Court orders PNG to negotiate Porgera permit with Barrick

The government hit back on Monday, saying it would be “forced” to take immediate control of the mine if it remains closed during the transition period.

State-owned Zijin followed suit. It said that if PNG didn’t conduct negotiations to extend the mining lease in good faith, the issue could impair the country’s relations with China.

The National Court order calls on PNG and Barrick to negotiate before returning to court in a week on May 8 to report on the progress of talks, local Post-Courier reported.

It also instructed Barrick Niugini Limited (BNL), the manager of Porgera, to maintain the mine infrastructure and assets during negotiations.

If talks fail, BNL said, the court would appoint an accredited mediator to facilitate dialogue between the parties.

Barrick and Zijin had applied in June 2017 for a 20-year renewal of the Porgera’s lease, which expired in August.

Since then, the company has faced backlash from landowners and residents over what they claim are negative social, environmental and economic impacts from the mine.

Negotiations with Porgera’s operators were complicated further by a split among the landowners.

Tier one potential

Barrick’s president and chief executive officer, Mark Bristow, said in March that Porgera had “tier one potential” but faced many challenges in the form of “legacy issues and an unruly neighbourhood.”

The gold mine, located in PNG’s northern highlands region, is a joint venture between Barrick and Zijin Mining. Each owns 47.5% of the mine, with the remaining 5% held by landowner group Mineral Resources Enga.

Porgera contributes to about 10% of the nation’s exports and employs over 3,300 Papua New Guinea nationals.

The open pit and underground gold mine sits at an altitude of 2,200-2,600 metres in Enga province, and is about 600 km (370 miles) northwest of Port Moresby.

“We don’t have many details on the implications of this decision yet, including the timing of the transition,” Jackie Przybylowski of BMO Capital Markets said in late April in a research note.

“Barrick has warned that it will pursue all legal avenues to challenge the government’s decision and to recover any damages. We expect that discretionary spending, such as development capex, will be minimized through the current period of uncertainty,” Przybylowski noted.

The mining analyst also said that “while removing Porgera from Barrick’s portfolio would have a negative financial impact, it would improve the ESG performance of the company’s portfolio going forward.”

“On its website, Barrick reports allegations of human rights violations in the region,” she pointed out, “including allegations of ‘extreme’ violence linked to local police forces or private security forces acting on behalf of the joint venture.”

Other mining companies operating in PNG, including Australia’s Newcrest (ASX: NCM), have not been impacted by the decision regarding Porgera. The miner has “welcomed” the Prime Minister’s support for its Wafi Golpu gold and copper asset, adding that its special mining lease at the Lihir operations remains in good standing with a renewal not expected until 2035.