monopolist, it exploits its market power. Australian and PNG researchers have been tracking mobile internet prices in PNG since Australia gifted it a new underwater cable . Their conclusion is that since the completion of that cable in December 2019 to today there has been no decrease in mobile internet prices. The reason is simple: the lack of retail competition. Michelle Nayahamui Rooney, Martin Davies and I last year exposed Digicel PNG’s predatory loan scheme. Digicel lends phone credit to its customers. They pay it back when they next top up. Our estimate is that Digicel made a 17% return from such loans every week, which is equivalent to an unbelievable 351200% a year. Is this really the way in which Australia want to engages in the Pacific – owning an enterprise that keeps prices high for consumers, and rips them off when they are desperate to make a call? Any monopolist is necessarily engaged in a battle between the consumer and their profits. At some point, Telstra will end up going toe-to-toe with the PNG telecom regulator, NICTA, as Digicel has done several times. It’s going to be awkward for both Telstra and the Australian government. Many will welcome the investment as a sign of Australian commitment to the Pacific. However, if we want to invest in the telecom sector in the Pacific, we should be backing alternatives to Digicel, to push prices down and improve services, not buying out the dominant player. Amalgamated Telecom Holdings based in Fiji is the Pacific’s second biggest telecom provider. It is currently planning to enter the PNG mobile market with support from the Asian Development Bank. This is the sort of investment we should be financing. That Australia has bought Digicel shows the extent to which the Pacific is now viewed through a China lens. That’s unfortunate. China is a massive economic power. Its companies will have increasing stakes in economies around the world. That is a fact we have to accept. The Australian government also needs to decide if its only goal is to counter China or if it is still seeks to promote Pacific development. When I was AusAID's Chief Economist, Digicel was the new kid on the block in the Pacific, and it was successfully challenging state-owned telcos that until then had been dominant. In 2006, in Foreign Minister Alexander Downer's flagship Pacific 2020 report, we wrote glowingly about the competition that various Pacific countries had recently started allowing in the mobile phone sector. Our analysis was right then, and remains relevant today. Yet here we are, in 2021, doing the opposite: rather than supporting greater competition in the telecom sector, subsidising the purchase of the incumbent monopolist. The decision to buy Digicel Pacific should be reversed. If it is too late for that, the Australian government should at least – in return for all its cheap and risk-reducing finance – oblige Telstra to operate Digicel for the benefit of the people of the Pacific rather than solely for its shareholders through an agreement that makes it clear that the Australian company is not only expected to return the cheap loan it has been given, but also reduce prices, and end rip-offs. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School.
PNG Business News - October 26, 2021
Taureka Replaced As Managing Director
Isikeli Taureka's position as managing-director (MD) of Kumul Consolidated Holdings (KCH) was terminated by the National Executive Council (NEC) recently. Professor David Kavanamur has been appointed as interim MD until a permanent appointment is made, and Moses Maladina, the current chairman of PNG Power Ltd, has been named as acting chairman. Taureka was removed after 20 months, according to Prime Minister James Marape, due to poor performance by KCH and State-Owned Enterprises (SOEs) and missed national project deadlines. “The reforms of the SOEs were endorsed by the Government in October 2019,” he said “We see it as the most-significant reform programme to be undertaken by any Government since the corporatisation of the state utilities and the creation of the Independent Public Business Corporation (IPBC), now KCH. “Building governance and accountability must go hand in hand with successful project execution. These are viable projects that can fundamentally change the accessibility and affordability of services and benefit the welfare of our people. “Extensive unexplained delays to major projects by KCH and SOEs are not acceptable. The Government understands that SOE issues cannot be immediately resolved as they take time. “That is why the NEC provided well over a year for KCH to work with SOEs to support the development and execution of strategies. We had hoped more would have been achieved during Taureka’s tenure. We regret to take the difficult step of severing the MD’s appointment. However, the NEC felt it had to be done. “The Telikom merger and partial privatisation with majority ownership and board control to be passed onto the super funds, for example, is one major issue the Government has been pushing since 2019 when we took office. “The merger of Water PNG and Eda Ranu is another matter that has been outstanding and not yet resolved. This merger is to take on a subsidiary structure where 20 percent of Eda Ranu is to be owned by Koiari landowners and 10 per cent each by Central Province and the National Capital District. “This decision was taken in 2019 but has not been implemented to date. “As for PNG Power and its continuous performance issues, these have been ongoing and evident. “These are badly-needed reforms within the SOEs and responsive policies have been launched by the Government, yet, very little or no progress have been made. “Out of respect to Taureka as a leading Papua New Guinea son, I had reached out to him for a meeting but there was no response forthcoming. Hence, the announcement of this decision (termination),” he added. Those nominated to crucial positions, according to Marape, must grasp the larger picture and act quickly to fulfill the government's goals.“For others in key leadership roles, whether as chair, members of boards, departments or agency heads, you are not here to pass the time or warm seats. Everyone must step up. “The Prime Minister’s Department is working to take stock of work done. So, if you feel you have not met your key performance indicators, I suggest you start thinking about resigning before the NEC asks you to leave.” According to Marape, Kavanamur had previously served as the chairman of KCH and had a thorough awareness of the organization's issues as well as the government's goals. Reference: The National (22 October 2021). “Cabinet Axes Taureka”.
PNG Business News - October 26, 2021
Digicel Pacific to be Acquired by Telstra
Telstra has announced that it will buy Digicel Pacific for $US1.6 billion, plus up to an additional US$250 million based on business performance over the next three years, subject to government and regulatory approvals. In its six South Pacific markets – Papua New Guinea, Fiji, Nauru, Samoa, Tonga, and Vanuatu – Telstra, Australia's leading telecommunications and technology company, will continue to invest in and operate the business under the Digicel brand name. Telstra International CEO Oliver Camplin-Warner said the agreement will allow Telstra to expand on Digicel Pacific's regional leadership and increase mobile connectivity in Papua New Guinea. “Denis O’Brien and the Digicel team have built a phenomenal business that’s centred on providing exceptional customer service, the best coverage and leading digital experiences. Telstra will add to these strengths and the team’s local knowledge with our more than one hundred years’ experience connecting the vast expanses of Australia to continue delivering great experiences for Digicel’s customers across the Pacific.” “We have 19.5 million retail mobile customers in Australia and our 4G network is the largest and most reliable in country. It covers some of the remotest parts of Australia – from the coast, to the outback and the Torres Strait Islands, just off the coast of Papua New Guinea. And we’re in the process of building Australia’s largest 5G network that now stretches to more than 240 towns and 75 per cent of the population,” Camplin-Warner said. There will be no employment losses in the region as a result of the transaction, and the present Digicel Pacific team will continue to manage the company on a day-to-day basis. Denis O'Brien, the current owner of Digicel, will continue on the Board of Directors. “We will invest our know-how and capital to further expand coverage and over time bring the benefits of 5G to Papua New Guinea. But we’ll retain the same Digicel brand the people of PNG know and love today with the same team and services they have come to rely on,” Mr Camplin-Warner said. The purchase, according to Camplin-Warner, is in line with Telstra International's expansion plan, which now comprises operations in 20 countries outside of Australia and thousands of clients, including businesses, governments, and some of the world's largest technology firms. “Beyond Australia Telstra also has the most extensive subsea telecommunications cable network in the Asia Pacific. And we’re one of the biggest providers of voice and data services connecting the South Pacific to the rest of the world through our Southern Cross cable.” “Network traffic is growing faster than at any other period of time and digital technology is changing our world. We are at the centre of this, and so is Digicel Pacific. We are committed to delivering the best technology on the best network for PNG,” Mr Camplin-Warner said. The people and businesses of PNG will benefit from Telstra's experience rolling out a world-class 5G network and connecting diverse geographies, according to Colin Stone, CEO of Digicel Papua New Guinea. “Telstra’s network innovation has played a critical part in Australia being ranked first in the global Mobile Connectivity Index which assesses networks based on performance, affordability and availability. We look forward to working with Oliver and the Telstra team,” Mr Stone said. The two firms' ideals, according to Camplin-Warner, were likewise matched. “Digicel Pacific and Telstra are both committed to building a connected future so everyone can thrive and this includes supporting some of the most vulnerable in our communities.” “Digicel Pacific has taken community development to the next level through the Digicel Foundation’s investment in health, education and community-based programs. We look forward to continuing this work, just as we do today with the Telstra Foundation and its commitment to using technology to support young people and help to reduce the digital divide.” “We will also bring a commitment to addressing climate change to help drive better environmental outcomes for the people of PNG,” Mr Camplin-Warner said. Despite the fact that the transaction is funded by the Australian government, Telstra will remain the only owner and operator of the company. Reference: Loop (October 25, 2021). “Australia’s biggest telecommunications company to acquire Digicel Pacific”.