Posted inStory / Melanesia

Sir Julius suggests exporting gold to raise PNG revenue

Exporting gold is the only way to rescue PNG’s economy from the impacts of Covid-19

Former Papua New Guinea prime minister and senior statesman, Sir Julius Chan, is suggesting an economic recovery strategy to be implemented by the State immediately to combat the impacts of Covid-19.

As far as he is concerned, the 81-year-old says there is no analysis from the national government on the economic impacts of Covid-19.

He says the current government needs to provide dependable information on the economic crisis provoked by Covid-19, thus, it must immediately provide a focus on expenditures and the level of debt the country has as well.

Sir Julius said with facts indicating that 80 per cent of the country’s total value of exports come from oil, gas, gold and copper and 20 per cent from agriculture, including forestry and fisheries, the government needs to immediately analyse and strategise a rescue plan.

He explained that exporting oil and gas following the Covid-19 pandemic will not benefit the economy due to the global price drop, therefore, another commodity must take lead with total revenue generation and suggested gold.

“Oil and gas together account for 38.5 per cent of the total export earnings and that is roughly about K9 billion in exports, but what is going to happen to the level of these exports as a result of Covid-19?” he said.

“With Covid-19 in the world today, big cities of the world like New York, Beijing and London are seen with no vehicles or less vehicles on the roads.

“Vehicles are the big users of oil and gas and if the vehicles are not running than the price for oil and gas drops, so LNG is not doing much better.

“The international prices of oil has gone from US$70 a barrel in January to US$42 this month, a drop of more than 40 per cent, so the World Bank focus is that the price of oil will be between US$30 and US$35 for the next two years at least.

“Our largest export commodity today with Covid-19 in place is gold because it acts very differently and doesn’t play the same game as the other commodities,” Sir Julius said.

Meanwhile, a senior PNG government minister has come out in supporting the stance taken by the Government not to renew the the Barrick Niugini Limited SML on Pogera Mine, now that the matter has been dismissed by the courts.

Trade and Industry Minister, William Duma in a statement, said the historic and correct decision made by the National Executive Council based on the advice of Mining Advisory Council (“MAC”) and announced by the Prime Minister, James Marape must be applauded by all Papua New Guineans.

Barrick Gold and Zijin Mining have always been aware that the Special Mining Lease (“SML”) held by the Porgera Joint Venture (“PJV”), of which they are partners, would expire on 16 August, 2019. In fact Barrick Gold in June 2019, sought declarations from the National Court that the SML would continue in force and that PJV could continue mining operations beyond 16 August, 2019, and until the determination of its application for an extension of the SML.

The National Court on 02 August, 2019, held that the Porgera SML would continue after 16 August, 2019, but subject to and pending the determination of the SML extension application by MAC.

Barrick Gold and Zijin Mining therefore knew all along that their application for an extension of the SML would be determined by the MAC, and that there was no guarantee that the SML would be extended.

The MAC in its wisdom recommended that the SML not be extended, and the NEC made the historic decision in the best interests of the country.

Whilst PJV has argued that the mine has contributed about 3 .8 per cent of PNG’s GDP, 10 per cent of its average export income, K4 billion (US$1.1 billion) in direct taxes, K656 million (US$188 million) in royalties and K5.1 billion (US$1.4 billion) in supplies and contractors, the question is how much have the PJV partners made for their shareholders compared to the benefits received by PNG?.

We know how much has been paid as taxes, etc, by PJV but how much have they made? Is it proportionate to the revenue and other monetary benefits received by PNG?

The more than 300 employees and around 1500 contractor employees and suppliers will be given the opportunity to continue to work under the new arrangement. So there will be no significant losses.

It is therefore misleading and irresponsible for Barrick Gold to, through the international media, claim that the actions of the PNG Government amount to nationalisation.

The SML expired so there is no basis to claim that PNG has nationalised the mine.

Mining companies operating in PNG over many years have enjoyed some of the most favorable fiscal terms in the world.

Porgera has been one of the most profitable gold mines in the world for Placer and now Barrick Gold and Zijin Mining. We only need to engage a team of reputable and experienced accountants, mining engineers, gold analysts, and tax advisers to audit the books for the last 20 years to work out how much PNG as a country has made from the mine compared to the profits made by Placer and now Barrick Gold and Zijin Mining.

“I am very sure that Placer, Barrick Gold and Zijin Mining have recovered their investments many times over. As far as I am aware, no independent audit of the amount of gold taken out of the mine and of course PNG, has been made.

“Moreover, no thorough tax audit appears to have been conducted by the Internal Revenue Commission in the past.

“I believe PNG has been underpaid taxes in the vicinity of K2 billion (US$573 million).

“Information available suggests that gold concentrate has been exported straight to China without the approval of the Bank of PNG.

“If this is true, we need to ascertain how and why this happened.”

The entitlements of Barrick Gold and Zijin Mining are only restricted to the value of the physical assets less depreciation, and the net value of contracts they together with emoluments for its employees. Barrick Gold and Zijin Mining are welcome to negotiate with the PNG Government for a new SML, if they wish.

This is not a decision that has taken Barrick Gold and Zijin Mining by surprise.

The decision has been made and announced by Prime Minister Marape who has demonstrated that he has the best interests of the people of PNG in his heart.

“We in PNG now cannot sit back and analyse the advantages and disadvantages of a decision which has already been made.

“We in PNG must not procrastinate and merely predict our future – we must now determine our future and destiny.”

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