Amendments To Mining Act Create Investment Uncertainty
Updated: Jun 22
Mining and petroleum industry representative body, the PNG Chamber of Mines and Petroleum has said the current national government is leaning towards public investment in the mining sector.
President of the chamber, Gerea Aopi, said the PNG Government has signalled that it favours public investment in the mining sector at the expense of private investment, according to the amendments to the Mining Act, introduced in Parliament last week, and statements related to their introduction, will cause private sector explorers and foreign investors to reconsider investment plans for PNG.
Taken in conjunction with the government decision to not renew the Porgera Special Mining Lease they diminish PNG’s mineral investment potential and increase it's country risk profile as an investment-friendly destination.
Mr Aopi said: “PNG’s development of a world-class mining industry has required billions of Kina in private investment over the last 40 years.
This involved foreign multinational and junior mining companies that have been complemented in the past decade by a healthy group of junior explorers driven by Papua New Guinean mining professionals and entrepreneurs.”
“The latest amendments to the Mining Act diminish the role of foreign and local private sector investors with privileges accorded to Kumul Minerals or other state-owned entities.
The changes increase tenure risk for existing exploration tenement holders, many of them Papua New Guinean explorers, who may have to offload development rights to a state entity.”
“The changes also marginalise landowners and provincial governments by making development forums optional, where Kumul Minerals or another State-owned company takes over ground covered by a mining tenement under the new provisions.”
“The government strategy is based on a philosophy that privately-owned mining companies, whether multinational mining corporations or locally owned, have nothing special to offer PNG and that exploration and mining can be more profitably conducted by state-owned companies,” said Mr Aopi.
“The record in PNG and globally shows that mineral exploration and discovery of commercial deposits is time consuming and highly risky,” he added.
Aopi explained that exploration for, and development of, mining resources requires large amounts of capital, while facing significant social, technical and economic challenges.
Having State-owned entities shoulder the burden of exploring and developing PNG’s mining potential will shift the burden of risk from private investors to the PNG taxpayers, and will stymie the entrepreneurial nature of these activities.
The Chamber considers that amendments in the PNG Parliament were introduced under a false premise, namely that the current Mining Act prohibited or disfavoured local investors.
Mr Aopi said, “This is a misrepresentation of the Mining Act, which takes a neutral regulatory stance regarding the source of investment, whether foreign or local.
“The Act states that “any person” may apply to the Mineral Resources Authority for an Exploration Licence and, on making a viable discovery, submit a Development Application.
“That is why there are a healthy number of Papua New Guinean exploration licence holders now, doing expensive and time-consuming work to discover mineral resources.”
He admitted that while it is true the sector is dominated by specialised foreign corporations, some of them with global operations, it is the high risks and costs of mineral exploration, the need for sophisticated technology and expertise and the capital-intensive nature of mineral development, and not because of any inherent bias in the legislation.”