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Barrick CEO Bristow tells Marape: Government left us hanging on Porgera SML

Mark Bristow, President and CEO of Barrick Gold Corporation, told Papua New Guinea Prime Minister James Marape in a letter that the government left his firm hanging on the agreement for the Special Mine Lease (SML) of the Porgera gold mine.

In the letter dated July 15, Bristow said he was replying for his company after Dr. Ila Temu, country director of Barrick Niugini Limited (BNL), exchanged text messages with Marape.

According to Bristow, Marape apparently told Temu that Barrick, the world’s second largest gold miner, was coercing the government to reverse its decision in April to not extend Porgera’s SML.

The government will take control of Porgera — located in Enga Province, about 600km northwest of Port Moresby — after Marape refused the extension, citing environmental concerns. BNL later announced it was laying off 2,650 PNG nationals from the mine.

The special mining lease for Porgera was first approved in 1989. Barrick Niugini, which is jointly owned by Barrick Gold and China-based Zijin Mining, owns a 95% stake in the Porgera Joint Venture that owns the gold mine.

The remaining stake of 5% is owned by Mineral Resource Enga, a consortium between the Enga provincial government (2.5%) and the Porgera landowners (2.5%).

The decision by the Marape-Steven government not to extend the SML is headed for the courts after the National Court of Justice at Waigani ordered both parties to have discussions to resolve the matter.

PNG Business News obtained a copy of Bristow’s letter to Marape, the entirety of which is printed below:

“Dear Prime Minister:

“Dr. Ila Temu has shared with me the July 14 exchange of text messages between the two of you, and I would like to use this letter to respond.

“In your message, you assert that I am trying to coerce the reversal of a “legitimate government process in as far as the SML is concern.” I believe you know that is not the case. I refer you again to our very first meeting in June of last year, only days after you had been elected Prime Minister. In our constructive discussion that day and in a letter afterward, you stated that you valued PNG’s partnership with Barrick and invited us to submit proposals for SML extension adhering to the principal of a 50-50 sharing of economic benefits. We honoured this request and, in two meetings with the State Negotiating Team the following month, presented a 20-year plan that would have delivered 52% of overall benefits to PNG stakeholders. For the following ten months, we waited patiently for the start of the formal negotiations that you promised on multiple occasions both verbally and in writing, but which never occurred. Then, without the slightest forewarning to us or to the legitimate Porgera landowners, you announced on April 24 that BNL’s application had been rejected.

“That is the factual record – one that, viewed by any objective party, would be considered precisely the opposite of a “legitimate government process.” It is why BNL had no option but to go to the courts to protect our legal rights as any responsible international investor would be obliged to do. And it was your decision – reached unilaterally and without even a gesture of consultation or transparency with key Porgeran stakeholders – that forced the suspension of mine operations and the dire situation faced by laid-off employees, contractors threatened by bankruptcy, and a community that has relied for years on the mine for critical services in the absence of a functioning government in the Valley. I was stunned, therefore, to read your message to Dr. Temu saying “the country will live on with or without Porgera” – coming from the country’s leader, whose judgments and decisions literally have life-or-death consequences for PNG citizens, including those who live in Porgera. Already, many thousands of Papua New Guineans – employees and contractors and their families, as well as everyone else who provide services to them or receive benefits from them – are reeling from the devastating consequences of your decision, including loss of incomes, loss of security for housing, education, health and economic sustenance.

“Meanwhile, the so-called “legacy issues,” which you have cited repeatedly as the reason for SML rejection, without once providing concrete examples or details, are clearly manufactured to try to justify a predetermined conclusion. How can there be serious environmental damage when the government of PNG has certified Porgera as being in full compliance with all of its environmental permits since the mine commenced operations? On resettlement, I challenge you to provide any legal basis for your claim that we have failed to honour our obligations. To the contrary, we have relocated thousands of families off the mine site and, as stated in the joint PLOA-BNL letter to you of April 14, are committed to continuing to resettle landowners impacted by mine operations as long as BNL remains the operator. In comparison, there are significant areas where the National Government and the Provincial Government have not satisfied their obligations under the various MOAs and agreements with the landowners and communities.

“Mr. Prime Minister, I do appreciate your recent willingness to engage in trying to find a solution to the current situation. To do so, however, I urge you to discard the assertion that the SML has expired as a precondition for talks. It is our view that the SML did not expire, as BNL lodged the application for SML extension two years before it was due to expire, ensuring that operations continued under section 112 of the Mining Act indefinitely pending the State’s decision on the terms of SML extension. As you know, the decision by your Government on BNL’s extension application is currently subject to judicial review by the National Court of PNG. In any case, it makes little sense to negotiate on the basis that there is no valid SML since, without an SML, legally there can be no restart of operations, and a completely new SML, whether held by BNL or another entity, would take years to negotiate and permit. Thus, it helps neither side to keep insisting that the SML held by BNL is no longer valid if you truly desire to reach an agreement that would enable the mine to reopen in the near future.

“As I have said previously, the solution sits right in front of us. It is the current proposal that would deliver 58% of overall economic benefits to PNG, totalling some US$4.5 billion over 20 years, representing the best deal by far that PNG has ever negotiated with a foreign investor.

The model presented to you would also allow for additional equity to PNG on top of the 15% free equity already offered, assuming offsets could be found in other areas to preserve the overall division of economic benefits.

“Finally, for your information, I believe it may be useful to explain the request for conciliation that BNL filed at the World Bank last week. In the Placer Porgera Sales Agreement of 1996, the Government of PNG covenanted not to increase its interest in the Porgera project beyond the 25% it held at the time. The Government also agreed to conciliation and arbitration at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in the event of a dispute. The World Bank takes its conciliation role and process very seriously, expects both investors and governments to engage in good faith, and takes note whether they do or not. We had no choice but to pursue World Bank conciliation because Chief Secretary Lupari has steadfastly refused to engage with BNL in any meaningful discussions, which I can only assume is at your instruction. We believe that for obvious reasons it is in PNG’s interest to engage in the ICSID conciliation and to cease its protests before Judge Kandakasi about the process. PNG’s reaction to the conciliation process will be scrutinized widely and you will be choosing whether to cast the country in a positive or negative light to international bodies.

“While the ICSID conciliation is a necessary measure, I continue to believe that the preferred solution would be a mutually acceptable agreement reached through direct negotiations without preconditions. Such negotiations, however, would need to start as soon as possible, as each day that passes makes a resumption of operations and economic benefits to PNG that much more difficult and expensive to achieve.

“As always, I stand ready to engage with you personally and work to find a resolution that is beneficial for all Porgera stakeholders, while sending a message to the international community that PNG remains an attractive destination for investment.”

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