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APRIL 2013

DAM CHALLENGES PNG’s great tailings debate

Port Moresby property A rental market ready to pop

Power crisis

Generating opportunities

Deporting expats Easier than thought

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Published by: Aspermont Limited (ABN: 66 000 375 048) MANAGING EDITOR: Michael Cairnduff EDITOR: Blair Price CHIEF SUB-EDITOR: Gerald Bradley SUB-EDITORS: Melanie Jenkins, Maxine Brown WRITERS: Mike Butler, Cindy Brown, Paul Oates PRODUCTION managER: Mata Henry SENIOR LAYOUT DESIGNER: Diane Thornley LAYOUT DESIGNER: Catherine Hogan



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From the Editor’s chair


News Wrap


Inside Track


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28: POM property The rental bubble 38: Port constraints Views from a leading shipper 44: Election feedback There is still more to learn

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46: Oil play New Guinea Energy’s fresh lead

12: Pure Power Private players step up

62: Gulf LNG Govt to rule on InterOil’s LNG project

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64: Gold Anomaly Small gold mining ahead


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55: Expat deportation Shockingly easy 60: Corruption Award-winner shares his views


Aspermont Ltd (ABN: 66 000 375 048), publisher and owner of PNG Report (‘the publisher’) and each of its directors, officers, employees, advisers and agents and related entities do not make any warranty whatsoever as to the accuracy or reliability of any information, estimates, opinions, conclusions or recommendations contained in this publication and, to the maximum extent permitted by law, the publisher disclaims all liability and responsibility for any direct or indirect loss or damage which may be suffered by any person or entity through relying on anything contained in, or omitted from, this publication whether as a result of negligence on the part of the publisher or not. The publisher does not hold itself out as an investment adviser, nor is it in the business of providing investment advice or any other advice whatsoever. Reliance should not be placed on the contents of this magazine in making a commercial or other decision and all persons are advised to seek independent professional advice in this regard.

52: Wafi-Golpu Newcrest remains bullish

66: Gold prices A comeback is due 68: Wantok Analysis of Garnaut’s departure 70: Car-jacking incidents What you can do

22: Dam challenges The tailings debate re-opens

77: Feeding PNG Farming issues

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AVING CONSOLIDATED HIS POWER, PRIME MINISTER PETER O’NEILL HAS the opportunity to make some serious changes in Papua New Guinea. What matters is whether the public good will benefit this time or not. O’Neill’s campaign against BHP Billiton’s influence over majority Ok Tedi mine owner PNG Sustainable Development Program Limited is intensifying with the PM declaring to the national press that the partnership between PNGSDP and the government is over. O’Neill has effectively signalled that OTML’s long-running mine life extension plan will not be approved unless the existing ownership of Ok Tedi is changed, although it is unclear how he will acheive this. While PNGSDP revenue from OTML could have arguably delivered more benefits, especially for the more impacted Fly River communities, whether majority government control of the mine creates other risks needs to be raised. Even if the government is genuinely ridding itself of corruption, and such a process would probably take many years given the decades of entrenchment, it does not have a good track record in mine operation, as is evident with the state-owned Tolukuma gold mine. Gaining any information on this mine is notoriously difficult, but given that it is helicopterdependent and has never finished an access road project to lower its cost curve, would indicate it’s a probable loss-maker. Politically charged government interference in the Ok Tedi mine lease area will affect PNG’s risk ratings. A loss in these standings not only scares off possible new investment but can make financing more expensive to existing resource players. No matter the context of Ok Tedi’s troubled past, it will be a difficult precedent for the world stage to ignore. After all, no resource company applying for an extension to an existing mining or petroleum licence anywhere in the world would really expect it to be declined because the government wants to change its ownership structure. Blair Price Editor PNG Report

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news wrap

Industry watch PNG LNG expansion avenues Rig 702 at the PNG LNG project’s Hides field last year. Image courtesy of ExxonMobil.

THE PNG LNG plant site is big enough for five trains, according to ExxonMobil senior vice-president Mark Albers. In the latter stages of construction, with first exports expected mid to late 2014, the existing design is for two trains with 6.9 million tonnes per annum of capacity. While it was long suspected that the plant was designed to allow possible development of a third or fourth train, the question and answer session of Exxon’s 2013 analyst meeting allowed for speculation of a fifth to emerge. Albers said Exxon aimed to add to its resource base and there was plenty of room on the LNG facility to add a “third, fourth and fifth train”. He expects resources to grow over time and said Exxon was looking at a “pretty active exploration program” to support additional trains. Exxon chairman and chief executive officer Rex Tillerson also discussed the potential for more gas reserves courtesy of the P’nyang South-1 drilling success last year. Partner Oil Search has estimated that the P’nyang field hosts 2.5-3 trillion cubic feet of gas resources – enough to fuel an expansion of PNG LNG. Oil Search believes there is further upside in the field’s tenement, PRL 3, and recently said 4

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additional seismic is planned for this quarter. Tillerson also touched on the seismic work ahead. “We acquired more than 55 miles of 2-D seismic in 2012 and planning is underway to acquire additional data in 2013,” he said. “This seismic data will guide future exploration activities in support of a potential third train.” Assuming that each additional train meets the existing design scope, a five-train PNG LNG project will have export capacity of 17.25 million tonnes per annum, which could make a vast difference to PNG government revenues and budgets. While organic growth is one method to increase resources, acquisition activity is another possibility. As part of an ongoing strategic partner hunt, at least two supermajors were involved in bids for the significant Elk-Antelope field in Gulf Province, according to InterOil chief financial officer Collin Visaggio. Meanwhile, Santos chief executive officer David Knox believes PNG LNG will get enough gas for a third train either through more exploration of the major Hides field or from third parties in PNG. In a February earnings call, Knox discussed some of the potential sources for additional gas, starting with the Hides field in the Southern Highlands region. “The principle one is the Hides

field itself and we’re about to enter the reservoir there with one of the first wells of the new campaign,” he said. “The results from those wells will be important, and potentially the Hides field itself will be bigger. There’s also another field beneath Hides called Hides Deep, which has never been drilled. “So that’s a really good exploration prospect … those are two really important aspects for us as we go forward to the third train.” Knox, who also talked up the prospects of a third train last year, said it would make the project bigger and give it a higher economic value. “We’ll see what the mix of gas that fills it will be. As I said, it could come from a combination of Hides, Hides Deep and third parties and, of course, we’d be a major participant because our ownership comes from the ownership of the Hides field. “Let’s see how this plays out, but I absolutely support getting a third train up as soon as possible.” The PNG LNG consortium consists of ExxonMobil (33.2%), Oil Search (29%), state-owned National Petroleum Company of PNG (16.6%), Santos (13.5%), JX Nippon (4.7%), landowner interest manager Mineral Resources Development Company (2.8%) and state-owned Petromin (0.2%). Exxon owns 49% of PRL 3, while Oil Search owns 38.5% and JX Nippon has the remaining 12.5%. APRIL 2013 PNG REPORT

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news wrap

Industry Watch Mincor drops Edie Creek Edie Creek snap courtesy of Mincor Resources.

MINCOR Resources, which is renowned for its financial performance, has exited the Edie Creek project in Papua New Guinea and shifted its focus to the Bolobip copper-gold project 60km east of the Ok Tedi mine. Both projects are part of a suite of joint ventures struck by the Western Australian nickel miner with PNG explorer Niuminco in 2011, with Mincor terminating their bottom-ranked Kubuna JV project in February. While Edie Creek is a proven historical gold mining area,

PNG’s ‘faecal lamington’ A contaminated export shipment of Papua New Guinean copra has been blamed for causing a beef measles outbreak in Tamworth, New South Wales, three years ago. The tapeworm-caused outbreak claimed 26 cattle at one feedlot and there was mystery over how human excrement entered this feed chain. According to ABC Rural News, months of investigation traced the source to an imported batch of PNG copra meal. Charles Sturt University 6

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Mincor’s 12-hole drilling campaign last year did not produce the right results despite the epithermal and mesothermal gold mineralisation found. “The company’s interpretation is that this system is widely dispersed and likely to have generated numerous small gold deposits rather than a single, viable ore deposit,” Mincor said. “Therefore, while potential remains, the rewards no longer justify the costs and Mincor has elected to cease expenditure on the project.” Meanwhile, the exploration camp parasitology senior research fellow David Jenkins vividly described how the accidental tapeworm export could have occurred. “What we suspect happened is that someone in the feedmill was desperate to go to the toilet,” he reportedly said. “And then this piece of faeces landed in the desiccated coconut and became like a faecal lamington and then slid through the coconut as they filled the 20kg bags. “Just by chance, it went to a cow property. Had it gone to a sheep or horse place you’d have never known because these animals aren’t

at the Bolobip project is complete. Field exploration, along with airborne and ground geophysics programs, are expected to finish by the end of June. Mincor said any targets identified could be drilled in late June or in July. A review of CRA’s (Rio Tinto) previous work there identified a 1km diameter copper-gold anomaly. CRA was interested in the project in the late 1980s but ultimately backed off from PNG during that time due to the difficulties it faced with the Panguna mine on Bougainville Island. susceptible to this parasite.” He has called for all imported copra meal to be sterilised by heat treatment or deep freezing. “Both processes will kill the cysts, but it’s a terribly expensive thing to do,” he reportedly said. “But people don’t like tapeworms, so I think it’s worth considering.” Tapeworms can range from 4-10m in length in extreme cases and infected cattle often host them in the jaw, tongue, heart or diaphragm. On the delay with reporting the findings, Jenkins told PNG Report that scientific manuscripts can take a long time. APRIL 2013 PNG REPORT

26/03/2013 11:51:25 AM

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3/25/2013 2:35:44 PM

news wrap

Industry watch St Barbara’s Pacific resurrection

Simberi mine image courtesy of St Barbara Corporation.

WHILE St Barbara is not discussing its prospects with the media at this stage, Macquarie Private Wealth says it could turnaround the Simberi and Gold Ridge mines within a year. St Barbara’s share price is yet to recover from its much-criticised acquisition of Allied Gold last year, but brokers are also seizing this as a possible buying opportunity. In a report following the Western Australian gold miner’s arguably surprising, even if small, half-year profit announced in February, MPW said the new fleet at the Gold Ridge

Bougainville prospects supersized BOUGAINVILLE Copper Limited recently upped its targeted resources at the old Panguna copper-gold mine by 70% to 1.8 billion tonnes and lifted contained metal estimates by 50% to 19 million ounces of gold and more than 5 million tonnes of copper. The increases to the 2009 resource estimates come from revisions made last year to the order of magnitude study for re-opening the mine in Papua New Guinea’s Autonomous Region of Bougainville. In 2009, the base case was similar to the scale of the operation in 1989, which mined 90 million tonnes 8

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mine in the Solomon Islands was significantly improving ore body access and recovery rates. It noted that stripping rates improved at the Simberi mine in PNG since some of the old Gold Ridge fleet arrived. “With the next step being the commissioning of the Simberi oxide plant in the March quarter, ramping up to full throughput during the June quarter, we see the current quarter as the marker of the operational turnaround at the Pacific Operations,” MPW said at the time. from the open pit, including 33Mt of direct feed ore and 35Mt of preconcentration screening material. But the sustained run of high copper prices made BCL lift the OMS base case to mining rates of up to 100Mt per annum and processing DFO and PCS fines at a rate of 60Mtpa. While the scale of open pit mining was revised upwards, BCL said new options included consideration of a higher throughput and more efficient ore processing plant. “Although we are only at the order of magnitude stage of the project study, the revised resource estimate supports consideration of a number of potential development

The investment bank set a 12-month price forecast of $1.70 for St Barbara shares, but also provided warned of the challenges ahead. “While we continue to believe that the operational turnaround of the Pacific operations will be time and cash consuming for the company at current levels, we believe that this is now well-understood by the market,” MPW said. “We see blue sky in the St Barbara operations, which can be delivered by the turnaround of these assets over the coming 6-12 months.” options,” BCL managing director Peter Taylor said. “BCL continues to work with stakeholders on exploring ways in which the project may be advanced.” BCL has flagged another update to its ongoing OMS revisions in April. Panguna was the world’s fourthbiggest copper mine in the months before it closed in 1989 and had produced 9.3 million ounces of gold and 3 million tonnes of copper from 1972. The mine was suspended due to militant attacks before the subsequent civil war, but ARB political leaders and landowner groups are increasingly supportive of re-opening Panguna. APRIL 2013 PNG REPORT

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news wrap

industry watch Indochine’s looming resource boost

Image courtesy of Indochine Mining.

Indochine Mining is working on an upgrade of its Mt Kare project resources in Papua New Guinea due to the results of its ongoing bonanza zone drilling program. In February the explorer announced a drilling result surpassing the 100 grams per tonne gold “bonanza” grade level with a 5m intersection hitting 105gpt gold. The results of its 2012 drilling, with the last assays only recently received, along with the intercepts in the ongoing drilling campaign in its identified bonanza zones, will improve the project’s geological model. “This will lead to an improved resource model for the deposit 10

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and, together with the increased drilling density, will result in a significant upgrade of material from the inferred to the indicated and measured categories,” Indochine said. “The improved geological model will also assist in targeting step-out drilling to expand the current Mt Kare resource.” Indochine chief executive officer Stephen Promnitz said the metallurgical test work on the 2012 drill core was underway to optimise the project process route and assist in mine scheduling. “With the project at the bankable feasibility stage, there will be an ongoing release of drill results from

the Bonanza drilling program, which will strengthen the project economics even further,” he said. “The oxide evaluation program and step-out exploration drilling will also make the project larger and much more attractive to investors.” Indochine’s best bonanza find so far is a 17.7m intersection at 100.3gpt gold. Last year, Indochine was aiming to lodge a mining licence application with the PNG government by late 2013. The project is located 15km southwest of Barrick Gold’s significant Porgera mine in Enga Province. APRIL 2013 PNG REPORT

3/25/2013 2:33:56 PM

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Words and images by Mike Butler


Still going: These hydro generators on the Lower Baiune have operated continuously since 1947. 12

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3/25/2013 2:37:58 PM


Power Could chronic shortages inside PNG’s electricity grid be solved with privately owned power stations? With the first publicprivate hydro scheme unveiled in March, business will be looking with interest.


hat does PNG lack more than electricity? With PNG Power struggling to keep up with the galloping demands of industry and the population, the switching on of a 9.4 megawatt hydro power station that it didn’t pay a penny for was a good enough reason to have its executives to smile ear to ear. In March, when the Upper Baiune hydro station near Bulolo was unveiled by its owner PNG Forestry Products (PNGFP), one of them was PNG Power’s COO Bennie Smith. “Our national capacity is really only around 250MW, so this is really significant,” he told the PNG Report. Even more importantly, this power unit is just around the corner from the Hidden Valley gold mine, which is at the end of the grid and is susceptible to chronic power outages. “We’ve paid significant penalty clauses (understood to be in region


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“The state-run entity is already hungry for more private-public schemes.” of 20 million Kina) to Hidden Valley when their supply is interrupted,” Smith continued. We mention the K20 million. Smith won’t confirm it, but the African American from Missouri erupts into a dynamite smile that says just as much. “Oh yeah. This is a big plus for us,” he said. PNG’s power chiefs weren’t the only ones beaming. The Upper Baiune shows that business can tap into the assured income of public electricity generation, which is sure to arouse wider interest. This is the first private hydro scheme built with a 20-year reassurance that PNG Power will purchase its power, guaranteeing income and cash flow to PNGFP. With the public electricity provider struggling to cater for current 13

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Construction and equipment supply has all come from China.

supply let alone future growth, the state-run entity is already hungry for more private-public schemes. Expressions of interest have been called for an “independent power producer” that will add a further 20MW into the Port Moresby grid. It comes as little surprise that the Bulolo company has entered into the hydro power generation game first. Soon after the company began as a gold miner in 1932 it set up five hydros to power its dredging operations and even before the new power station came online in December 2012 it had been running 5.5MW from hydro to fuel its electricity needs as well as powering the Wau and Bulolo valleys. The new capacity means it will be helping keep the lights on in Lae and right up the Highlands Highway and, in the process, be a major cash flow for the forestry company that in the late 1990s had been floundering under bad management. When Honey took the reigns around a decade ago he embarked on an ambitious program of growth and diversification that soon included a possible return to gold mining. “The company is growing very fast

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3/25/2013 2:38:33 PM

and it was obvious that good potential for further hydro development existed immediately on the Upper Baiune with a 270m fall in the line over a distance of only 2km,” said Honey. The highlight of its growth to date is the new electricity with millions a year expected to come from it. It certainly needs to, because hydro isn’t cheap. The Upper Baiune has cost PNGFP K100 million, compared to K25 million paid for Lae’s 12MW Taraka diesel power station three years ago. Keen to ride on the scheme’s credentials, particularly the surety of government-guaranteed income, almost K80 million of that was financed from Westpac. The bank lent the money because the scheme was “environmentally and socially sound”, said Westpac PNG managing director Ashleigh Matheson, who added that the bank was part of a group of world financiers that “consider financing projects that are not environmentally and socially sound, which is just as bad as being the developer of these projects”. Aside from pollution, the big benefit of hydro is its minimal running costs. Once the Westpac

Forestry Minister Patrick Pruaitch and PNGFP’s Tony Honey unveiling the power station.

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26/03/2013 11:52:39 AM

PNGFP resident engineer Ron Sneath at the end of the nearly 2km long head race pipe.

loan is paid off (expected within a decade), the power plant will be an almost pure profit stream for PNGFP that will last decades. One of its three existing hydro generators has been running continuously since 1947 and is still going strong. Significantly, for Morobe Mining, it’s desperately needed. Hidden Valley gold mine has struggled to hit half its nameplate capacity and, although the tight-lipped South African-led consortium hasn’t blamed it, its power supply has been a problem. The direct feed by PNG Power has been so patchy that the mine’s 19MW of onsite back-up diesel capacity has been getting plenty of wear. Each time they’re needed, however, there are hours of disruption as the generators come on-line. There have been times when seven diesel tankers a day were needed to fuel them ¬ hence the large penalty costs to PNG Power.

The direct feed by PNG Power has been so patchy that the Hidden Valley gold mine’s 19MW of onsite back-up diesel capacity has been getting plenty of wear. This new hydro will directly address their supply and disruption issues from the grid by providing more reliable and cheaper (diesel is in the region of K1.2/kWh while the hydro power is K0.9/kWh) electricity. While details are confidential, it’s understood that PNGFP is being paid K0.35/kW by PNG Power, which will then on-sell it through the grid at around K0.9/kW, a massive mark-up and significant saving for the mine, which has most likely negotiated discount rates. Whichever way the pie is divided, overwhelmingly the addition of extra electrical generating capacity is necessary for the country. Incomes and the growing demand could be a valuable feather in the cap for businesses considering it. Without question, topographical maps will be unrolled on some of the most important tables in the country to see which hills around them have money in the water. 16

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“For this project to be delivered with nominal variance to time and budget is a credit to PNGFP” Ashleigh Matheson managing director Westpac PNG

The Big Grids Ramu System

The Ramu system includes a huge area covering Lae, Madang and Gusap and then deep into the Highlands all the way up to Wabag, Mendi and Yonki, through mining, oil, gas, coffee, tea, timber and industrial areas. The main source is the 75MW Ramu Hydro Power Station near Yonki with the 12MW Pauanda in the Western Highlands. The Bulolo hydro will now supply up to 10MW. Endemic transmission line outages, energy and peak demands are met by diesel plants at Madang, Lae, Mendi and Wabag.

Port Moresby System

Ashleigh Matheson

Upper Baiune’s Nuts and Bolts With the first sod turned in June 2011, the completed on budget and on time Upper Baiune is an impressive piece of hydro engineering, which also sets a few PNG firsts. Ron Sneath, PNGFP’s resident electrical engineer who has been with the scheme since its inception six years ago, says it has the highest head in the country (441m) which belts almost three tonnes of water through the generators every second. The next closest is Yonki at 275m. It is also the first fully automatic


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hydro in the country. Perhaps most significantly it’s also the first to be fully electrically and mechanically kitted out with Chinese technology. “We considered German technology but the delivery times were too high, whereas the Chinese weren’t,” said Sneath. It will further establish Sino engineering’s credentials in PNG. Civil construction was also done by China Railway Construction, including the use of state-of-the-art argon gas welding (another first in PNG) for the 2200m penstock pipe.

The Port Moresby system spreads throughout Central Province. The main source of generation is the Rouna system, four hydro stations on the Laloki River, generating 62MW. It also has a diesel thermal power station outside Port Moresby, which is used to top up to 30MW. In January 1999, Koreanowned Hanjung Power Ltd built PNG’s first private power station Kanudi starting a 15-year build-operate-transfer agreement that provides 24MW of diesel generated electricity.

Gazelle Peninsula

The Gazelle Peninsula system serves Rabaul, Kokopo and Keravat economies which are largely based on copra, coconut oil, cocoa, timber and fishing. It’s powered by a 10MW hydro power system at Warangoi, 8.4MW Ulagunan Diesel Power Station and 0.5MW Kerevat Diesel Power Station. APRIL 2013 PNG REPORT

26/03/2013 11:54:29 AM

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Electricity In PNG

Power Plant: Ron Sneath with the two 4.8MW generators.

PNG Generating Capacity System

Site Capacity MW




Port Moresby












Other centres








Total installed capacity of the state-owned utility is estimated to be 250MW. In addition to that is an estimated 280MW privately generated primarily for their own use. This includes generation from Hides gas field in Southern Highlands to Porgera and 54MW of geothermal capacity used by Lihir Gold. The other main area is the Ramu hydro system, which has 87MW of installed capacity. Standby diesel generators in Lae, Madang, Mendi and Wabag in the Momase and Highlands regions supplement this. There is an additional 12MW of hydro capacity in the Islands Region, also supplemented by diesel generation.

* Source PNG Power


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26/03/2013 11:55:17 AM

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SITUATION The Papua New Guinean government is reviewing mine tailings management legislation which may result in a ruling that all tailings be stored on land – possibly affecting six of the eight operating mines in the country that practice river or ocean tailings disposal.

The Hidden Valley mine’s engineered tailings storage facility. Image courtesy of halfowner Harmony Gold.


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HE REVIEW AIMS to ensure protection of the country’s environment and its people and to modernise tailings management practices. The Constitutional and Law Reform Commission released an issues paper in February to kick-start the process. It has been a long time coming. The issue was originally raised in 2007 but faded into the background until now. CLRC secretary and environmental law professor Dr Eric Kwa stresses the paper is the tool to get the ball rolling. “Government has no current position on the subject. Stakeholder feedback is critical to crystalise issues and determine mutually acceptable solutions as far as possible. I have already received many comments from miners and the private sector saying they are happy we have taken the bull by the horns and revived this issue in an inclusive way,” he said. The CLRC has established a working group with representation from the Chamber of Mines and Petroleum, the Center for Environmental Law and Community Rights, the Centre for Environmental Research and Development, the University of Papua New Guinea, the Mineral Resources Authority, the Department of Environment and Conservation and the Department of Geohazards Management. The group will drive consultation, including public forums and minesite visits in various provinces. It will also confidentially review submissions in response to the issues paper. Responses are due in September. Kwa said the CLRC wanted to have a draft report to present to the public for comment in October, with a report for government in December. “We hope any new legislation or amendments would be enacted around mid-2014,” Kwa said. Government mining departments have been working on policies around waste management and Kwa said all parties would work together to ensure alignment. Crucially, an outcome for tailings management legislation that makes the majority happy will require a fine balancing act. The overarching conundrum is achieving legislation that helps attract foreign investment – greatly needed to advance the country – and which also supports publicly and scientifically acceptable environmental and social impacts. To date, Papua New Guinea APRIL 2013 PNG REPORT

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has had no specific legislation for the management of mine tailings. Miners manage waste in accordance with relevant legislation provided mainly within the Environment Act and the Mining Act (the exception is the stateowned Ok Tedi mine, which operates within its own act). As mentioned in the issues paper, improvements specific legislation may bring include a standard process for risk assessments; more transparent environmental impact assessments with a shift of responsibility from miners to government; increased fines for environmental damage; and a sustainable mining plan which aligns project development with government capacity. Introduction of specific or tighter legislation may also reduce public concern about environmental and social damage. For example, the Ramu NiCo court case, which was instigated by local community concern over damage to the environment from the mine’s deep-sea tailings placement plans, was settled in late 2011 in favour of the company. Ramu said its DSTP plans should proceed given its compliance to relevant legislation.

Had there been more specific tailings management legislation, would Ramu have been able to proceed with its DSTP plans in the current form? Aside from legislation, a globally groundbreaking report was published in 2010 about the general use of DSTP in PNG. It was commissioned by the government and prepared by the Scottish Association for Marine Science. The report aimed to improve understanding of DSTP’s environmental impacts and included a baseline survey of Ramu’s DSTP site. The report has resulted in best practice environmental guidelines for DSTP in PNG, which Ramu is adhering to. The SAMS report concluded that DSTP in PNG could cause environmental damage – the extent of which could not be confirmed as there was very little historical scientific data. SAMS surmised the government must decide whether DSTP could be used within a project, based on analysis of specific environmental and social impacts. So it sounds like the Ramu mine will need close monitoring as it ventures into relatively unknown territory.

Alongside DSTP, three PNG mines employ the highly environmentally criticised riverine tailings disposal method – Ok Tedi, Porgera and Tolukuma. PNG is one of two countries in the world where mines continue to deposit tailings into the river (Indonesia is the other). So if RTD is believed to be too environmentally unfriendly, why is it still being practiced in PNG? There is a gamut of possible answers. A major one is the challenging environment. Steep terrain, heavy rainfall and earthquake activity have historically posed too great a threat to large on-land facilities. Another reason is location – mines may be too far inland to use DSTP. RTD also holds a legacy advantage, in that once a mine employing RTD closes there is no on-land facility left behind for anyone to maintain. If, as the issues paper questions, RTD and DSTP were banned in PNG, would it be a retrospective ban? For mines with ocean access, will DSTP be considered an option when on-land storage is not feasible and stringent social and environmental requirements could be met?

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These are questions that need to be explored as part of the review. The latest crop of big mining projects are at different stages of potentially planning on-land facilities. Marengo’s Yandera, Newcrest and Harmony’s Wafi-Golpu, Indochine’s Mount Kare and Xstrata’s Frieda River have all signalled intentions to take the higher ground, so to speak. So why the shift towards this method? Aside from technical and economical viability, maybe the trailblazing Hidden Valley mine has provided inspiration, coupled with the pressure to follow international standards. Newcrest and Harmony’s Hidden Valley is the first PNG mine to incorporate a major on-land tailings storage facility. The dam is designed to be around 160m high, which will make it one of the highest dams in the world. It has been a pioneering project and a tangible example that the country can incorporate world’s best-practice tailings management. Klohn Crippen Berger mining environmental group vice president Len Murray said tailings management had come a long way during his time


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in the industry. Murray is very supportive of PNG’s move to review its tailings management approach. Originally a geotechnical engineer, Murray has worked extensively on tailings dam construction around the globe since the early 1980s, including in an ongoing relationship with PNG, in particular the Ok Tedi mine. “These days, project site selection involves much more scientific, environmental and community aspects – it is no longer based only on physical engineering considerations,” he said. “Essentially, projects now have to take a sustainable, triple bottom-line approach.” Murray said tailings management in PNG (as with the rest of the world) could not be underpinned by a onesize-fits-all approach and there were pros and cons to each method. “Most countries now do not practice RTD, as the community and environmental downsides overwhelm the engineering upsides,” Murray said. “Physically, the big advantage of RTD is once the mine closes, the community is not stuck with a tailings dam forever.”

“From my experience, on-land tailings facilities work well for sites in PNG with little or no catchment outside the tailings area.” Len Murray Klohn Crippen Berger He said tailings dam legacy issues would still be a major impediment to employing terrestrial facilities in PNG. “This is because most sites are in fairly remote locations and once the mine shuts its infrastructure is usually removed – including any township – and the access road disappears, which makes it hard to maintain the dam left behind,” Murray said. “However, responsible companies usually provide a sum of money for the dam to be maintained on a longterm basis, which can be an incentive for the local community as it could become a small industry for them.” Murray said most mine permits would include a requirement to describe the end use of the dam. “In a positive outcome, dam sites can be turned into agricultural or residential areas as they are


3/25/2013 2:44:14 PM

Marengo Mining’s Yandera project in PNG abandoned deep-sea tailings plans last year in favour of developing a tailings dam.

usually very flat and, in this modern day, dams are typically abandoned as ‘dry’ so there is no pond. This is much safer and they can be grassed or treed over,” he added. A negative scenario for the community would be the instance of a miner going bankrupt and it being stuck with an orphan site and no funds. When asked why Hidden Valley had been able to implement an on-land storage facility when its nearby neighbor Porgera had not, Murray advised that Hidden Valley was much smaller, with advantageous environmental conditions. He also highlighted kudos should go to Hidden Valley’s owners for being the first to implement this method in the country. “The Hidden Valley dam sits on a stable landform with a small catchment,” he said. “From my experience, on-land

“Mount Kare will benefit from Hidden Valley’s lead.” George Niumataiwalu Indochine 26

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tailings facilities work well for sites in PNG with little or no catchment outside the tailings area. Hidden Valley’s catchment area is less than 10 square kilometres, if not five. “There is a lot more risk involved if a dam is built on a big stream, with potential for constant terrain erosion where normal flows could be four or five cubic metres per second but could jump to several thousand cubic metres per second during a big flood. The failed Ok Tedi Ok Ma dam site was located on such a very large catchment.” Given its myriad of challenges, Murray notes that PNG is a place where tailings disposal facilities must be rigorously designed since they will get regularly tested against floods, earthquakes and other geohazards. It will lead to globally important advances in tailings management techniques and the country is now following others in refining its legislation. “The United States used to employ RTD, for example, in its Idaho Basin during the gold rush era in the late 1800s and this continued

in the country until the 1960s when it decided RTD was no longer acceptable. Chile is another more recent example of the banning of riverine disposal. “However, it would be very hard to develop detailed worldwide guidelines for tailings management as each site is so different. Most countries follow a set of high-level standards with their own twists.” Indochine Mining Mt Kare project director George Niumataiwalu has extensive exposure to tailings management in PNG and Fiji, including playing an instrumental role in Hidden Valley’s storage facility. Niumataiwalu said the Mt Kare gold mining project, currently in its feasibility stage, would not have proceeded if a tailings storage facility had not been viable. “Mount Kare is being planned in accordance with the International Finance Corporation and World Bank guidelines, which include rigorous requirements for triple bottom-line planning,” he said. “This process ensures potential longterm negative impacts of the project are mitigated against from the outset. We are aiming to be a preferred and proactive responsible developer of the country’s mineral wealth.” Niumataiwalu said sustainability costs were amortised from the outset, rather than choosing an option that might be economically justified in the short term but failed the triple bottomline criteria over mine life. “Mount Kare will benefit from Hidden Valley’s lead. To its advantage, Mount Kare’s tailings storage facility can be located on a more favourable topographic terrain, with less seismic activity,” he said. Niumataiwalu said the government review might determine those projects unable to include on-land tailings storage to then be assessed for viability under far stricter guidelines. “The technology is there to design and construct tailing storage facilities under most conditions. In many cases in developing countries like PNG and Fiji, it is the regulatory components of approving and managing facilities that require more capacity to better represent state and community interests in ensuring responsible tailings management. More focused legislation will help the country maximise its massive mineral endowment benefit in a more sustainable way,” Niumataiwalu said. PNG Report will keep you updated as this hot topic unfolds. APRIL 2013 PNG REPORT

3/25/2013 2:44:41 PM

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Rental market

Words by Mike Butler

POM property

Will POM’s

Bubble Burst? Port Moresby’s rental prices skyrocketed when Exxon moved in. Now the question is, what will happen when they move out? If you’re considering renting in the next 12 months this is essential reading.


t’s been a BBQ stopper across the capital for a couple of years now – tales of rents doubling overnight, ruthless landlords and exorbitant property prices. Move over Tokyo, Sydney and New York, because Port Moresby is now one of the most expensive property markets in the world, that’s

despite rents coming off around 30% from highs in 2011 when it wasn’t unknown to be paying 7000 kina per week for a three-bedroom unit. Now, thanks to factors including a hot market, a construction boom, jittery banks and the market’s biggest player – Exxon – about to desert it, Moresby’s market is set for a shake-up.

Exxon is keeping 50 apartments at Airways Hotel, currently constructing more accommodation.


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“Everyone’s got an opinion and it’s extremely difficult to know what’s going to happen,” said Ingrid Richardson, owner of Strickland Real Estate, one the country’s longest established and most respected agents. Despite that, her money isn’t on the property market shooting up like it has done recently. “It won’t, it can’t, because there’s going to be a definite oversupply,” she said. “There’s currently around 450 new units under development, plus the 250 city residences from Exxon coming online next year when the LNG construction phase is completed (Exxon is building it’s own compound next to Airways). That means 700 coming into the market in a year.” A drive around Port Moresby shows that the capital is certainly in the grips of a residential building boom, fuelled largely with Chinese, Malaysian and regional money. On the waterfront, Curtain Brothers will release 20 properties some time in April and will later be releasing 140 more with marina moorings out the front. Ela Beach is starting to have shades of Surfers Paradise, with cranes and building sites crowding

Ela Beach is due to have a 250-room hotel built on this site.

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out apartments built in the past construction boom in the 1980s. A 250-bed hotel on the beach road is currently having its foundations laid. And a series of 40-unit apartment blocks have already been completed by a Malaysian consortium led by a former employee of RH. Without question, the looming glut of accommodation will be a godsend for choice-starved tenants. And although the new buildings are architecturally attractive, there are warnings that they haven’t necessarily been designed for the Moresby lifestyle. “Because people tend to do a lot more in the properties than other cities, living and balcony space is more important,” said Richardson, adding that the older 1980s stock tended to be 180–200sq.m, compared to newer averages of 120-130sq.m. “That’s why it’ll be curious to see if people renew leases in the new properties because although they’re shiny and new now they’ve got a lot of defects with the plumbing and they’re very small.” The Moresby rental market became interesting around five years ago, said Richardson. For more than a

decade there had been hardly any construction in the city and then the Australian government started renting accommodation in the capital en masse to house 300 police officers it was seconding to PNG to help with law and order. “That was the first time we had

a change in 12-15 years. We were probably renting expat accommodation for K1000/week and that went to 1500 because of that.” The deal fell through, but not before hundreds of properties were secured with the Australian government paying out the dud leases for at least a year.

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This new development in Badili, bankrolled by Chinese money, is emblemic of the boom.

A brief history of POM property • Late 1990s: Chevron leaves PNG, market stagnates. • Circa 2008: Australian Federal Police secures properties for hundreds of staff. Rents for three-bed expat apartments jump from K1000-1500/w. Deal collapses but leases are still paid out for 12 months or more. • October 2008: Exxon appears and becomes first company to start taking K4000-5000/w properties. • Landlords start doubling rents for long-term tenants overnight. • 2011: Market peaks with some properties getting K7000/w. • 2011: Construction boom starts • Mid-late 2011: NGO accommodation allowances went from K2000-5000 a month. • 2013: Rentals fall approximately 30% from their peak. • 2014: 700 city properties (250 former Exxon, 350 new build) due to come onto market.

And then, in October 2008, Exxon turned up and property prices went through the roof. “They were the first to start paying K4000-5000/week. K1200-1800 was the highest companies would pay and almost overnight it went up to K5000,” said Richardson. “There were a couple of organisations that blackened their names, because even for long-term tenants they were doubling their rents overnight.” Around Port Moresby today, Steamships has the reputation of being one of them. “It was hard from a personal level because many of our tenants were asking for help in finding accommodation, but there wasn’t anything. Now there is definitely more choice.” How low can it go? Two years ago

the best time to secure a property was immediately, if not the week before, now things are reversing. For starters, with so many units coming available so soon, the ball is most definitely moving into the renters’ court, so short-term tenancies and ones where you can negotiate are key. Why? Because of warning signs, such as the PNG banking sector getting jittery about property. Currently returns on existing properties are around 8-10% and banks won’t lend if it’s less than 1214%, and that’s with a 50% deposit. “The banks have become very, very cautious,” said Richardson, who added she regularly got calls from developers asking how big and how many rooms they should build. “I tell them you definitely need to do their research; there will be an

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9:33 AM

oversupply and unless you’re cashed up and happy to accept lower rents you just wouldn’t do it.” How low could it go? The answer perhaps lies in Port Moresby’s “other” market aka the low-cost market housing the burgeoning numbers of aspiring middle-class nationals who are helping fill cash registers in developments such as Vision and Harbour City. “It’s a really interesting question. Six years ago, K250-300/week would get you basic housing, not in good condition, but a roof over the heads of your national employees. “Even they have been impacted by LNG. If you’re wanting decent stuff you’re looking at K800-900/ week,” said Richardson, who pointed out there was upward pressure on those rents because there was such as supply squeeze. “There has been next to no construction in that sector because the returns aren’t there. I know middle management nationals who are living in the settlements because there aren’t properties available,” she said. While it’s hard to see expat properties dropping down to that level, where is it going to meet? “Some are of the newer properties being built are going to have to drop their rents so low, who is going to fill them? How’s that going to impact on the sense of security within a building or compound,” said Richardson and she has a point, because of not only different expectations between the two markets but the demands of the wantok system. Best advice? If you’re in the market for renting, hold out until next year.










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3/25/2013 2:47:26 PM


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Things that make you go boom

Century 21 real estate chief Brian Hull says there is no property bubble, but a period of extended growth.

BRIAN Hull, owner and founder of Century 21, sees Port Moresby entering a period of maturity and growth that the capital has never seen the likes of before. “People say ‘the boom!’ I say, ‘what boom?’ “They answer, ‘you know, the boom!’ I say, ‘I have no idea what you’re talking about, because there is no boom’,” said Hull.

“We’ve had a $US20 billion LNG project that’s being completed, there’s another one about to start that’s a bit smaller and there are three others to go ahead, plus one of the world’s largest dams yet to start. I’m going to be dead before this ‘boom’ is finished,” said the 74-year-old 40-year veteran of the Moresby market. “This town is a million people now,” said Hull. “In 10 years it’ll

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be two million. It’s growing like an Asian city,” he said, pointing to examples like Jakarta with its infamous traffic jams, congestion and chaotic town planning. He may be right, because it’s not only PNG nationals who are flooding into the capital in search of opportunity. The Interoil LNG project in the Gulf Province should commence this year or early next year. Talisman and four others in Western Province are rapidly firming up and the big Purari hydro dam project appears to be getting a lot of interest both locally and in Queensland. China has made it clear it wants PNG as a major part of its sphere of interest and the US is building a new embassy with the intention of countering what it perceives as galloping Chinese influence. Put that together with Australia foreign and NGO money as well as a string of mines set to open and – on paper – there should be no shortage of demand for expat standard property. Hull goes further, saying Port Moresby has the potential to become a manufacturing hub. “Port Moresby’s got a lot going for it; a beautiful climate, 300 days of sunshine a year, unlimited water, is on international trade routes and has one of the best harbours in the world. It’s got a big unemployed population that can be trained and we could become a production hub for anything needing cheap electricity,” if/when the Purari hydro project happened and when LNG was bought to the capital for power generation, he said.

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3/25/2013 2:50:24 PM


Words by Blair Price



constraints The world’s biggest shipping company is facing more difficulties with Papua New Guinea’s berthing reservation systems than with the country’s lacking port infrastructure.


aersk Line entered the PNG market almost two years ago by launching a fortnightly containerised cargo service from Malaysia’s port of Tanjung Pelepas to Port Moresby, Lae and Madang. The strategy was to put PNG on its global network with a shuttle service

that goes straight into an Asian hub and to differentiate itself as a more reliable service. “It’s no longer a question of whether we are committed or not to the PNG market but now it’s more about how do we add more value to our product offering for our customers,” Maersk Line Australia and PNG managing director Nicolaj Noes said.

All images courtesy of Maersk Line. 38

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“Our goal is to be acknowledged as the world’s most consistently reliable carrier and over the past few years in PNG we have made fast and steady progress in being able to confidently deliver cargo on time and move it with ease.”

“We are enabling our customers to source goods from anywhere in the world.” NICOLAJ NOES MAERSK LINE

Maersk Line put PNG on its global network by opening up a shipping route from Malaysia.


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Yet PNG is notorious for its logistical challenges. While stateowned PNG Ports has taken various measures to improve productivity, including the introduction of rubbertyred gantry cranes in 2011, Maersk did not expect the issues with berthing times it has been experiencing. “The biggest challenge Maersk Line faces is regarding the berthing windows,” Noes said. “The use of fixed berthing windows is a standard global shipping practice and has been successfully implemented


3/25/2013 2:51:44 PM

Maersk aims to deliver consistent service levels across all of its products and won “shipping line of the year” during the Supply Chain Asia Logistics Awards in December.

all over the globe. It reduces waiting time of vessels as they will berth upon arrival. The terminal will be able to increase their productivity as they will be able to better plan for each vessel coming in, ultimately resulting in a significant reduction in congestion in the whole port. “Maersk Line remains committed to having a strong presence in Papua New Guinea and to providing our customers with sustainable and reliable connections to markets and suppliers around the world.

“To achieve that, we need to ensure our own services link with our global network as efficiently as possible. “Ongoing issues with berthing windows must be resolved to ensure a high quality of service for all customers operating in and out of the PNG ports. “Reliability is an integral part of our products and services and our customers value the great care we take to ensure their cargo is available to them when they expect it be. “Due to the waiting time at the

“The industry needs to encourage a culture of rewarding reliability and prioritising people that show up on time over ad hoc shipments.” NICOLAJ NOES MAERSK LINE port the unfortunate situation is cargo is being delayed and as a result has a negative impact on our customers. This is the basis for our concern.”


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3/25/2013 2:52:02 PM

Maersk Line hopes to expand its services to PNG.

Maersk could potentially expand its service offering through using larger vessels or increasing the frequency of its shipping to PNG. But there are constraints on both fronts. “There’s no point having a bigger vessel if the vessel lies idle, as the cost of remaining idle is proportional to the size of the vessel and likewise the benefit of having a weekly service is eroded if there are berthing delays,” Noes said. “Maersk Line would like to pursue both bigger vessels for economies of scale and/or increase frequency of vessels but we have to be realistic to pursue our current offering with the current infrastructure. “Hence our offering remains on a fortnightly service for both dry and refrigerated cargo, we have

“We have to be realistic to pursue our current offering with the current infrastructure.” Nicolaj Noes Maersk Line 42

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simplified our service to direct calls in Port Moresby and Lae, with Madang/Wewak serviced via Lae with a weekly coastal product. As for expansion within PNG ports, we are always open to expanding services where opportunities lie within PNG or elsewhere.” The Maersk executive discussed what the PNG government could do to reduce shipping costs in terms of infrastructure development and policies. “Maersk Line not only would like to see a greater interest by governing bodies to assist in implementation of fixed berthing windows and increase port capacity at berth but also more support through incentives to shipping lines who actively seek to improve the reliability and efficiencies in overall ports operations,” Noes said. “The industry needs to encourage a culture of rewarding reliability and prioritising people that show up on time over ad hoc shipments. “A larger focus should also be on getting PNG’s infrastructure ready and able to work larger vessels,

allowing the industry to use scale to drive efficiency both in productivity and environmental impact.” Despite the various challenges, Noes said Maersk was excited to be operating in PNG and it hoped to broaden its geographical coverage to service customers throughout the country. “As a leading container shipping and logistics provider, we aspire to create these opportunities in global commerce for our customers in PNG,” Noes told PNG Report. “Wherever our customers can find an opportunity, chances are Maersk Line can carry their cargo there. Whether it is exporting PNG’s worldclass tuna or coffee or importing machinery into PNG we are enabling our customers to source goods from anywhere in the world, creating efficiencies in their supply chains and making it possible for commodities to reach new markets. “That is incredibly rewarding for me and my team to know that we are facilitating a new trading pattern and indeed making a difference in growing trade.” APRIL 2013 PNG REPORT

3/25/2013 2:53:16 PM

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3/25/2013 2:54:27 PM




ELECTION ASSESSMENTS While last year’s election ended a dramatic constitutional crisis, in many ways there is still plenty of unfinished business.

Simon Sinai, second from the left, with the PNGEC team and next to WA Deputy Electoral Commission Chris Avent with WA Electoral Commissioner Warwick Gately in the middle. 44

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apua New Guinea’s Court of Disputed Returns has the uneviable task of going through more than 100 election petitions and the results so far have already unseated three members of parliament, while Higher Education, Research, Science and Technology Minister David Arore was arrested in March as part of bribery investigations into two election officials.

It is still not clear whether he might contend for this East Sepik seat again. Another by-election will also need to be held due to more tragic circumstances, with Angoram member of parliament Ludwig

Schulze dying in hospital in March. Schulze defeated former public enterprises minister Arthur Somare in last year’s election. It is still not clear whether Somare might contend for this East Sepik seat again. Prime Minister Peter O’Neill has also recently defended against criticism from Transparency International that the election was “seriously flawed”. He labelled this as disappointing and an exaggeration. Yet the Australian National University’s Domestic Observation Group also found a host of issues with the way the election was run, with many stemming from electoral roll failures and breaches of procedure. Its report found that cheating and voting irregularities occurred across the country but were most pronounced in the Highlands regions. As part of an AusAid program, a PNG Electoral Commission delegation made the journey to Perth,

“We need more staff and there are immense access difficulties.” Simon Sinai

Western Australia, to witness the systems in place at the state’s election in March. “Project management is better here than in PNG,” election manager Simon Sinai said in Perth. “We need more staff and there are immense access difficulties. We also need a lot of police to scrutinise the election and this is always a big challenge.” There are obvious big differences between WA and PNG, but Sinai was still able to gather useful information which can be applied back home. Of this, Sinai told PNG Report that the most interesting takeaways related to how WA managed its election boundaries and used a much-faster decentralised counting process.

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3/25/2013 2:55:56 PM




UNTAPPED OIL After years chasing the source of a 100km trend of oil seeps, New Guinea Energy is eyeing a 50 million barrel oil target in the river-prone, southeastern corner of Western Province.


IL SEEPS MIGHT be considered the best surface sign of liquid gold around but their appearance won’t tell the story of an elusive hydrocarbon journey that starts hundreds of kilometres away. A key Panakawa oil seep in NGE’s

PPL267 block still flows about 5 barrels of highly marketable, light sweet crude a day and the explorer first came across this unexpected sight in 2007. Investigations have since narrowed down the probable areas for the source reservoirs, but NGE is yet to nail them down.

An aerial view of terrain at southern coast of PNG near river mouth. Image courtesy of NGE. 46

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3/25/2013 2:56:53 PM

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3/25/2013 2:58:32 PM

Water transport options in PPL267. Image courtesy of NGE.

This amounts to a potential $200 million boost to the explorer, which has a market cap of under $25 million.

PNG’s petroleum scene often relies on helicopter transport. 48

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In 2010 NGE spudded the Panakawa-1 exploration well targeting 202 million barrels of oil which found oil and gas shows, but no commercial accumulation. This experience, which was only compounded when the Siphon-1 exploration well it shared with operator Talisman Energy failed to hit commercial amounts of gas and condensates north of the Stanley field in 2011, has caused NGE to conservatively approach its next stab for Panakawa-linked crude. This lead is based on the same Toro and Alene sandstones of Panakawa-1 and is a similar faultbased play type. But the key finding from that well was that a bigger fault was needed to better seal the two target reservoirs. “So we think we have found a bigger fault,” NGE general manager technical and operations Dan Kendrick said of the new lead. “We’ve got six seismic lines so far across it. They show a nice rollover

anticline into the fault.” Another $A2-3 million will be spent on a program, which includes two additional lines of 2D seismic on the western end of the lead to have data on the lead from all directions. NGE could move quickly if there is a good outcome and already half owns a rig suitable for the job. Financing such an exploration well in this wholly owned NGE licence is a challenge. NGE chief executive officer Grant Worner flagged that possible funding solutions included raising more capital, bringing in a joint venture partner or making a transaction with one of its five other licences. In what is a classic case of risk versus reward in the petroleum game, the potential payoff from proving up 50 million barrels of oil would transform NGE. On the basis of typical net present values that analysts apply for commercial and yet to be APRIL 2013 PNG REPORT

26/03/2013 12:07:27 PM

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3/25/2013 2:59:05 PM

“We could be able to move really quickly from discovered to developed” Grant Worner

NGE’s half-owned Western Drilling rig.

The Chamber is a non-profit, peak industry association that represents the interests of the mining and petroleum industry and associated industries in PNG. Current membership is over 200 companies. The Chamber’s mission is to promote the mineral and petroleum exploration potential of PNG and the development of a world-class sustainable resources industry that provides benefit streams to improve the welfare of all Papua New Guineans. The Chamber:  Promotes world-class sustainable mineral and hydrocarbon exploration, production, processing and support industries.  Is the representative voice for the mining and petroleum industry in PNG.  Informs and educates the wider community of the activities and benefits of the mining and petroleum industry.  Conducts conferences, seminars and workshops to promote and support the industry.  Keeps members informed with a regular Bulletin.  Supports education and training institutions.  Manages a women in mining and petroleum program. P. O. Box 1032, Port Moresby NCD, 121, Papua New Guinea Tel: (675) 321 2988 Fax: (675) 321 7107 Email: Website:


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developed oil discoveries in PNG, each barrel of recoverable oil could add $10 to NGE’s value immediately after discovery and prior to any development. This amounts to a potential $200 million boost to the explorer, which has a market cap of under $25 million. The location of this lead, close to the Bamu River that links to the nearby coast, is favourable for logistics, which makes it easier to commercialise an oil discovery there. Any find is also expected to have similar porosity levels to the Panakawa oil seep of 22% and to consequently flow readily. “It means you don’t have to drill too many wells to get started,” Worner told PNG Report. “So we could be able to move really quickly from discovered to developed.“ While the proximity to waterways allows for oil to be easily barged out to export markets, it also helps reduce the typical helicopter reliance of PNG’s petroleum scene. NGE is even considering bringing in a suitable vessel to operate as a floating exploration camp complete with bunks, laundry and kitchen which will lower costs and save time.

NGE is even considering bringing in a suitable vessel to operate as a floating exploration camp. With interest in PNG’s petroleum plays hitting new peaks each year as the PNG LNG project gets closer to fruition, considerable interest in this lead is expected, with NGE making a separate $15 million licence sale to Oil Search and ExxonMobil last year. Disclaimer: Aspermont Publishing, which owns PNG Report, holds shares in New Guinea Energy. APRIL 2013 PNG REPORT

3/25/2013 2:57:32 PM

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3/25/2013 2:59:41 PM


Words by Kristie Batten and Blair Price


Wafi-Golpu excitement Along with recent expansions at its Lihir and Cadia gold mines, the “exciting” Wafi-Golpu copper-gold project in Papua New Guinea is dominating management activity in the words of Newcrest Mining managing director Greg Robinson.


t’s what I think is the best copper-gold porphyry non-producing asset in the world,’ Robinson told the Mines and Money Hong Kong conference in March. “It’s a very big driver for the company going forward.” Recent results from exploration included a 942m intersection at 1.18% copper and 0.94 grams per tonne gold. “You start feeling like you’re onto something special,” Robinson said. “The old saying ‘grade is king’ – well, this one’s got it and the tonnage to match.” The total combined Wafi-Golpu resource is 28.5 million ounces of gold and 9.06Mt of copper, but Newcrest and its 50% joint venture partner Harmony Gold have set an exploration target of 40Moz gold and 15Mt copper. Robinson mapped out a six-year “development horizon” for the project. The company was aiming to be at the feasibility study stage next year,

“Through this next period gold companies will do well.” Greg Robinson 52

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followed by a 3-4 year construction phase, with first production likely in 2019. Robinson was confident it would be an easy project to execute, being a “Cadia look-alike”, with Newcrest’s Cadia Valley gold-copper operations in New South Wales producing more than 7Moz of gold since 1999. Until Wafi-Golpu comes online, Newcrest’s growth will come from newly commissioned expansions at Cadia and at its Lihir gold mine in PNG. Robinson expects 5-10% growth every year, with two-thirds to come from Lihir and the balance from Cadia. He also discussed wider issues facing gold miners at the event, revealing that Newcrest was behind the World Gold Council push for gold producers to report “all-in” cash costs to give all stakeholders a clearer picture of industry costs. “I think it’s important that the industry gets a fully loaded cost profile out,” he said. Robinson said all-in costs across the industry probably averaged around $US1300-1400 per ounce. “It’s a hell of a lot in the labour costs,” he said, adding that Newcrest’s labour costs were around 40% of APRIL 2013 PNG REPORT

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26/03/2013 2:23:07 PM

Lihir gold bars. Image courtesy of Newcrest Mining


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total costs. Robinson said the mining industry as a whole was shifting its focus from “growth at any cost” to optimisation. “Doing more with what you’ve got,” he said. Newcrest’s biggest focus going forward will be productivity and Robinson said he expected it to be a focus across the industry. “Productivity is where the gains are,” he said. “These are the things that are really a big prize for the industry in the years ahead.” Robinson said Newcrest would continue to invest heavily in exploration at a time when discovery rates were “volatile and declining” and the importance of cheap resource acquisition couldn’t be underestimated. “That really underpins everything,” he said. “It should never ever be ignored. You can build a great company off the back of it.” Robinson flagged project delays over the coming years and urged patience because good projects would still be funded. “The capital market really isn’t

in a big mood to fund projects.” As a result, he doesn’t expect any production growth in the gold industry, which was an opportunity for existing producers to thrive. “Through this next period gold companies will do well.” Newcrest aims to lift Lihir’s annual production to around 1.2 million ounces per annum, although there are plans to further expand it to 1.4Mozpa, and that is when management considers there could be 30 years or more of life left in the mine. As for the Wafi-Golpu project in Morobe Province, so far a prefeasibility study is only complete for the proposed Golpu block cave operation. Ongoing drilling is further supporting the investment case for a potential third lift expansion and the PFS envisioned a 30-year-plus life and production of 580,000ozpa gold and 300,000 tonnes per annum copper for a three-lift Golpu mine. These underground plans are not the full story either, as the associated Wafi copper-gold deposit is within open cut minable depths with a concept study still underway.


26/03/2013 2:25:56 PM




EXPAT DEPORTATION A personal grudge and an oversight in Papua New Guinea’s bureaucracy of migration services is all it really took to deport Unitech vicechancellor Dr Albert Schram from the country twice in just over a month.


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3/25/2013 3:03:40 PM


CHRAM RUFFLED more than a few feathers at the Unitech council within weeks of his appointment in February last year, with most of the former management team arrested, as police investigations into corruption at the Lae university continue. While what has been called the Unitech saga is still unfolding, which includes a questionable court challenge mainly based around Schram’s qualifications, the Dutch academic is still employed by the university and has a valid work permit and visa. Consequently, his recent deportations have implications for any expat in PNG. Schram was first deported upon his return to PNG on February 8

“Suddenly, it was not who you know, but how well you do the job – which is very threatening to these council members.” DR ALBERT SCHRAM


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and it happened again on his second attempt on March 9, with officials not mentioning much more than there was a referral against him entering the country. “The specific reasons on why I was deported the first and second time were never explained to me,” Schram told PNG Report. The academic has since learned lessons he wants to pass on to PNG’s business community. “The process to decide whether expats should be allowed in or out of the country must be much more carefully managed,” Schram said. “I heard from my lawyer that there is a one-page form and anybody with a grudge against an expat can basically fill that out and then they won’t be allowed into the country again. “Apparently, that has been there for a while and it has been misused quite often.” In the hope that this will change as a result of the media coverage of the scandals plaguing Unitech, Schram wants the Foreign Affairs Department to revise its procedures and put in more checks and balances.

“We have unofficial reports that one disgruntled employee, who we [Unitech] fired was the one who got my deportation done,” Schram said. “In fact, he bragged about it. Publicly he said, ‘I got him deported’.” Schram suspects a former Unitech council member was involved, but added that a low-level migration official had been very active, “to put it that way”. Schram said the effective deportation power held by the lower branches of migration bureaucracy explained “the confusion at the top” when he was deported the second time. This setback came after Unitech’s new chancellor, Sir Nagora Bogan, who was twice PNG’s ambassador to the US, failed to make inroads despite his considerable contacts in the Department of Foreign Affairs. “He is an excellent chancellor and he went to speak to the Minister of Foreign Affairs [Rimbink Pato], who assured him that the referral had been lifted from my file and I could come in,” Schram said.


3/25/2013 3:04:01 PM

“But he [Pato] doesn’t really seem to be in charge of the migration services.”

Origins of the Unitech saga As Unitech’s vice-chancellor for a little more than a year, Schram is widely supported by Unitech’s staff and students. Under his leadership there was a notable increase in spending and the university started construction of its first houses on campus since 1967 with the contract awarded to PNG Forest Products in December.

Audits of Unitech’s finances already implied that mismanagement was taking place. Schram suspects the various resistance he faced by rival Unitech leaders was because he symbolised a new type of management. “Suddenly, it was not who


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As part of his deportations, Schram was asked to hand over his passport, even though he has a valid work permit and visa.


3/25/2013 3:04:14 PM

you know, but how well you do the job – which is very threatening to these council members,” he told PNG Report. With the new PNG government calling for university councils to be reformed, Schram used his first council meeting to raise the prospect of reducing Unitech’s council from 32 members to nine.

A low-level migration official had been very active. He secondly raised issues with the existing set of critical third-party reports, including the paperwork that detailed that all audits since 2006 were negative, and told the council it had not made its management team accountable for the various failures. “I think any professional who takes over an organisation will just show the present state of the organisation – you know this is where we are at and these are not my words but these are external reports which show where we are standing – then you analyse it and make a strategy

Dr Albert Schram was deported twice from PNG in four weeks.

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Schram.indd 58


26/03/2013 12:09:32 PM

and a plan that will allow you to leave the organisation in somewhat better shape after your term is over,” Schram said of his approach. “In my view, I was doing something absolutely routine.” The vice-chancellor was not solely unveiling corruption either, as audits of Unitech’s finances already implied that mismanagement was taking place. “Unitech, unfortunately, is the only state institution in PNG that gets an adverse opinion from the auditor-general, so it is quite obvious that there is something wrong. It was public knowledge.” Perhaps the big difference was that Schram took action on these findings. He thought he started the process of making reforms “very gently” but it didn’t take long for council figures to go to bizarre lengths to undermine him, including several failed attempts to dismiss Schram. “The former council basically panicked,” he said. “During that process the degree of mismanagement and fraud in the previous management team became apparent through an internal inquiry that was ironically initiated


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by the former council itself.” That inquiry into infrastructure spending, which was started by the council’s finance and general purpose committee, centred on a 675,000 Kina reimbursement cheque made to the then head of electrical engineering Narayan Gehlot. “The management team wrote the terms of reference for that internal inquiry – they worked long and hard for three weeks and found all the documents but it became quite clear that not all of the expenses which were claimed could be justified – so that is what set the whole thing in motion,” Schram said. Apart from the later series of arrests, other key events of subsequent months included a student revolt against former chancellor Philip Stagg’s attempt to dismiss Schram without council authorisation. Stagg famously climbed a fence to escape an angry student mob which set fire to his car. Former council players seem to have also kept a power struggle alive, with the PNG government’s inquiry into Unitech mainly centred on Schram’s qualifications, which he finds baseless.

“I heard from my lawyer that there is a one-page form and anybody with a grudge against an expat can basically fill that out and then they won’t be allowed into the country again.” Dr Albert Schram

“The only thing they could come up with for almost a year to try and fire me again was my qualifications. Obviously, they couldn’t find out much else wrong. I’ve come out against this inquiry because the terms of reference are extremely biased. I’m afraid it will not be conclusive – just a waste of money. “Of the seven objectives, six are about my background, then there is only one objective relating to council which is very limited related to its legality.” With Schram kept out of PNG, an impasse of protesting students and staff demanding his return was still underway at the time of publication.


3/25/2013 3:04:55 PM



GOVERNANCE Martyn Namarong was interviewed by Phillip Adams on ABC Radio National last year.

TALKING CORRUPTION Award-winning blogger Martyn Namarong recently toured Australia for a series of United Nations-sponsored talks on corruption in Papua New Guinea. Unsurprisingly, he isn’t convinced that the newly elected PNG government will make much of a difference.


N WHAT WAS ALSO A recognition for the growing power of internet-based media, Namarong defeated journalists from the mainstream outlets to become the overall winner of PNG’s 2012 Excellence in Anti-Corruption Reporting Media Awards. In a phone interview with PNG Report after making a speech at Australian National University in Canberra, Namarong found it hard to name any parliamentarians he thought were genuinely anti-corruption. “There are people in the middle benches like [Oro Governor] Gary Juffa,” he said. “If there is hope in this Parliament it comes from the middle benches who are sort of a loose group of opposition and government backbenchers, with the most vocal being Gary.” Aside from these observations, he said one of the best things that happened as a result of the election last year was that PNG now had a strong Opposition party. As for Task Force Sweep, the specialised anti-corruption police unit formed after the Somare government

“It’s an unofficial mandate to go against those who are not in the political coup.” MARTYN NAMARONG 60

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unravelled in Parliament in August 2011, Namarong did not dispute the conception that it was designed to investigate politicians not aligned to Prime Minister Peter O’Neill. “It was initially created along those lines after the constitutional crisis, so that is sort of its mandate, if you like – unofficially that’s its mandate,” he told PNG Report. “It’s an unofficial mandate to go against those who are not in the political coup.” Essentially Namarong views most politicians as part of a predatory elite who thrive on the proceeds of corruption. He described the elite as highly educated Papua New Guineans who were aware of the government systems and how they worked and who then used them to their own advantage at the expense of the ignorant or apathetic general public. Ultimately he believes the people of PNG need to empower themselves in order to fight corruption and that an increase in small-holder agriculture offers the best opportunities. “It creates a broader spread of people who are powered economically,” he said. “The beginning of a creation of an empowered civil society is needed to respond to those predatory elites. “It’s about how wealth is channelled and who controls it because with money comes power.

“We need to sort of create a different playing field. That will not come out of the elite. There is no way that this group is going to build the road system needed for agriculture, or the bridges – there is no way they going to do that. It has to be the people themselves.” While Namarong is less active on his blog this year, he was surprised to recently hear that he had a following from Australians working for key banks who wanted to learn more about certain PNG figures. Despite the apparent monitoring, Namarong believes Australia is generally not focusing on the money coming in from PNG, with its authorities more concerned in relation to foreign money inflows based around drugs, gun smuggling and terrorism. A blogger who was selling buai (betel nut) in Port Moresby to support his livelihood, Namarong left the capital last year to return home to Western province as a consequence of the government’s buai stall crackdown. But he believes buai selling in the capital may return at some point once enough people realise the atmosphere the sellers created “isn’t there”. “The betel market is a social hub,” Namarong said. “It is like the pub for Aussies – that sense of community has been lost.” APRIL 2013 PNG REPORT

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3/25/2013 3:06:17 PM


Words by Blair Price

Government dealmaking

The Antelope-2 well gas flare. Photo by Blair Price

Govt to decide

Gulf LNG fate

After years of various LNG and condensate proposals, the Papua New Guinea government is expected to have the final say over how to commercialise InterOil’s significant Elk-Antelope field in Gulf Province. 62

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3/25/2013 3:06:52 PM


nterOil’s existing 2009 project agreement with the PNG government is based on a conventional LNG development operated by a world-class LNG player, but in recent years it championed modular and floating LNG development. These approaches might save considerable expenditure but are less proven, especially in the case of FLNG which is yet to start up anywhere in the world. Consequently, the government pressured InterOil into bringing in such a suitable LNG operator in accordance with the 2009 project agreement, and after more than a year the final deadline for bids arrived in late February. InterOil chief financial officer Collin Visaggio, who revealed that at least two supermajors were in the running last year, recently confirmed to that two supermajors were involved in the final bidding round for an operating stake of the Gulf LNG project and the ElkAntelope field which underpins it. But he could not disclose whether these separate bids were non-binding or discuss what possible due diligence was associated with them. “I cannot comment on the specifics of the bids as we are in the closing phases,” Visaggio told in March. “We will disclose to the market in accordance with the continuous disclosure requirements.” In response to a question about possible InterOil board-level divisions over how to develop the project, the CFO revealed that the ultimate decision would be made by the government. “There are no differences at board level,” Visaggio said. “The development decision will be recommended by the strategic partner and the PNG government will decide and approve the best commercialisation approach.” The new partner’s recommendation will relate to developing an initial 3.8 million tonnes per annum LNG plant for the project. Visaggio said InterOil was holding discussions with the government over amendments to the 2009 project agreement, which was based on developing 7.6-10.6Mtpa capacity back when the project was known as Liquid Niugini Gas. There are other loose ends, as the Mitsui Group has lent almost $US12 million to InterOil for their long-running condensate stripping APRIL 2013 PNG REPORT

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“The PNG government will decide and approve the best commercialisation approach” Collin Visaggio project based on Elk-Antelope. “Mitsui are currently working with us on the condensate stripping facilities required for the Gulf LNG project and awaiting the partner outcome,” Visaggio said. A wild card is what stake of the field the PNG government will end up with. Prime Minister Peter O’Neill revealed in November there was conditional Cabinet approval for the government to acquire an additional 27.5% stake to own half of ElkAntelope’s resources. The government has been quiet about that plan ever since. Visaggio said the priority was to bring a reputable partner to the government. “We are working as swiftly as possible to conclude the strategic partner process,” the CFO said.

New possibilities

While there are hopes of no further delays, a new operator of InterOil’s Gulf LNG project may result in new commercialisation strategies. Perhaps the most obvious example would be if a PNG LNG project partner was in the running and selected, as the ExxonMobil-led joint venture is on the hunt for more gas to support at least a third train expansion. In such a scenario, the group could aim to pipe Gulf Province gas into its significant infrastructure, which is in the latter stages of construction, with first exports expected in 2014. GLJ Petroleum Consultants has estimated that InterOil’s ElkAntelope and Triceratops fields in Gulf Province host resources of 10.3 trillion cubic feet of natural gas equivalent with about 0.4tcfe coming from the less-drilled Triceratops field. The PNG government is using separate Elk-Antelope estimates made by Gaffney Cline and Associates, which are yet to be publicly revealed. To make matters more interesting, InterOil had a rig on location for its next well, Elk-3, in Gulf Province. Success at that well could boost valuation estimates for the field and it is unclear how that might impact the ongoing negotiations between the government, the bidders and InterOil. 63

3/25/2013 3:07:08 PM


Words by Blair Price

Trial mining

Crater Mountain image courtesy of Gold Anomaly

Starting small Inspired by the profits made by artisanal miners, Gold Anomaly plans to start small-scale mining at its Crater Mountain project in Papua New Guinea to fund more drilling.


A more recent snap of Crater Mountain.


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rtisanal mining of the project’s shallow highgrade zone is estimated to have produced 15,000 ounces of gold through basic digging and gravity separation techniques since 2005. The local miners were removed in 2011, but their mining did prove that the fractured oxide material could relinquish high gold grades with relative ease.

Gold Anomaly managing director Greg Starr was impressed from a metallurgical point of view, and said they used running water, a sluice box and garlic mashing-style mortars and pestles for hand-crushing gold separation. The explorer, which is working on getting a variation on its project licence, aims to put a 100m-deep adit into the artisanal mining zone and then put in some cross cuts off it. The adit is expected to be at a slight angle and the particular area targeted has previously delivered strong drilling results, such as a 2m intersection grading 98.2 grams per tonne gold. The adit development will only require an excavator and a bulldozer and Starr expects it to start in the coming months. If it all goes to plan, Gold Anomaly will later apply for a special smallscale mining lease with production centred on using simple gravity separation techniques. The explorer has already estimated there could be 100,000 ounces of gold in the fractures and ore shoots at this zone, but they could extend more at depth. As part of this shift towards early

cashflow generation, Gold Anomaly hired mining engineer Richard Johnson as its PNG operations manager. Johnson supervised the profitable operations of the Tolukuma gold mine between 2002 and 2005 when it was owned by DRDGold. Financing the small venture is also largely taken care of with Gold Anomaly lining up a $A6.9 million rights issue underwritten by key shareholder FreeFire Technology. Starr said the big picture to this strategy was self-funding more drilling into the project’s mixing zone, an area with lower grades but broader mineralisation which may prove to be suitable to support a conventional open cut style operation. There are also question marks over the mineralisation found deep in the project area. A 1km deep hole indicates that a top of a copper porphyry system might start there, but a lot of funds will be needed to scope out a deposit at those depths. It remains too premature for Gold Anomaly to reveal the possible costs per ounce and production rates for its proposed small scale mining at Crater Mountain. APRIL 2013 PNG REPORT

3/25/2013 3:07:53 PM

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3/25/2013 3:08:25 PM




GOLDEN FAITH Gold prices have struggled over past months but its safe-haven investment status cannot be ignored.


ESPITE WORLD GOLD Council figures in February which revealed that central banks bought the most gold last year since 1964, many financial commentators and brokers have talked down the prospects for higher gold prices so far this year. Mine Life founding director and senior resource analyst Gavin Wendt

“The move has raised questions about whether bank runs could be set off elsewhere within the euro zone.” GAVIN WENDT 66

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was one of the few who bucked this trend, and he only sees more reasons to invest in precious metals as quantitative easing policies continue around the globe. A recent turning point for gold was the unprecedented European Union plan to tax bank deposits in Cypress to fund a new 10 billion euro bailout to save two struggling banks in that Mediterranean island nation, news which lifted it back over the $1600 an ounce territory. This legally questionable move consisted of a one-time tax of 9.9% on bank deposits of more than 100,000 euros and a 6.75% tax on Cypriot deposits under that amount. “The move has raised questions about whether bank runs could be set off elsewhere within the euro zone,”

Wendt said in his report after this news emerged. The analyst remains bullish on gold and believes that after a period of consolidation around its long-term support line of $US1600 an ounce, it “will inevitably push higher”. “Whilst gold has recently been at an eight-month low, and as most of the major investment banks have turned bearish on gold, the precious metal has staged yet another recovery,” Wendt said. “The reason for my positive outlook on gold relates to the fact that the fundamental drivers for investing in gold have not altered, and as the people of Cypress are finding out, we are silly to put our trust in any government. Instead, the better option is to invest in gold.” APRIL 2013 PNG REPORT

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PNG EXPULSION When Prime Minister Peter O’Neill late last year decided that Professor Ross Garnaut was not welcome in PNG there was consternation in many quarters. Why this would happen to someone who had built a close connection with PNG over more than four decades was a question asked commonly enough.


N THE SURFACE it seemed the PM had been upset by a suggestion that he wanted to get his hands on the funds controlled by PNG Sustainable Development Program Ltd (PNGSDP), which had inherited the equity stake in the Ok Tedi copper/ gold mine following the withdrawal of BHP Billiton. In 2001, BHP had decided it preferred to shut the mine down because of the immense environmental damage it had caused since mining commenced in 1984. But because the government and local communities wanted the mine to go on, BHP decided to transfer its 52% stake to PNGSDP. PNGSDP was given a broad mandate to help mitigate the impact of the planned mine closure in 2013 with a role of using one-third of Ok Tedi dividends for immediate development within Western 68

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Province and in the rest of the country. The rest of the money was invested in Singapore for long-term use after mine closure. Right at the start, BHP appointed three of the seven PNGSDP board members and a Singaporean director, because the entity was registered in Singapore. Only one of the other three members was a direct PNG government nominee, courtesy of the PNG Treasury. Garnaut, who had a long history in PNG dating back to pre-independence days, was made chairman. To maintain its independence, the board was not required to report back to or take instructions from BHP Billiton, although it was required to submit annual reports. In the past year, following recommendations from a peer review, BHP has given up its role of directly appointing the three directors, passing this task to the PNGSDP board. There has been no mechanism APRIL 2013 PNG REPORT

3/25/2013 3:10:14 PM

in place to replace BHP-appointed directors. Prior to the recent change, one director, Jim Carlton, chose to retire and BHP unilaterally appointed an expatriate in his place. All of this seems innocuous enough. In fact, perceived probity is one of the key reasons why the national government acted the way it did against Garnaut and, indeed, was offended by the manner in which his successor as PNGSDP chairman was chosen. Prior to the change, Garnaut made a very sensible move and advised O’Neill that he was stepping down as PNGSDP chairman. O’Neill immediate began to contemplate who he might consider a good replacement. Much to his consternation and surprise, the PNGSDP board, without prior warning, suddenly replaced Garnaut with former PNG prime minister Sir Mekere Morauta and presented this to O’Neill as a fait accompli. Sir Mekere was one of the most highly respected former national leaders prior to his decision not to contest the 2012 national election. But there are many in high political office, possibly including O’Neill,

who do not share his views. Although Sir Mekere was responsible for financial sector reforms that benefitted the national economy, while he was prime minister the country faced a serious recession with the situation deteriorating under his watch. Investors began to flee the country and pessimistic views held sway about the future of the nation. The turnaround came with surprising speed when the Somare government took office in August 2002. Confidence in future economic directions grew steadily and then gathered momentum in subsequent years with the fillip providing by rapidly increasing commodity prices and the approval of the $US19 billion PNG LNG Project. The government’s shock and anger at the manner in which Sir Mekere replaced Garnaut has its roots elsewhere. It was Sir Mekere as prime minister who approved BHP’s withdrawal from the Ok Tedi mine and who agreed that PNGSDP would indemnify BHP Billiton against any future litigation over the environmental damages it had caused.

This PNGSDP indemnity was also extended to the PNG government. What has made some political leaders irate is the possibility – and the perception – that Garnaut had been provided a plum role in PNGSDP and at the time Sir Mekere had agreed to the BHP departure. These leaders also fear there could have been an implicit understanding that one would replace the other if and when such an opportunity arose. The latest peer review completed at the end of 2011 pointed to problems of transparency and accountability with PNGSDP, including criticisms that PNGSDP had circumvented the criteria for ongoing national development expenditure by questionably categorising projects within Western Province as “national projects”. The PNGSDP board has not responded to these criticisms and has conveniently swept them under the carpet as though these questions were not legitimate or that they did not require a response, confirming the view of some critics that they are a law to themselves. • First published in on March 20.

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HIGH-RISK ENVIRONMENT An expatriate on her way from Jacksons International Airport to a hotel in Port Moresby was carjacked by seven armed men and abducted. The offenders were armed with homemade shotguns and a knife, which one of the men held against the woman’s throat. The offenders drove the victim in her vehicle to a nearby but remote location, where she was held captive for about two hours and repeatedly raped. The victim managed to break free and escape and two other women she came across contacted police. The police quickly arrived and took the woman to a medical facility.

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N ANOTHER INCIDENT, three expatriates had just left their residential compound when the immobiliser in their vehicle malfunctioned, turning off the engine and unlocking all the doors. A nearby group of up to 30 men saw this occur and rushed toward the vehicle and opened the doors.

It was reported that up to eight of the offenders entered the car with the victims and proceeded to punch, kick and stab the male driver, inflicting serious injuries. The two female victims, one in the passenger seat and one in the back seat, were also set upon. They were punched and sexually assaulted by the men.

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These cases are a grim reminder of the high levels of serious crime that regularly occurs throughout Papua New Guinea, particularly in the major centres of Port Moresby and Lae. “The frequency of these types

of incidents is actually quite hard to quantify as there are few if any agencies that maintain statistics on these types of attacks. There are also numerous reports of incidents occurring in remote locations that

are not making it into the media,” International SOS regional security director Simon Francis said. “From our experience these types of incidents seem to have increased since the last federal election.


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This may be due to police having limited resources to combat this type of crime or it may indicate the constant improvement in access to information coming from the ground,” Francis said.

COMPLY WITH THE ATTACKER’S DEMANDS Unfortunately, there are no hard and fast rules for responding to these types of attacks. The general advice and first rule is to not resist or

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the influence of drugs and or alcohol and so attempting to reason with them may also exacerbate the situation. “Our general advice is to comply with the attacker’s demands, hand over any items of value and declare

any movements prior to acting so that the attacker knows what you are doing and does not perceive a threat,” Francis said. Tell your attackers in a slow, clear and loud voice, without yelling, that you are about to take out your wallet, while attempting to slowly put some distance between you and the attackers. If you are seated in a vehicle this equally applies to your movements, such as saying that you are putting the vehicle in park or undoing your seatbelt. “Carrying a robbery wallet is a good idea. A robbery wallet is an old wallet in which you keep a small amount of cash, an old photo, some useless receipt stubs and an expired credit card that you can quickly hand over to attackers if being robbed. “When they look inside it looks real enough but you have any valuables hidden somewhere else on your person,” Francis said. Do not attempt to injure the attacker/s particularly in PNG as under the wontok system an injury sustained by one member of the community is recognised

“In some instances, curling into a ball has been successful in thwarting abduction.” SIMON FRANCIS as being sustained by the entire wontok (family). “Many people ask me if they should carry a firearm, and this is typically not recommended. There are a number of reasons for this, such as the firearm being turned against you, so unless you’re very familiar with firearms and have regular opportunities to practise firing them I would warn against their use,” Francis said. “In a hold-up or car-jacking situation where there is a female present, personnel should be very careful as there is a real risk of the female companion falling victim to rape,” Francis said. In instances of car-jacking, female occupants should always try to exit the vehicle first so as not to be abducted along with the vehicle. Upon exiting the vehicle, females should make themselves as hard to carry

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as possible, in some instances curling into a ball has been successful in thwarting abduction. “The key thing to remember in these situations is that your life is far more important than any physical possessions and while we provide some basic tips here, the key to surviving these situations is to avoid them and get the proper security awareness training.” WHAT SHOULD MANAGEMENT DO? Management need to understand the various risks faced by their employees, particularly in a demanding operating environment such as PNG, and prepare them accordingly. A clear message should be broadcast to the company’s personnel that the company values life over property. Training and briefing sessions should be provided to employees on the risks of the environment and how to avoid them.

It is often on routine trips that personnel let their guard down and are attacked.


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Training should include recommendations on the display of valuables, carrying cash and how much or how little cash to carry. “Situational awareness is vital in the PNG context. Your personnel should be given a clear understanding of driving and vehicle related risks, areas prone to hold ups and carjackings, passenger responsibilities, how to approach intersections and compounds and how to identify the possible signs of an impending attack. “I would recommend carjacking awareness training for any new expatriates entering PNG,” Francis said. Further, operational protocols should be designed around the above types of risks, such as communication plans and check-in procedures, as part of journey management planning. This includes notifying the base or the office when you are departing, checking in along the route to confirm everything is okay and then notifying of arrival at the destination. Trips, even short journeys should be planned and it is often on routine trips that personnel let their guard down and are attacked. Vary your routes and timings and your personnel should be “missed”

TIPS TO HANDLE A CAR-JACKING OR ARMED HOLD-UP • Comply with your attacker’s demands • Carry a ‘robbery wallet’ • Get security awareness training • Ensure your company has journey management procedures if not arriving at their intended destination within a specified timeframe so that contact can be quickly made. If your company vehicles have an immobiliser, arrange to have them removed. They are purely an asset protection device and in high risk environments such as this, only place people in danger. In PNG a security escort service or support from a trusted person who is conversant with the risks and mitigation measure is a mandatory precaution. These activities are only a few of the precautions and procedures that should be taken. A company’s specific operations and profile would dictate their needs in greater detail.


26/03/2013 12:13:04 PM

Growth issues

Words by ex-kiap Paul Oates


Feeding Papua New Guinea Food is such an integral part of human life that we sometimes tend to take food production as an automatic “given”. Millennium Development Goals for the year 2050 are predicated on the expectation that the world’s current 7 billion people will increase to 9 billion by that time.


n a somewhat smaller but parallel universe, PNG’s population could be anticipated to grow from the present 7 million to roughly 9 million, but by 2023 instead of 2053 if the present growth rate of 36% over the past decade continues unabated. In a speech to the Port Moresby Chamber of Commerce and Industry in February, ANZ chief executive Mike Smith said PNG could benefit from the continued urbanisation and industrialisation of Asia, with the prosperity of the nations “underpinned by a supercycle in mining and energy, and increasingly in agriculture”. “I believe agriculture has the potential to be the next sector in PNG to experience significant Asia-led growth,” he said. “Here there is enormous upside in commodities like palm oil and coffee; an upside that will also require significant investment which could in turn create a new wave of additional jobs in rural communities.”


Oates.indd 77

PNG Report editor Blair Price raised some considerations in a later interview: “As for agricultural development, I think ANZ is being too optimistic. PNG is already facing stiff competition from Indonesia in oil palm and many parts of the country still have food production and drinkable water issues despite metres of annual rainfall and fertile soil. ‘“Then there is the dire lack of infrastructure to consider.” Price clearly seems to have a more “down to earth” view of what might be viewed as practical reality versus hyperbole. One may possibly feel compelled to ask, is the view from Smith’s office window the same as the one from Hanuabada on Moresby’s shore line or the small house window of an Ahi villager around the city of Lae? Land is always an issue in PNG, where the concerns of traditional clan ownership can meet head-on with any boardroom-planned “development”. The Port Moresby Chamber of Commerce recently released plans 77

26/03/2013 12:14:24 PM





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to cater for the anticipated expansion of their city. The chamber’s website explains: “On current projections the city will grow from around half-amillion to over two million by midcentury.” The National Capital District Physical Planning Board has, however, reportedly received a petition from Motuan landowners from the nation’s capital demanding extension of the comments and objections period for the PoreporenaNapanapa Local Development Plan by a further 12 months. “The petitioners said that the 28-day minimum period for comments and objections, which ran from December 2012 to February 15, 2013, pursuant to Section 59 of the Physical Planning Act, was harsh and oppressive.” The petitioners continued: “We are unsophisticated persons with untrained eyes and minds that have yet to read the Poreporena-Napanapa Local Development Plan.” The petitioners demanded the extension to enable affected villagers to put together a technical team and a program to prepare an alternative plan. While PNG is experiencing various growing pains, developed APRIL 2013 PNG REPORT

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economies are increasingly worried about the impacts of continual global population growth. A frightening tone was set in 2011 by a UK government-commissioned report on global food and farming futures. Professor John Beddington, the British government’s chief scientific adviser and report author, raised the prediction that world’s population is forecast to reach 9 billion in 40 years time. The report claimed that urgent changes were needed to even feed the existing world population. “With the global population set to rise and food prices likely to increase, it is crucial that a wide range of complementary actions from policy makers, farmers and businesses are taken now,” Professor Beddington is quoted by AFP as saying. The UK report is clearly directed at practicalities and not merely wishful thinking. In the Executive Summary it explains: “The solution is not just to produce more food, or change diets, or eliminate waste. The potential threats are so great that they cannot be met by making changes piecemeal to parts of the food system. “It is essential that policy-makers

Photo courtesy address all areas at the same time. “The food system makes extensive of Tony Morley use of non-renewable resources and consumes many renewable resources at rates far exceeding replenishment without investing in their eventual replacement. “It releases greenhouse gases, nitrates and other contaminants into the environment. . “Unless the footprint of the food system on the environment is reduced, the capacity of the earth to produce food for humankind will be compromised with grave implications for future food security. Consideration of sustainability must be introduced to all sectors of the food system, from production to consumption, and in education, governance and research.”

“Unless the footprint of the food system on the environment is reduced, the capacity of the earth to produce food for humankind will be compromised with grave implications for future food security.” Global Food and Farming Futures report 79

26/03/2013 12:15:27 PM

Harvesting peppers in the US, where monoculture is widespread. Photo courtesy of Paul Oates

Future Challenges for feeding PNG

Some potential problems for PNG include land alienation, both previous and anticipated. Together with the question of land ownership are the problems associated with equitable wealth distribution. Broad scale agriculture is not easy due to PNG’s collective land ownership traditions. Communes or co-ops have not worked well in the past due

to diffused responsibility and governance issues. Ownership and the distribution of profits will need very careful consideration. Perhaps an agreed method of the leasing of suitable land to grow food may be the answer in the short term. The concept of a fixed-term lease with a set number of landowners could still be a problem when the issues of who is included and who receives what share of any profit.

Perhaps a legally binding contract including recognised prior Social Mapping might be an answer prior to any contract being officially recognised and binding on both parties. If communal land is not looked after, or quickly becomes exhausted, is something that needs to be addressed. Tropical soils are quickly leached of nutriments and the costs of fertiliser and insect and anti-fungal sprays are high. What happens if

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those who decide to make their land available for leasing then find it impoverished after a lessor departs? Tree crops that produce commercial fruit and nuts may take many years to become established. This will require a more long-term concept of land usage. If future population pressures then cause an urgent need for the same arable land to be used for essential home gardens, what happens to the previously planted fruit trees and lease contract? There is a current lack of infrastructure that will need careful planning and resourcing. Port Morseby is not connected to the main source of agriculture coming from the Highlands. Types of traditional PNG foodstuffs do not travel well. Climate, rainfall and lack of available maintenance funds have been consistent problems in keeping roads and bridges from being destroyed. A railway track would suffer the same problems, although it might be easier to maintain. Another real problem may also be who owns the land that any road or railway passes through. Compensation may appease the

current landowners, or those who claim to be landowners, however future claimants may well decide to up the ante. Fuel in PNG is expensive too and must be amortised across the whole cost of producing, transporting and distributing produce. Monoculture is very labour and cost-intensive but does, or should, provide economies of scale. Traditional PNG gardeners are used to growing a variety of fruits and vegetables in the same garden and any change will take time to foster. A varied diet needs fresh vegetables and protein. Meat can be grown in intensive small areas. However, that operation requires the extra overheads of growing or buying food, transporting the fodder to the site, animal husbandry costs, vet costs, transporting product to consumers and so on. But there is also an additional risk as disease in tropical climates can quickly decimate a herd of cattle or a flock of chickens. On a recent tour of US farms I observed massive, broad-scale agriculture. This seems to be the way of the future.

“Foreign fishing companies are now poised to further exploit PNG’s rich fishing resources.” The methodology is, however, alien to traditional PNG food production and very expensive to set up. Labour costs are also expensive and, in the US model, itinerant or seasonal workers are employed with what seemed to be very low wages. The traditional exploitation of oceanic resources has been limited to coastal fishing. Foreign fishing companies are now poised to further exploit PNG’s rich fishing resources. The planned opening of four new tuna canneries is an example. However, had PNG done her research before this decision was made? Could the same situation of exhausting the local fish stocks happen to PNG as has happened elsewhere? How will PNG monitor the planned expansion of foreign fishing? The PNG government urgently needs to do some thorough research and extensive planning to ensure local food production keeps pace with increases in population.

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Inside Track

Fuelling the wheels of corruption


ecent events have served to emphasise that the record 2013 national budget, fuelled by extravagant public sector borrowing, will serve one function above all else. In a sense the clock is being turned back. The 2013 budget forecast that public sector domestic debt would have risen by 21.5% or 1.1 billion Kina to K6.2 billion at the end of last year with a further increase of 35.8%, or K2.23 billion, to K8.43 billion by the end of this year.

The biggest call on the increased funding will be for various forms of corrupt practices. The external public sector debt, nearly all of which is attributed to multilateral agencies and bilateral creditors, last year rose by 6.1%, or K140.3 million, to K2.4 billion with a further increase of 19.6%, or K475.9 million, planned this year. The budget said other significant state guarantees, given under exceptional circumstances, included the Independent Public Business Corporation’s (IPBC) “borrowing to fund the state’s share of the LNG project of $A1.7 billion (K3.8 billion) and unfunded superannuation liabilities of around K2.1 billion”. It seems the financial experts in the PNG Treasury have some difficulty in discerning the difference between “borrowing” and IPBC’s “exchangeable bond”, involving essentially an asset swap, that brought in the initial $A1.7 billion used as payment for the government stake in the PNG LNG Project. Even though government revenue and grants is forecast to reach a record level of K10.5 billion this year, up from K10.16 billion in 2012, the government is planning to ramp up 84

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expenditure by K2.47 billion to K13 billion on the back of huge increases in public sector debt. Even though the government has proclaimed the necessity of such a massive ramp-up in spending because of the need for better service delivery, particularly for education and health, and for infrastructure development, a case seems to be building that the biggest call on the increased funding will be for various forms of corrupt practices. The end result will be that project implementation will still show as woeful a record as in the past because of projects that have been stalled after being fully funded and/or because of vast amounts illegally siphoned away by bureaucrats, contractors and others. Already the government’s Investigation Task Force has reported that in the case of a recent project at the Port Moresby General Hospital it was found that the successful tenderer did not have adequate funds to commence the task and needed advance payments. By the time all payments were made the project remained unfinished and had to be re-tendered. Task force head Sam Koim adopted the South African terminology of “tenderpreneurship” to describe what he called “the booming of bogus companies and routine domination of government procurement process by elitist capture groups for private gain, while the masses continue to suffer”. Parliament’s Public Accounts Committee has just disclosed that the latest Auditor General’s report on the 2008 national budget – supposedly during the years of “fiscal responsibility” under the previous Michael Somare government – showed the transfer of K830 million from the development budget to the recurrent budget. Treasury and National Planning officials openly admitted this was illegal and claimed they did not have

any knowledge how or why this happened. The Auditor General recently noted that his office had only been able to audit the much-acclaimed, and much-abused, District Services Improvement Program, for 12 of the nation’s 89 districts, with another 17 currently being worked on. Most of the audits had been poorly conducted, he said. Early this year, parliament Speaker Theo Zurenoc disclosed that up to K59 million had been fraudulently paid out by parliament over the past two years to members of parliament, prominent lawyers, senior police personnel and high ranking individuals in key government and non-government positions. In view of these revelations it could be fair to assume that much of the record government spending this year will be put to the greatest use to grease the wheels of corruption, which former prime minister Sir Mekere Morauta once famously described as being “systemic” and “systematic”.

Project implementation will still show as woeful a record as in the past Although the jury may still be out at this early stage, just after the first quarter of 2013, it seems more than likely that corrupt practices will funnel away a bigger chunk of the deficit than the national infrastructure or services it was meant to rejuvenate. After all, some of the nation’s publicly elected guardians will be busy attending classes at the University of Papua New Guinea and other similarly august institutions. The Post Courier recently reported (March 21, 2013) that at least seven MPs, including three cabinet ministers, have enrolled as full-time students at UPNG. APRIL 2013 PNG REPORT

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3/25/2013 3:21:30 PM

PNG Report - April 2013  
PNG Report - April 2013  

In this issue: • Dam challenges – the PNG tailings debate re-opens • Pure Power – generating opportunities • POM property – the rental bubbl...