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Source: Bougainville Copper Limited
Chairman’s Address to Annual General Meeting of
Bougainville Copper Limited on April 29th, 2015
The Annual General Meeting gives me an opportunity, as chairman, to make a
statement concerning the up-to-date affairs of the company. Copies of this statement
will be distributed as you leave today, and with your permission, I would now like to
The most significant event to impact the company in 2014 was the passing of new
mining legislation by the Autonomous Bougainville Government, which creates
uncertainty regarding Bougainville Copper’s rights to mining and exploration
licences. The Bougainville Mining Act 2015 was passed on April 1, substantially
mirrors the clauses of the Interim Mining Act, which has reclassed the existing
Special Mining Lease as an Exploration Licence. There remains uncertainty over the
seven (7) leases for mining purposes.
The Company made applications for new licenses and to affirm rights which appear
to have been impacted by the interim ABG mining legislation. These applications
have been declined. The final “Bougainville Mining Act 2015” prevents the Mining
Registrar from accepting or registering applications for tenements before October 1,
The company is taking some comfort from correspondence and continued dialogue
with the ABG and President Momis where he acknowledges that the company is a
holder of a Special Mining Lease prior to the Act coming into force. The Act
substitutes the “SML” with an Exploration Licence. The Company will seek formal
granting of the exploration licence and exclusive access to the SML area.
Given the potential impact of the new legislation, the Board has decided to take a full
impairment of the value of the mine assets, and to restrict the flow of funds into some
of BCL’s work programs. The impairment dramatically decreased the value of the
company fixed assets and has resulted in a corresponding impairment expense in
the Statement of Comprehensive Income. I will discuss the impact of the impairment
shortly when I summarise the 2014 results.
Company representatives continue to engage with the National Government and the
Autonomous Bougainville Government seeking clarification of the company’s rights,
and at the same time to explore legal options, as well as taking steps to protect
BCL’s priority position should re-commencement of mining at Panguna be viable and
The company’s major shareholder Rio Tinto announced in August 2014 “In light of
recent developments in Papua New Guinea, including the new mining legislation
passed earlier this month by the Autonomous Bougainville Government, Rio Tinto
has decided now is an appropriate time to review all options for its 53.83 per cent
stake in Bougainville Copper Ltd”.
The review is ongoing.
President John Momis has emphasised that the new mining legislation was needed
to address unregulated mining activity on Bougainville, and was not aimed at
discouraging BCL. President Momis has supported redevelopment of the Panguna
mine, subject to community support.
Given the uncertainty the company has minimised its Bougainville work programs.
The results for the year ended December 31, 2014 as reported in the Annual Report,
record an operating loss of K9.1 million and an impairment charge of K166.6 million
which equates to an overall loss of K175.7 million. This compares with the profit of
K6.8 million in the previous year. The impairment charge reflects the diminishing
rights of the company to the mine assets and resources with the directors acting
prudently in impairing the mining assets completely. We continue to seek advice
regarding all our options.
The value of the mining assets in 2013 was K197.9 million and after the asset
revaluation reserve of K31.3 was reversed the net impact of the impairment recorded
in the statement of comprehensive income was 166.6 million.
Revenue from Interest and Dividends (K4.9m) was slightly lower than budget
Operational expenditure overall (K14.1m) was lower than budget (K15.9), reflecting
the scaling back of work programs.
The company will not pay a dividend.
The company has sufficient funds to cover its recurrent expenditure under the
current three year plan and is debt free.
I am pleased to report to the shareholders that the company has negotiated a
settlement with the Commissioner of the Internal Revenue Commission (IRC) in
PNG. A scheduled second mediation occurred on 2nd April 2015. I am able to report
the court has confirmed the company will receive back K39.7 million from the funds
held on term deposit with the Registrar of the High Court. This concludes this long
There was a total of K70.6 million reported in the 2014 Financial Statements as
receivable. The IRC was paid K13.0 million in addition to K4.4 million of interest
withholding tax. K14.0 million was agreed to be paid to the IRC in settlement from
the K53.2 million, held on IBD for the national court, which leaves the Company with
around K40 million.
Financial Assets and Investment strategy
At the end of 2014 Bougainville Copper’s liquid assets were K4.7 million in cash and
K102 million in Australian equities. The company’s financial position is linked to the
performance of the Australian equities market, which is in a positive phase.
In 2014 Bougainville Copper’s Australian Equities Portfolio, performed broadly in line
with the Australian Stock Market.
It is intended to continue with the current investment strategy, for as long as the
investment committee deems this to be the best option, or until such time as equities
need to be sold to fund further work programs.
The company’s cash position is enhanced as a result of the conclusion of the
Bougainville Copper has governance reporting obligations to the Australian
Securities Exchange (ASX). A statement on the company’s compliance with the
ASX Corporate Governance Principles and Recommendations is contained within
the annual report. In addition, the company has adopted policies that seek to comply
with Rio Tinto’s comprehensive range of policies including safety, environment,
financial management and other governance practices. The company has chosen to
“early adopt” the latest edition of the ASX principles, for the 2014 Financial
Statements, one year before the mandatory adoption date.
Safety and Risk Management
Bougainville Copper is particularly safety conscious and has in place a
comprehensive set of safety standards to ensure that it provides a safe working
environment and that its employees and contractors comply with best practice safety
procedures. The company complies with the requirements of the Rio Tinto safety
The management of Bougainville Copper undertakes regular risk reviews.
Bougainville Copper Foundation
Bougainville Copper has continued to support the work of the Bougainville Copper
Foundation. This is an independent, “not for profit” company that has been funded by
Bougainville Copper since its inception.
In 2014, as in previous years, the Foundation had more than 100 Bougainville
students on scholarships. Many are continuing to be supported in 2015.
The Foundation also undertakes “special projects” on a needs basis with the
emphasis placed on education, peace and good governance.
The Foundation is proud of its achievements and those of its former scholars who
are contributing to the development of Bougainville.
The Foundation continues to review its objectives and future direction. As
mentioned, the Foundation is an independent body, and it is hoped that its range of
activities will not be materially reduced by the factors that are now constraining some
of BCL’s social and work programs.
I will now report on some other current events which have a bearing on the
company’s prospects and its progress towards the vision of reopening the mine.
In view of recent actions of the Bougainville legislature, funding to progress all
studies and welfare programs will be limited until uncertainties of tenure and the
legislative regime are clarified.
During the period, limited work continued to refine the 2013 Order of Magnitude
Study, which is an exercise aimed at giving the company guidance as to the most
appropriate and cost effective way to re-develop the Panguna resource. It is one of
the Board’s major tools in evaluating options going forward.
The Order of Magnitude Study is based on many assumptions including commodity
prices, market demand, investor risk, opportunity costs, security of tenure and
others. In brief it describes a new mine at Panguna processing between 60 million
and 90 million tonnes of ore per annum, over a mine life of 24 years, with an
estimated capital cost of 5.2 billion US dollars, as estimated in 2013.Further, more
detailed studies, such as a pre‐feasibility study and a feasibility study are required to
confidently determine the potential economic viability of re‐opening the mine. Only
upon completion of those studies will the Board be sufficiently informed to take a
decision whether or not to proceed with financing and commencement of
The time-line to first production could be between five and seven years from the date
of approval and financing.
Many of the assumptions, including the size of the resource, the life of the mine, and
the start-up cost, may vary significantly when the company gains access to the
former mine site and undertakes further work.
Several other studies were initiated by the company, in conjunction with the
Bougainville Administration, aimed at providing a clearer picture of the environmental
conditions, the needs of the population, training and employment readiness, as well
as land ownership and social mapping. However the company is not in a position to
commit to funding these studies until tenure is assured.
Representatives of the customary landowners from the mine lease areas have
requested that Bougainville Copper perform a cultural ceremony with them, “Bel Kol”.
The ceremony is aimed at restoring relationships between Bougainville Copper,
landowners, the Autonomous Bougainville Government, ex-combatants and
Significant progress was made towards Bel Kol by the end of 2014. A senior
Bougainville Copper manager began regular travel and participated in discussions in
Bel Kol is now postponed until after the Bougainville elections. As a gesture of
goodwill, the company will make commitments to support programs focused towards
health and education initiatives.
The company has asked for open access to Panguna and the area covered by the
original Special Mining Lease, assurances of safety, and an invitation to establish a
presence in Arawa, as a base for field work, baseline studies and social mapping
previously mentioned, and for the recruitment of local people to participate in drilling
and other evaluation and de-risking programs.
A training program has been jointly designed, to be supported by the company, to
prepare members of the “lost generation” for work opportunities.
Joint Panguna Negotiations
The Joint Panguna Negotiation Coordination Committee (JPNCC) consisting of
National Government and ABG representatives, together with landowner and
company delegates, was active in 2014 in defining several baseline studies and
preparing to implement them.
The JPNCC has established a Multi Trust Fund, to manage joint monies including
aid, and to conduct the process of tendering and awarding the baseline studies, in
order to vest the findings of studies with arms-length transparency, and credibility
with all parties. The Trust Fund formally came into effect in November 2014.
Senior PNG statesman Sir Peter Barter accepted chairmanship of the Multi Trust
Fund, and as a respected Bougainville peace-maker, reminded the people of his
long held view that there can be no meaningful autonomy without a viable economy.
Throughout the year, company management maintained its own fruitful dialogue with
a wide range of Bougainvillean interest groups, through regular meetings at Buka,
Arawa and Kieta, with landowners, ex-combatants, women’s groups, ABG agencies,
aid donors and other stakeholders.
Events on Bougainville
There have been a number of developments in Bougainville, including Prime Minister
Peter O’Neil who visited Bougainville and Panguna in January 2014, and visited
again in December 2014 to re-open the Aropa airport.
Australia’s Foreign Affairs Minister Julie Bishop visited the region.
Preparations for elections to the Parliament of the Autonomous Bougainville Region
are gathering pace, polling scheduled for May 2015, with results known during June.
President John Momis is one of nine candidates seeking election.
There has been a re-structure of the Bougainville Public Service administration.
The relationship between President Momis, his government, and the Board and
management of Bougainville Copper remains cordial.
The regulatory regime and the company’s position
The practical effect of the permanent mining legislation requires further clarification
so that the long term mining regime for Bougainville is settled, allowing the company
to factor these terms into its assessment of the viability of the potential mine
The next phase of study, a pre-feasibility study on reopening the mine, will be very
expensive, and requires certainty of a workable mining regime and conditions prior to
committing the study funds.
I wish to restate that even if further studies confirm that recommencement of mining
is economically attractive, mining at Panguna cannot recommence unless all parties:
the Landowners, the Autonomous Bougainville Government, the National
Government of PNG, and BCL, are acting in close accord, now and into the future.
Funding and sovereign risk assurance for the project will require a united effort.
Investors also need a fair and stable regulatory regime that gives them the
confidence to commit to a project that will require billions of dollars of investment.
Let me assure you that the vision to return to active exploration and profitable,
sustainable mining remains, with the active support of many local stakeholders.
The Board and Management of Bougainville Copper Ltd are well positioned to
recognise the opportunities inherent in recent challenges, and to maintain progress
in a new year.
I believe the economic self-sufficiency of Bougainville needs the successful
development of Panguna.
The company faces the coming year with resolve and determination.
For your further information, I remind you that reports and commentaries of the
company’s activities are regularly reported to the Australian Securities Exchange and
associated media, and can also be accessed on our website.
Thank you for your attention.
The European Shareholders of Bougainville Copper do not share Mr. Callick's point of view and his assessment.
Source: ABC Radio Australia
Reports Rio Tinto considering giving away its stake in Bougainville copper
There are reports that Rio Tinto is considering selling or even giving away its majority shareholding in the copper mine that sparked a ten-year civil war on Bougainville.
Reports Rio Tinto considering giving away its stake in Bougainville copper (Credit: ABC)
Writing in The Australian, the newspaper's Asia Pacific editior, Rowan Callick, says that with a new mining act in place and talks with landowers ongoing, there is a window of opportunity for Rio to get out of Bougainville Copper, its mine-owning subidiary.
But if it comes to it, why would Rio Tinto want to give up its stake and get nothing in return?
Presenter: Jemima Garrett
Speaker: Rowan Callick, Asia Pacific Editor of The Australian
LISTEN HERE !
Source: The Australian
Rio Tinto’s window opens for Bougainville Copper exit
by Rowan Callick, Asia Pacific Editor, Melbourne
Rio Tinto’s review of its controlling stake in Bougainville Copper, now in its ninth month, is considering the options not only of a trade sale but also of giving its shares away, possibly to a charitable trust.
A year ago the mining giant gave away its 19.1 per cent shareholding in Northern Dynasty, owner of the Pebble copper-gold project in Alaska, to two Alaskan charitable foundations.
Rio owns 53.38 per cent of the Papua New Guinea mine, closed by conflict in 1989, that still contains copper and gold worth more than $50 billion, as well as possessing a recently reconfirmed exploration licence.
The mine, which would cost an estimated $6.5bn or more to reopen, is also owned 19.06 per cent by the Papua New Guinea national government, and 27.36 per cent by other shareholders through its ASX listing.
In the current commodity environment, even the largest miners are not contemplating starting — or restarting — a massively expensive project at a stroke, preferring instead to work green-fields sites less ambitiously, gradually building up output.
Rio has waited patiently for its social licence to mine to be restored but despite the desire of the Bougainville Autonomous Government, under its president John Momis, to restore mining revenues — with no clear income alternative in sight — landowner issues have not been fully resolved.
And under new mining legislation passed by the Bougainville parliament recently, all resources are owned by traditional landowners, while the national government based in Port Moresby continues to insist that geological resources remain the property of the state.
Apart from Rio, there are few potential alternatives with the capacity to rebuild the mine, except for a handful of other international miners and some large Chinese corporations.
But the window of opportunity for an exit is looking reasonably favourable now, while the prospect for the medium to longer term appears more shaded.
The prospect of a change of leadership on Bougainville, with an election due there at the end of May, injects a note of potential uncertainty.
At the Port Moresby end, Prime Minister Peter O’Neill is leading a government with rare political strength — and has the appetite for the state to run mines. But PNG’s history shows this may not last forever.
Mr Momis has warned Mr O’Neill to reveal any dealings with Rio.
The PNG Prime Minister confirmed that “we have had discussions with other shareholders of on a range of issues including the reopening of the mine and the disposal of shares by existing shareholders including Rio Tinto”. But, he added, “there are no secret deals”.
The Bougainville government’s concern was aroused by information it had received that law firm Norton Rose Fulbright, which works for Rio internationally, had received instructions to handle the sale of Rio’s shares. A Norton Rose spokesman decline to comment.
Source: The Australian
Bougainville mine now in play, government says
by Rowan Callick, Asia Pacific Editor, Melbourne
The Bougainville Autonomous Government is convinced Bougainville Copper — which owns a mine containing copper and gold worth more than $50 billion, as well as a recently reconfirmed exploration licence — is now in play.
Bougainville President John Momis last week called on Papua New Guinea’s Prime Minister Peter O’Neill and Rio Tinto to reveal any dealings over Rio’s 53.58 per cent shares in BCL.
“For over a year now, Mr O’Neill has expressed interest in the national government taking control of BCL,” Mr Momis said.
“He proposes that PNG operate the Panguna mine in Bougainville in the same way it operates the Ok Tedi mine,” which Mr O’Neill’s government took over in 2013.
The PNG government has hired Peter Graham, who led ExxonMobil’s successful construction of the country’s first liquefied natural gas project, to manage Ok Tedi mine and potentially to steer other state-owned mining assets.
The Bougainville mine, which was closed by conflict in 1989 and which would cost an estimated $6.5bn or more to reopen, is also owned 19.06 per cent by the PNG government, and 27.36 per cent by other shareholders.
Mr O’Neill confirmed that “we have had discussions with other shareholders of BCL on a range of issues including the reopening of the mine and the disposal of shares by existing shareholders, including Rio Tinto”.
But, he added, “There are no secret deals, and we are disappointed that President Momis is trying to use this issue at the time of the election” for a new Bougainville government that takes place at the end of next month.
“President Momis has been informed of whatever talks we have with other shareholders of BCL, only because the state is the second biggest shareholder,” Mr O’Neill said.
There would be no talks about reopening the mine, he said, “until landowners and the people of Bougainville are ready”.
It is understood the Momis government’s concern was aroused by information it had received that law firm Norton Rose Fulbright, which does a considerable amount of work for Rio internationally, had instructions to handle the sale of Rio’s shares, and had held discussions with agents in Port Moresby in relation to the deal. A Norton Rose Fulbright spokesman declined to comment when questioned by The Australian.
The BCL share price suddenly soared by 50 per cent a fortnight ago. The ASX issued a “speeding ticket”, asking the company to explain the leap. BCL said it couldn’t.
Mr Momis, whose government has recently passed new mining legislation that hands back control of all resources to landowners, said: “We cannot allow a new form of colonial dealings in Bougainville’s resources to occur.”
He said that last month he wrote to BCL, seeking advice from either it or Rio Tinto, about whether share transactions between Rio and PNG were under discussion or preparation.
“I received a brief reply from Rio, addressed to BCL but passed on to me, dated March 23. The letter simply stated that ‘Rio Tinto … is reviewing its options with respect to its stake in Bougainville Copper Ltd. This review is continuing’,” Mr Momis said.
“Secret dealings of this kind are completely unacceptable to the people of Bougainville,” he said. “It would be unacceptable to the people of Bougainville for the national government to try to take control of Panguna.” Such a move, he said, would trigger demands for immediate independence.
Peter Taylor, who has been chairman of BCL for 12 years, told The Australian “the Bougainville government seems to want the mine reopened, but we have to sit down … and see what’s doable”.
Source:Papua New Guinea Today
Momis: “NO” To PNG Buying RIO TINTO Shares In Bougainville Copper Ltd
“The Autonomous Bougainville Government (ABG) has been deeply concerned at the possibility that Rio and PNG might be contemplating trading shares in BCL. The only valuable asset that BCL has is its limited rights over minerals at Panguna. Trading in Bougainville’s minerals between Rio and the Australian colonial Administration occurred in the 1960s, without any reference to Bougainville. We cannot allow a new form of colonial dealings in Bougainville’s resources to occur.”
President John Momis has called for the Prime Minister O’Neill and the global mining giant , Rio Tinto, to reveal any dealings between PNG and Rio Tinto in Rio Tinto’s shares in Bougainville Copper Ltd (BCL).
Rio Tinto is the majority shareholder in BCL, with 53 per cent equity. In August 2014, Rio Tinto announced a review of its investment in BCL.
The President said:
“For over a year now, Prime Minister O’Neill has expressed interest in the National Government taking control of BCL. He proposes that PNG operate the Panguna mine in Bougainville in the same way it operates the Ok Tedi mine. The Prime Minister expressed that view to me early in 2014, and to members of the Bougainville group known as the Me’ekamui Government of Unity.
“In 2014 I made two strong statements against the Prime Minister’s proposal, the most recent dated 11 December. In that statement, and in a letter to the Prime Minister of 11 December, I made it clear that all decisions about mining in Bougainville must be made by the Autonomous Bougainville Government. I also spelt out that it would be completely unacceptable to Bougainvilleans for the National Government operate the Panguna mine.
“The Prime Minister replied in a letter dated January, but not received by me till late March. Amongst other things he said the National Government had no intention of taking control of the Panguna Mine.
“But as yet unconfirmed information available to me indicates that the National Government may be planning to purchase the Rio Tinto 53 per cent share in BCL. The National Government has always held 19.3 per cent of the BCL shares, and so if it takes Rio’s shares it would own over 72 of the equity.
“On 20th March, I wrote to BCL, seeking advice from either BCL or Rio Tinto, about the whether such share transactions between Rio and PNG were under discussion or preparation. I received a brief reply from Rio, addressed to BCL but passed on to me, dated 23 March.
The letter simply stated that ‘Rio Tinto … was reviewing its options with respect to its stake in Bougainville Copper Limited. This review is continuing.’
“The Autonomous Bougainville Government (ABG) has been deeply concerned at the possibility that Rio and PNG might be contemplating trading shares in BCL. The only valuable asset that BCL has is its limited rights over minerals at Panguna. Trading in Bougainville’s minerals between Rio and the Australian colonial Administration occurred in the 1960s, without any reference to Bougainville. We cannot allow a new form of colonial dealings in Bougainville’s resources to occur.
“Secret dealings of this kind are completely unacceptable to the people of Bougainville and so the ABG. It would be equally unacceptable to the people of Bougainville for the National Government to try to take control of Panguna. As I said in my public statement in December: ‘Any attempt by the National Government to control mining in Bougainville could cause Bougainvilleans to lose all faith in the BPA (Bougainville Peace Agreement). Many would refuse to work with the National Government any more. They would want immediate independence. It would be a recipe for undermining, perhaps even destroying, support for the BPA.’
President Momis said that as a result of the gravely serious issues involved, he was now calling on both the Prime Minister and Rio Tinto to clarify the position: ‘They must state publicly and clearly whether or not either of them is planning, or is in any way involved, in preparing for or conducting, any transaction involving transfer of Rio Tinto’s shares in BCL, either to the PNG Government or to any entity controlled by or involving PNG’.
The President also said that as a result of ABG mining laws passed in August 2014 and March 2015, the only legal right BCL has in Bougainville is an exploration licence over the former Special Mining Lease at Panguna. He said:
“That exploration licence is intended to put BCL in the same position as any exploration licence holder that has completed exploration, and wants to apply for an negotiate about possible grant of a mining licence. It gives BCL a right to negotiate the conditions on which it might be allowed to resume mining, but only if it gets permission from both customary landowners and the ABG.
“It is normal for mining laws to allow withdrawal of an exploration licence if there are any commercial dealings in the licence in the first two years after it is granted. In passing the Bougainville Mining Act 2015 in March, the ABG House of Representatives amended section 112 of the Act to make it clear that dealings in more than 25 per cent of the shares in any company holding an exploration licence will also allow withdrawal of the licence.
“Both Rio Tinto and the Prime Minister need to be aware that transfer of Rio’s shares in BCL in the two years since BCL’s exploration licence came into operation, in August 2014, will result in action to withdraw that licence. In the meantime, I call on them to clarify the issues I am raising in this statement”
Chief John. L. Momis
Source: Radio New Zealand International
Bougainville ready to start talking mining
If Bougainville's caretaker president John Momis is re-elected in next month's elections his government will immediately begin discussions on re-opening the Panguna mine.
The huge mine was the catalyst for the civil war that engulfed the Papua New Guinea autonomous region for much of the 1990s.
Mr Momis says a resumption of mining is the only way Bougainville can become economically viable and meet the conditions for a referendum on independence which must be held by 2020.
He says with the new Mining Law now in place guaranteeing local landowners control of their resources he is confident Bougainville can safely resume mining.
"After the election we will be taking immediate steps to talk to Rio Tinto [the parent company of Bougainville Copper Ltd, which had operated the Panguna mine]. We will find out whether they are interested. If they are not we will try another company. Look you know, we can try others."