Miners reel after Papua New Guinea ownership bombshell

In a surprise announcement Papua New Guinea on Friday introduced a plan to hand state ownership of mineral and energy resources to landowners, a move that may prove disastrous to foreign miners developing massive projects and pushing into new regions of the resource-rich country.

The announcement by PNG’s new leader comes ahead of elections in 2012 that many observers have warned is bound to lead to civil unrest.

The move may also derail PNG’s economy which is booming with growth this year expected to reach 11%. The mining industry employs roughly 30,000 people and supplies 80% of export earnings.

Radio Australia spoke to Greg Anderson, Executive Director of the Chamber of Mines:
“I think it’s just going to be a nightmare. But there’re many questions that arise with that. if the landowners are under-resourced, and they’re going to be shareholders in the project, who’s going to pay for it? Where’s the money going to come from? What’s going to happen to royalties? How can you run a dual system? I don’t think it’s going to work, and if you’ve got a policy that’s completely ill-defined, uncertain, nobody’s going to invest on something that’s uncertain. You’ll scare off the explorers, like you wouldn’t believe.”

The Australian quotes and analyst: “This was totally unexpected, and is especially explosive in election year, with landowner groups expected to cheer and push for renegotiation even of existing projects.”

In March Papua New Guinea’s National Research Institute warned that the country faces the risk of a what it described as a “political cyclone” in the 2012 national elections.