PNG Receives K1.5B From Lihir Mine
by PNG Business News - September 12, 2022
Photo credit: Newcrest
With the help of royalties, taxes, a production levy, and vendor agreements, PNG has received K1.5 billion from Newcrest's Lihir Gold Mine in the province of New Ireland.
Speaking during the recent induction of the Members of the 11th Parliament in Port Moresby, Newcrest PNG country manager Stanley Komunt stated that the business is dedicated to investing in PNG.
He stated that Newcrest is pleased with the progress it has made toward a more powerful and affluent Papua New Guinea and that it looks forward to "expanding our presence in the nation for many years to come."
“In financial year 2022 (from July 2021 to June 2022) the highlights of Lihir’s contribution to PNG include, but are not limited to the following K238.8 million total tax and production levy paid to the PNG government, K85.8 million in royalties paid to the PNG government and Newcrest prioritises the purchase of goods and services from local suppliers and contractors in PNG,” Mr Komunt said.
“In 2022, the company paid K1.2 billion to PNG suppliers for operating costs including equipment, labour, maintenance, consumables, food and fuel and out of this, over K553 million was to Lihirian vendors, which is an increase of 8 per cent on the same period last year.”
One of the biggest foreign exchange donors to PNG, according to him, is Newcrest, which purchased K1.711 billion in cash and contributed almost US$487 million to the country's foreign exchange balance.
Measures attempted to lessen the effects of COVID-19 on Lihir's communities and activities, according to Mr. Komunt, resulted in an extra K144 million in management expenses.
He also emphasised the need of stable policies and regulations, which will promote expanded mining exploration and the approval of new mining enterprises.
PNG Business News - September 06, 2021
Newcrest Posts K4.07B Profit
Newcrest Mining, Papua New Guinea's largest gold miner, has posted a profit of K4.07 billion (US$1.164 billion) for the 12 months ending 30 June, a new high. Due to greater gold and copper prices as well as decreased operating costs, this is 55 per cent higher than the previous financial year. Newcrest's gold revenue increased by 9% despite somewhat lower gold production, while its copper revenue increased by 46% and its silver revenue increased by 63%. However, its operating costs decreased by 11%. “Newcrest has delivered a strong operational and financial performance for the 2021 financial year, producing 2.1 million ounces of gold at an AISC [All-In Sustaining Cost] of US$911 per ounce. “Together with the benefit of higher gold and copper prices, this translated into a record statutory and underlying profit of US$1.2 billion and a record free cash flow of US$1.1 billion,’ said Newcrest’s Managing Director and Chief Executive Officer, Sandeep Biswas. The company's shareholders will benefit from the windfall, with a payout per share of US$0.40 (K1.40) — a 129 per cent increase over last year's dividend. During this time, Newcrest's gold mine on Lihir Island in New Ireland Province produced 737,000 ounces of gold and 38,000 ounces of silver, accounting for about 35% of the PNGX and ASX-listed company's global production for the year. The mine brought in US$1.425 billion (K5.02 billion) in sales, accounting for around 31% of the company's total revenue for the year. While the firm claims incidences of COVID-19 on Lihir Island are at "low levels," it is maintaining "extensive contact tracing and isolation protocols," and charter flights to the island are limited. Reference: Pacific Mining Watch (31 August 2021). “Newcrest Records K4.07 Billion in Profit”.
PNG Business News - October 11, 2021
Newcrest Profits US$1.2 billion
In the financial year 2021, Newcrest Mining Limited made a statutory and underlying profit of US$1.2 billion. In the 2021 annual report, Managing Director and Chief Executive Officer Sandeep Biswas stated, "It has been more than 18 months since the onset of the COVID-19 epidemic, and we are still experiencing its catastrophic effects throughout the world." Newcrest's operations were able to continue operating without any major disruptions, according to Biswas, because of the devotion and personal sacrifice of its employees. “I extend my personal gratitude to those who have endured extended periods away from their families to ensure that our business was able to continue without material disruption,” he said. As a result, Biswas said that the firm produced 2.1 million ounces of gold at an All-In Sustaining Cost (AISC) of $911 per ounce in FY21, resulting in another outstanding operational and financial performance. “Our strong operating performance, combined with the benefit of higher gold and copper prices, underpinned a record free cash flow of $1.1 billion and a record statutory and underlying profit of $1.2 billion, 80 per cent and 55 per cent higher than the prior-year respectively. We expect that the contribution of copper will continue to increase, with the relative proportion of copper to Cadia’s revenue expected to increase over the coming years in line with the estimated grade profile of gold and copper,” he said. “We also have significant copper potential at Red Chris, Havieron, Wafi-Golpu and Namosi. I have always seen copper as an excellent complement to our gold portfolio as it provides us with good earnings diversification and makes us more resilient and profitable in the longer term. Both gold and copper are metals of the future, with copper, in particular, being key to a low carbon world. It is a very exciting time at Newcrest as we progress our multitude of organic growth options.” Reference: Post-Courier (6 October 2021). “Newcrest Records K351b Profit”.
PNG Business News - February 28, 2022
Newcrest Mining Limited reaffirms commitment to PNG
Newcrest Mining, whose interests in PNG include the Lihir Gold mine and a 50% share in the proposed WafiGolpu project with Harmony Gold Mining Company Limited, has a long-standing partnership with PNG. Newcrest MD and CEO, Sandeep Biswas, travelled to Port Moresby this week and met with Prime Minister James Marape, during which he reaffirmed the company’s deep commitment to PNG through its operations. “Newcrest is pleased that it has been able to continue to make a significant contribution to the PNG economy throughout the challenges of the global pandemic. To date, we have had no material disruptions to production, and I would like to take this opportunity to thank the PNG Government for its support throughout a very challenging time”, said Mr Biswas following his meeting. “I would also like to thank our employees, contractors and business partners for their resilience and flexibility, with extended rosters and time away from their families to support our Lihir operations’. Newcrest employs approximately 4,500 people at its Lihir operations, with about 90% of those being from Papua New Guinea. Newcrest’s investment in PNG continued despite COVID19 challenges. In the last financial year, K180 million was added to operational costs to mitigate the impact of the pandemic on our Lihir operations and employees. In addition, over K1bn was spent with PNG suppliers, with more than K400m going to Lihirian vendors alone. Newcrest also contributed K284m in taxes, K99m in royalties and contributed USD450 million to the national account through the acquisition of K1.574bn in foreign exchange. Newcrest established our Community Support Fund in April 2020, to support the Government and communities’ preparedness and response to COVID-19 across the jurisdictions we work in. Since it's inception, 22 projects in PNG have been approved to the value of over K17m, and have been implemented primarily in response the priorities of the communities we work in, focusing on delivery of health care supplies and equipment. We have worked provincially in partnership with the New Ireland, East New Britain, Morobe and NCD PHAs, and nationally in partnership with donors such as UNICEF. “Most recently we have turned our attention to supporting the roll-out of the COVID-19 vaccine in New Ireland. Our implementation partner Australian Doctors International are working very closely with the Provincial Health Authority to overcome vaccine hesitancy and give the people of New Ireland the opportunity to understand the benefits of getting vaccinated”, said Mr Biswas. Mr Biswas thanked the PM for his ongoing support for Lihir and commitment to progressing the discussions on the permitting of the Wafi-Golpu project. “Newcrest looks forward to a long partnership with Papua New Guinea, which will deliver benefits to both the people and the Government of this country for many years to come,” he said. Lihir Gold Limited is very well positioned for the future, with an aspiration of a million ounces a year in the coming years.
Paul Oeka - September 29, 2022
AGRICULTURE HAS HUGE ECONOMIC POTENTIAL
Photo credit: Oxford Business Group The creation of the new ministries by the current government for both major agricultural commodities, Coffee and Oil Palm is a huge step forward in achieving the agriculture sectors economic potential. For the past years the agricultural sector had not been fully utilized by consecutive governments as the focus had mostly been centered on the extractive industry and Mining & Petroleum sector. This important and vital sector is eventually and currently being recognized as an economic pillar to boost the state coffers. Prime Minister Hon. James Marape said the allocation and restructure of the four newly created ministries concentrating on Horticulture (Fresh produce), Coffee, Oil Palm, and Livestock to the agricultural sector is a complete paradigm shift to get agriculture moving again. The focus of the Marape Government on ‘Taking Back PNG’ is deeply rooted and aligned with the mechanisms and functions of the agricultural sector as most of the country’s population are situated in rural settings and largely depend on subsistence agriculture to sustain themselves. Coffee, Cocoa, Oil palm and Fresh produce have been a mainstay that this rural population rely on for income for so many years. As far as many Papua new Guineans can recall and relate, Agriculture has always been the foundation and backbone of the country and it can surely drive the economy forward. Although the agricultural does not match in monetary turnovers for the country, it is an economic foundation and is here to stay. In comparison over monetary benefits with other sectors, Agriculture had not been performing to expectation due to so many underlying issues concerned and faced with the value chain of agricultural commodities prompting a decline in agricultural activities over the years. The Prime Minister said it was no secret that agriculture had declined since independence in 1975, and the current allocation of the four agricultural ministries was to revive the sector for it to be a major income generator for PNG. PM Marape said this when explaining the concept and rationale for his allocation of four ministries to the agricultural sector. This direction by the Marape/Rosso Government to emphasize more on agriculture will boost agricultural activities in and around the country. Mostly the sector had not been given proper recognition for decades and had been lacking government intervention from past successive governments. Now with the current Government’s backing, the respective agricultural ministries and its industries are expected to flourish dramatically and are likely to bring more benefits. The new ministries will also empower provinces that currently do not have mining and petroleum resources. This will certainly build stronger local economic activities for future generations. “We want to see import replacement and more exports within the agriculture sector, which is why we have allocated four separate ministries to agriculture,” PM Marape said. The recognition of this agricultural industries will also ease and slowdown rural-urban drift. The number of people migrating from rural areas into towns and cities in search for better opportunities have risen in the past couple of years due to inequality in the distribution of wealth and lack of government services. Thus, the governments focus on agriculture will encourage many unemployed Papua New Guineans living in urban areas to go back to their home Provinces or villages and be self-reliant. As economic opportunities arise in rural areas from vibrant and innovative policy interventions within these newly created agricultural ministries, it will attract many to contribute meaningfully and be productive on their own customary land. Prime Minister Marape said over the last three years prior to the creation of the new agricultural ministries, his government has given millions of kina to support agriculture through price and freight subsidies and SME support. “We are now targeting specific commodities through the establishment of the four ministries. Over the next term of government, we will give specific production targets for Coffee, Oil Palm and all other major agricultural Commodities” he said. The government also plans to revive and rehabilitate once thriving agricultural hubs in the country such as Cattle farming in the Central Province and the Coffee plantations of the Highlands region that produced quality organic Coffee and grew the fledgling industry pre-independence in the 1960’s. Now that the agricultural sector has been categorized into four industries, there will be room for much improvement in economic activity within the agricultural sector as people will start contributing meaningfully to the economy.
Paul Oeka - September 28, 2022
TREASURER WANTS REVIEW OF ELECTION FUNDS
Treasurer Ian Ling-Stuckey is dismayed at how the 2022 National Elections were conducted and is now looking forward to a complete review of the allocated funds that were spent on the elections. Ling-Stuckey recently stated in parliament that the government had allocated and funded enough money for the election process to be conducted this year. “We provided a further K50 million to cover the costs for the 2022 election, bringing the total funding for the election to nearly double the level of expenditure in the 2017 national elections. There was enough money to support a much better election this year, so I look forward to the proposed parliamentary committee examinations of what went wrong and what can be done better” he said. The Treasurer also expressed concern that there was a decrease in the public servants’ salaries. He explained that “Once again there is a salary cost overrun. This is K201 million much lower than in previous years, and out of this, over 70 percent is related to teacher wage overruns. We contributed to bring this area under control. After no pay increases during the latest part of the Covid-19 crisis, it is now time to start increasing some salary payments”. “There is also the need to provide additional funding for the seven new districts that have been created and K3 million each has been provided. There are also new members in existing electorates, and it is appropriate that they be given some funds for commencing programs through to the end of the year. For equity reasons all districts and provinces needed to benefit the same so an additional 2 million per district and province have been allocated bringing the funding back to 10 million per districts and provinces” he said. Meanwhile there was an announcement on Thursday last week that the Department of personnel management, Treasury and Finance are working together to ensure that there will be a three percent pay increment in the salary of public servants. This pay increment is to be adjusted and effective by December this year, the welcoming news for public servants was confirmed by the Secretary of the Department of Personnel Management, Taies Sansan.
PNG Business News - September 28, 2022
PNG’s minimum wage
Commentary by Stephen Howes, Kingtau Mambon and Kelly Samof The urban minimum wage has been an important part of Papua New Guinea’s economic history. In the last few years before independence (in 1975), it was greatly increased. In the decade or so after independence, it was widely regarded as too high. In 1992, it was slashed, merged with the rural minimum, and hardly increased again for more than a decade. We can compare the minimum wage in PNG today with other Asia and Pacific developing countries using International Labour Organization (ILO) data. As Figure 1 shows, PNG’s minimum wage is 18% below the average of the 19 countries shown if the market exchange rate is used to compare minimum wages. It is 37% below the average if differences in cost of living are also taken into account (with conversions made on the basis not of market exchange rates but so-called purchasing power parities or PPPs). The greater difference in terms of PPPs reflects PNG’s relatively high cost of living. Of the countries shown, only Samoa and Kiribati have a lower minimum wage than PNG when a PPP comparison is made. This is very different to the past. Raymond Goodman, Charles Lepani and David Morawetz in their 1985 report The economy of Papua New Guinea compared minimum wages in PNG with a subset of the countries above back in 1978. Then, the PNG minimum wage was about twice as big or more than the other comparators. Today (using market exchange rates, and the earlier authors do), PNG comes in the middle of the pack, as Figure 2 shows. So far, we have shown that around the time of independence minimum wages were very high in PNG by international standards, and that they no longer are. Figure 3 shows how this change came about – also, for interest, comparing trends in PNG with those in Australia. Both the PNG and Australian weekly minimum wages are shown in Figure 3 measured in Australian dollars. The PNG minimum wage is converted into Australian dollars using the current exchange rate. Both wages are then adjusted for inflation and expressed in 2021 prices. The two series follow diametrically opposed paths. The Australian minimum wage fell with the high inflation of the 1970s and industrial relations reforms of the 1980s, and by the early 1990s was little more than half its value in the 1970s. It then increased in the late 1990s and 2000s during the resource boom, and has continued to increase. Adjusting for inflation, it is now almost back to where it was in the early 1970s. The PNG minimum wage does the opposite. It increased in the 1970s and was then held stable due to indexation, until the big bang reforms of 1992. Adjusted for inflation, PNG’s minimum wage continued to fall until 2004. There have since been some significant increases, but today PNG’s minimum wage is only about one-third of its value at independence, and below its value even in 1972, which is when the steep minimum wage increases began. The Australian minimum wage has always been significantly higher than the PNG one, but the ratio has changed a lot over time. The lowest that ratio has ever been is 2.2 in 1986, the highest 45 in 2004. The gap between the two wages is much higher now than at independence: the ratio of the Australian to the PNG minimum wage was 14.5 in 2021, compared to only 3.2 at independence (1975). This reflects PNG’s 1992 deregulation, and the faster growth in the Australian economy, which has enabled an increase in the Australian minimum wage. The solution to low wages in PNG is not necessarily to increase the minimum. In some sectors, where there is a lot of international competition, a higher minimum wage might lead to job losses. For example, in tuna processing, one of PNG’s main competitors is the Philippines. From Figure 1, we can see that PNG’s minimum wage is lower than the Philippines' on the basis of PPPs, but actually higher on the basis of market exchange rates. While the former is what matters for the welfare of workers, the latter is what matters for international competitiveness. Whether PNG’s minimum wage should be increased will require a lot more analysis. The point of this blog is simply that PNG’s minimum wage does not look high any more by international comparisons, as it has fallen a lot since independence. PNG is often described as a high-cost economy, and this is a fair description. However, with regards to unskilled labour, it is no longer a high-wage economy. Data note: The PNG Economic Database provides the weekly minimum wage of PNG going back to 1972, and the PGK-AUD exchange rate. Wikipedia provides the Australian weekly minimum wage data (hourly and weekly, on the assumption of a 38-hour week) starting from 1966. The Australian CPI is from the Australian aid tracker. There are some years where Australian minimum wage rates change more than once in a year. For such cases, we took the average as annual minimum wage rate. The data for Asia-Pacific comparisons are from the International Labour Organization and the World Bank. The different frequencies of minimum wages for each country in 2019 in the ILO’s report are adjusted to convert to weekly rates. World Bank data is used to obtain market exchange rates and PPP conversion factors. For the Goodman, et al., data go to Table 3.6 on p.61 in their report.\ Disclosure: This research was undertaken with the support of the ANU-UPNG Partnership, an initiative of the PNG-Australia Partnership, funded by the Department of Foreign Affairs and Trade. The views are those of the authors only. This article appeared first on Devpolicy Blog (devpolicy.org), from the Development Policy Centre at The Australian National University. Stephen Howes is Director of the Development Policy Centre and Professor of Economics at the Crawford School of Public Policy, at The Australian National University. Kingtau Mambon is currently undertaking a Master of International and Development Economics at the ANU Crawford School of Public Policy, for which he was awarded a scholarship through the ANU-UPNG Partnership. Kelly Samof is a lecturer in economics at the School of Business and Public Policy, University of Papua New Guinea.