Non-Renewal of Porgera Mine Lease Could Affect China-PNG Relations

gold

Papua New Guinea has announced that it would no longer renew the 20-year mining lease at its Porgera gold mine. The PNG government cited social unrest and environmental damage as reasons for not renewing the lease. The mine is jointly owned and operated by China-based Zijin Mining and Canada-based Barrick Gold Corp.

Barrick (Niugini) Limited (BNL), the local mining venture in which Barrick and Zijin have a 47.5% stake, has already suspended its operations since the PNG government has not provided any plans for renewal or transition. But PNG Prime Minister Marape has warned Barrick that they may be forced to take immediate control of the mine if it remains closed during the transition period.

The announcement was not taken lightly by Zijin and warned that failure to renew the lease could affect the bilateral relations between China and PNG. Zijin’s chairman of the board Chen Jinghe, in a letter to Marape, said they would like to contribute to strengthening the good inter-governmental, cultural, economic and trade relations between PNG and China. But if the PNG government cannot protect Zijin’s investments in Porgera, there could be a significant negative impact on China-PNG relations, Chen added.

China is PNG’s biggest creditor. But local residents and landowners have serious complaints against the operation of the Porgera mine. They said it provided very minimal economic benefits for the locals and have caused water pollution and other social and environmental problems.

Zijin also said that understands the importance of benefits distribution among governments, stakeholders and landowners. But if the special mining lease is not extended, the mine will be forced to close. And the closure of the Porgera mine would include the removal of all facilities and installations which would render the mine impossible to operate for years. Both Zijin and Barrick plan to pursue all legal means to recover damages and protect their interests.