THE TOKAUT BLOG
Scramble for Bougainville’s Resources: A Window Into Mineral Exploration Culture
While the extraction of natural resources such as minerals, oil and gas, frequently generate significant revenue flows, its volume diminishes as each stakeholder takes their cut.
There are the financiers, the equity interests, the contractors and subcontractors, the management, the workers, all of whom absorb a sizeable volume of the revenues. Then there are dividends and royalties that go to government and landowner companies, which historically have been cloaked in financial secrecy and mismanagement, with some honourable exceptions. Finally, there are tax receipts that go into the consolidated budget, which itself is a leaky bucket owing to corruption and the associated problem of maladministration.
What begins as a raging torrent ends for the average citizen of PNG as an easily forgettable drop.
The entire undertaking generally begins with the process of exploration, where speculative companies engage in prospecting seeking out exciting new deposits that will attract significant investment and interest from the major corporate operators.
But exploration involves much more than just technical work studying geological activity, it involves building a coalition of stakeholders behind the company and proposed project, including landowners, provincial governments and national government leaders.
Bougainville is an autonomous region and future independent nation, that has had a particularly difficult relationship with the mining sector, after the Panguna mine was pushed through by the then Australian colonial administration, against the warning and protests of impacted communities. As is now well know the mine sparked a war that saw many lose their life in the fight for land, environment and independence. This paved the way for the mine’s closure and a referendum where Bougainvilleans voted overwhelmingly for independence.
Now Bougainville stands on the perch of independent statehood, foreign owned exploration companies are entering the island in a big way, arguing that Bougainville’s rich resource base could be monetised generating a significant revenue stream for the Bougainville Government. Under legislative changes in Bougainville, to secure a mining lease, an exploration company requires both government and landowner backing. However, landowner consent can be given through landowner organisations, which has generated questions over how representative such a body or bodies may be in a contentious environment.
A new report by research centre Jubilee Australia, documents some of the methods being used by foreign exploration companies to secure leases over mineral deposits on Bougainville, including the still seismic deposit that exists in and around the Panguna pit. What the report details is a number of concerning dynamics.
In today’s PNGi blog we will look at the headlines from this study by Jubilee Australia, which led to litigation before Australia’s Federal Court.
Key Corporate Players
There are a number of corporate players jockeying for mining rights over Panguna and other major deposits on Bougainville. Each has its offshore backers, and each has its onshore supporter base.
One notable corporate actor is RTG Mining. They were the ones that initiated litigation against Jubilee Australia over the draft report.
RTG Mining Inc, Jubilee Australia notes, is incorporated in the British Virgin Islands commonly known as the BVIs. While it is perfectly legal to incorporate an entity in the BVIs, the jurisdiction is nonetheless widely regarded as a corporate secrecy location where the public is unable to openly access corporate filings such as shareholder registers and annual financial statements.
RTG Mining Inc, Jubilee Australia reports, has a majority interest in the Australian company Central Exploration Pty Ltd, along side a number of minority shareholders include Ian de Renzie Duncan who has been directly involved in negotiations on Bougainville and was formerly associated with Transpacific Ventures, where he was Executive Director.
Central Exploration Pty Ltd was set up to participate in a joint venture with landowners groups in Panguna, Jubilee Australia note. In particular, Central Exploration Pty Ltd are partnering with the Special Mining Lease Osikaiyang Landowners Association (SMLOLA) through the joint venture, Panguna Minerals Ltd. SMLOLA’s Chairman is Mr Philip Miriori.
Alongside RTG, competing for rights over Panguna is of course Bougainville Copper Limited (BCL), which was the original operator of the mine until it was closed in 1988/89. Up until 2016, Anglo-Australian company Rio Tinto was the majority shareholder. Their shares were transferred to the PNG and Bougainville Governments in 2016.
According to Jubilee Australia ‘BCL supports and has support from the Panguna Development Company Limited (PDCL) … PDCL describes itself as “owned by five major clans from Panguna area including the recognised Lands Title Commission agents who represent block owners in the former special mining lease area”’. They continue: ‘The company’s current chair is Michael Pariu, listed on the BCL website as a “Bougainville Copper Envoy”. Previously, Pariu was a member of the ‘old’ Panguna Landowners Association which fell into dispute with the ‘new’ Panguna Landowners Association in 1987/88 over the latter’s efforts to close the Panguna mine.’
Another important offshore player on Bougainville is the Western Australian mining company Kalia Limited, which is now known as MCB resources. According to Jubilee Australia its top two shareholders appear to be registered in Belize. Belize is another often criticised corporate secrecy jurisdiction.
MCB Resources Limited is exploring copper, gold and energy deposits in the Mt Tore region of North Bougainville. During a key part of this period the non-Executive Chairman of Kalia Limited, as it was then known, was David Johnston, a former Australian Minister for Defence.
MCB is in partnership with a group known as the Toremana Resources Owners Association. MCB claims the association represents the seven major clans on exploration licenses 3 and 4 in North Bougainville.
In 2019 Caballus Mining Pty Ltd emerged as another company interested in Bougainville’s ore deposits, in particular the reopening of Panguna.
Caballus is an Australian company with a single director and ultimate shareholder, Jeffery McGlinn. McGlinn is an Australian businessman who previously worked in mining support services. He is now also involved in Arabian horse breeding and luxury brand promotion. Caballus’ primary landowner support appears to have come from a group called Panguna Tangku-urang Chiefs.
Initially Caballus Mining had backing from the ABG under then President John Momis. However, following the election of Ishmael Toroama in 2020 that support appears to have been withdrawn.
Yet another player in Bougainville mineral exploration is the Nevada (USA) registered company Numa Numa Resources. A 2021 investor presentation indicates Numa Numa is the parent of a corporate network involved in alluvial gold mining, refining and export, limestone quarrying, and energy generation. The presentation also indicates the company’s interest in supporting Panguna’s reopening.
It has not yet announced a formal partnership with a landowner organisation in Panguna, but Numa Numa does note its local business interests have helped it forge strong local relations.
Finally, a fifth significant exploration company on Bougainville is the PNG registered Wyndale Investment Limited. Its parent company is the Australian registered, Wyndale Holding Pty Ltd. The latter’s Director is Nik Zuks, who is also a shareholder. Wyndale has reported a partnership with the local landowner company Karatapo Resources. The ABG has stated Wyndale does not currently have an exploration license on Bougainville.
Exploration Companies and Landowner Organisations
While the Jubilee Australia report looks at mining exploration across Bougainville, a chief focus is Panguna given its significant role in the crisis.
Jubilee Australia note that there are diverse positions within landowning communities over large-scale mining at Panguna: ‘Not only are there divisions between different pro-mining factions supporting different corporate operators, there are also divisions within communities around Panguna and more generally, over the merits of largescale mining, with significant opposition remaining to Panguna’s reopening in the short to medium term. Companies claiming to have the unequivocal support of the “genuine” landowners of Panguna risk oversimplifying a complex reality.’
Within the factions that support large-scale mining, there are splits over which outside operator they are loyal too.
Noting the important role landowner organisations play under Bougainville’s Mining Act (they can consent to a mining license on behalf of customary landowners), Jubilee Australia observe: ‘In the scramble for resources, exploration companies have presented an overly simplified image of landowning communities, where there is in fact a diversity of opinions and leadership structures. In particular, a number of the main players outlined above have claimed to being the preferred the company to hold rights to or develop the valuable Panguna mine’.
They note for example ‘Both BCL and RTG have issued statements asserting that they have the support of landowners in the Panguna area’.
BCL, in a reply to questions, informed Jubilee Australia ‘Panguna has been highly factionalised since the Bougainville crisis. Numerous factions exist with varying views about any future redevelopment. Outside interests – who do not hold tenure rights – have sought to take advantage of this and weak governance arrangements in Bougainville to deal directly with factional leaders as their primary interface’.
Payment to Landowner Organisations
Given that landowner organisations in Bougainville can potentially green light mining licenses on behalf of their community, Jubilee Australia note challenges issues arise when those landowner organisations are in receipt of money from the corporate actor they are partnering with:
As in other contexts, the practice of companies providing support to local communities in which they operate is not uncommon in PNG and Bougainville. However, where the individuals receiving support are also those whose permission is required for a mining permit, complex ethical issues arise. In Bougainville, several companies have made payments to landowner representatives (or have been alleged to have done so), raising questions about when such payments infringe on the principle of free, prior and informed consent.
In 2017 for example Director of the Office of Panguna Mine Negotiations claimed in a letter to the Minister of Mining that Central Exploration (RTG) is ‘dishing out cash to different individuals and groups to undermine the process ABG has put in place to address the issues in Panguna’.
In its reply to questions from Jubilee Australia RTG claimed ‘the joint venture has employed parties to work on unity and social programs and engage with the Government, the benefits of which have been shared by the community. They are arms’ length and are simply time based for work performed – there are no pecuniary or other benefits provided in a form designed to influence decisions’
Similar issues have arisen for BCL. For example, Jubilee Australia note: ‘The PDCL Chairman and General Manager are both employed by BCL’. Jubilee also notes: ‘In a meeting with Jubilee Australia, PDCL’s General Manager Jeffrey Clason confirmed that BCL provides a monthly grant to PDCL, noting that this is to cover the costs associated with community organising. However, he stated that BCL has no input into PDCL’s decisions and that PDCL’s aim is to bring the landowners together’.
While perfectly legal, these payments raise serious questions.
First, the payments and relationships with these landowner organisations would be the subject of contractual relations in some format, with payment made by one side, in return for services provided by the other. For there to be any real clarity over exactly what is expected for these payments, there is a clear need for these contracts to be made public in order to verify the scope and nature of these relationships.
Second, these payments also point to potential aspects of the Bougainville Mining Act that may need reform. Any decision made by leaders on behalf of a constituency, ought to be made in an environment where the leaders are free from conflicts of interest, whether real or legitimately perceived. This is a basic standard of good governance. As it stands, the current Act does not appear to have safeguards in place to ensure Landowner Organisations are representative and meet the standards of good governance expected of key civic office holders.
For example, it does not need any great foresight to imagine what would happen if a landowner organisation, representing a community with diverse views on mining, consented to a mining license for Company X, under conditions where they were also in receipt of money from Company X.
Questionable Corporate Advice for the ABG
Jubilee Australia also note that a number of executives with mining exploration interests on Bougainville, have also provided strategic consultancy services to the ABG during the Momis presidency, where questionable advice was solicited.
Jubilee observe: ‘As in other countries, it is common for companies seeking to access Bougainville’s resources to meet with government representatives as part of their efforts to acquire mining permits. Over the past five years, there have been many meetings between exploration company executives and representatives of the ABG. While it is not inherently inappropriate for companies to make their case to government, in two cases, leaked presentations prepared for the ABG contain advice on the economy and legal system that goes well beyond a company presenting its case’.
By way of example, Jubilee point to a leaked presentation bearing the logo of Caballus Mining Limited and Bougainville Advance Mining. It proposed setting up an offshore company for managing the region’s mineral interests. Jubilee note ‘The document specified that Bougainville Advance Mining would be registered in the British Virgin Islands. Incorporation in a secrecy haven such as the British Virgin Islands, would in effect deny the public on Bougainville access to all corporate filings’.
Most crucially … the document outlined a plan for legislative reform that would establish a “Bougainville Special Entity”, which would have a significant advantage, if not a monopoly, over largescale mining in Bougainville. The “Bougainville Special Entity” would be 60% owned by the ABG and 40% by a “chosen partner”. The implication from the presentation is that the proposed offshore company Bougainville Advance Mining would be the Bougainville Special Entity, although this is not spelled out explicitly. The four-step plan outlined in the presentation included passing amendments in 2019 to Bougainville’s Mining Act 2015 to “solely enable the Bougainville Special Entity to cut through the red tape of the current application process (which will continue to be in force for all other mining operators) to ensure the mining operations of the Bougainville Special Entity are not unnecessarily delayed… so that the commencement of mining operations coincide with the referendum for independence”. The presentation outlined that the following step would be that selected delegates of the ABG would be empowered to issue “special mining leases ONLY to the Bougainville Special Entity in respect of mining tenements in Bougainville’. Further, the Bougainville Special Entity would then “commence mining operations at specific locations chosen by the ABG on a rapid basis, whilst maintaining stringent environmental controls and mechanisms”.
Another exampled pointed to be Jubilee Australia, is a powerpoint presentation purportedly by Innovative Economic Solutions, a consultancy group mandated by the ABG in 2017 to assist in developing Bougainville’s economy.
The August presentation recommended that ABG achieve at least 50% representation on the BCL board of directors, and then “appoint advisors in ‘behind the scenes’ role to guide & support ABG directors on BCL board”. These advisors, also referred to as “shadow directors”, were to be allowed access to historical records, management contracts, environmental data, and insurance programs. This access to documentation was labelled “IMPERATIVE”. The advisors were to “conduct a strategic review to re-purpose BCL without Panguna”, either by developing an alternative operating model for BCL “that benefits ABG and other shareholders” or dissolving BCL and distributing remaining funds to shareholders. While not spelled out in the presentation, the effect of this “re-purposing” of BCL would be to free up the Panguna mine for other developers.
Jubilee then note:
Having recommended separating the Panguna mine from BCL, the IES August presentation goes on to recommend that the ABG create a wholly-owned offshore company (Liberty Minerals), which would be the holder of the Panguna mining licence. According to RTG and Central’s Statement of Claim in the WA case, and data available through the Pandora Papers, Liberty Minerals was in fact incorporated in November 2017 in the British Virgin Islands, with one of Kalia Limited’s directors its ultimate beneficial owner. The IES August presentation notes that after assuming ultimate ownership of the Panguna licence, the ABG, with landowners’ consent, can “sell all or part / JV/ with developer / operator”. The future operator is also to “assist mine area landowners to incorporate, possibly similar to Toremana, holding interests”. Toremana is the landowner company partnering with MCB in the Mt Tore area.
Reflecting on the advice solicited in these presentations, Jubilee Australia opines: ‘It is not inherently inappropriate for representatives of a company to share information with government representatives. Indeed, this practice is common. However, when this engagement is not undertaken responsibly and transparently, it risks eroding public trust and good governance.’
Jubilee Australia’s research is the first of its kind to synthesise open source corporate filings and leaked documents on mining exploration companies vying for ore bodies on Bougainville.
And for the simple act of analysing corporate filings and synthesising a number of documents that have been leaked publicly, Jubilee faced serious litigation from one of the key corporate players.
That invariably has a chilling effect.
What the report reveals is there are a number of red flags, but without full transparency, it is difficult for the public to interrogate these red flags, such as payments to landowner organisations or their officialdom. Instead, all we have access to is the fact of the payments, and claims made by the companies and landowner organisations, that everything is totally legitimate.
It also raises serious concerns over the kind of corporate structures being promoted by some foreign exploration companies, which appear to violate basic standards of good governance and transparency.
And finally while the Bougainville Mining Act should be rightly celebrated for placing landowner consent at its centre, the fact this consent can be given by a landowner organisation that is unrepresentative of wider opinion in the community, which is also in receipt of payments from the company applying for the license, could undo the merit of this important legal reform.
To conclude, here are the recommendations which Jubilee Australia made in its report based of the data-set it analysed: