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  • GDP, US$bn: 20.5
  • GDP per capita, US$: 2,631.3
  • Population, mn: 7.6
  • Inflation, CPI ave: 6.5
  • FX, LCY/US$: 3.1
  • Budget Balance, % of GDP: -4.8
  • Mining GVA, US$bn: 6.0
Regulatory Risk Rating
32
0
100
Score: 32
Severe Risk
Papua New Guinea’s Mining Act (MA) shares many features with the mining laws of the provinces and territories of neighbouring Australia. Unfortunately, though the successes of Australia’s industry may suggest otherwise, those laws are not reflective of model investment standards and this is certainly a critique that can be levelled at the MA. But all is not lost! The MA’s fatal flaw is the excessive level of government discretion, an issue that may be overcome via the use of a Mineral Development Agreement. However, with regulatory changes on the horizon caution is advised, as future amendments may not prove easy to navigate.

Corruption Potential Index

Score: 25
Very High Corruption Potential

Corruption Risk Index

Score: 60
Moderate Corruption Risk

Regulatory Risk Rating

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Mining Overview Commentary plus sign

PAPUA NEW GUINEA - MINING REGULATIONS

GENERAL

Papua New Guinea (PNG), officially known as the Independent State of Papua New Guinea, is a country in the Oceania region whose territory comprises over 600 islands. The country includes the eastern portion of New Guinea – the world’s second largest island after Greenland; the Indonesian province of West Papua occupies the western side. PNG is recognised as one of the most culturally diverse countries in the world, with over 800 languages spoken and over 1,000 different ethnic groups and tribes (World Bank). The majority of PNG’s eight million plus population live in rural areas, with only about 20% based in the country’s urban regions.

According to the World Bank, PNG’s GDP per capita has shown steady growth at an average rate of 3% since the mid-2000s. The country’s economy revolves around two key industries – agriculture (including forestry and fishing) and mining / energy (World Bank). Oil, gold, copper, coffee and cocoa are amongst PNG’s main exports. As with all countries which rely heavily on mining as a source of revenue, fluctuating commodity prices have impacted greatly on PNG’s economy in recent years; in addition, operational issues and problematic weather conditions have also caused challenges for existing projects. These factors resulted in the shutdown of several mines and projects, which had a negative impact on economic growth. That said, following an increase in production and the re-opening of several mines, the mining industry contributed around 26% of GDP in 2016 and was responsible for 84% of PNG’s export revenue (Chamber of Mines).

In terms of mineral resources, PNG is a producer of copper, gold, cobalt, nickel and silver (USGS). The country also has large natural gas and oil reserves. The majority of operating mines are gold focused. Several large mining companies have operations in PNG, including Barrick, which holds shares in the Porgera gold mine in the northern highlands and Newcrest, whose subsidiary company Lihir Gold Limited owns the Lihir gold mine in the New Ireland Province. The controversial Ok Tedi gold and copper mine on the Indonesian border is now a State-owned mine, though BHP Billiton previously held majority shares in the project.

PRINCIPAL LEGISLATION AND REGULATOR

The Mining Act 1992 (as amended) (MA) and the Mining Regulations 1992 (as amended) (MR) provide the legal framework for the mining industry in PNG. Also relevant are the Mineral Resource Authority Act 2017 (see below); the Mining (Safety) Act & Regulations 2007; the Environment Act 2000 (EA); the Environment (Prescribed Activities) Regulation 2002 (ER); the Environment (Permits) Regulation 2002; and the Investment Promotion Act 1992. The government has tabled significant amendments to the MA, which have resulted in some pushback from industry. The amendments were put on hold in 2017 due to elections; a commitment from the government to carry out an independent review of the changes has also been made, though to date this has not yet occurred.

The primary authorities responsible for the oversight and administration of the mining industry in PNG are the Minister of Mines (Minister), the Mineral Resource Authority (MRA) and the Mining Advisory Council (MAC). In Feb. 2018, the Mineral Resource Authority Act 2017 (MRAA) was passed, repealing the 2005 law of the same title (see our ‘Regulatory Risk Analysis’ for more information). Under the terms of the MRAA, the MRA has various functions including: advising the Minister on matters relating to mining and the management of the industry; receiving, assessing and managing applications for mineral tenements, as well as providing technical advice to the MAC and the Minister; overseeing the MA; and negotiating mineral development agreements on behalf of the State (s. 5, MRAA). The MRA’s Board (MRAB) is responsible for performing the MRA’s functions, exercising its powers and managing its administrative affairs (s. 7, MRAA). According to the MA, the Minister has overall authority for granting mineral rights in PNG.

Section 5(1) of the MA states that: “All minerals existing on, in or below the surface of any land in Papua New Guinea […] are the property of the State.”

GRANTS AND FORMS OF MINERAL TITLE

The following mineral rights, collectively referred to as mineral tenements, are provided for under the MA:

 

  • Exploration Licence (EL): grants the holder the right to enter and occupy the land and conduct exploration activities in accordance with the Exploration Programme (s. 23, MA). Applications must include a description and map of the area and be accompanied by an Exploration Programme and a statement detailing the applicant’s technical and financial resources (s. 24, MA). Licences are granted for a period not exceeding two years, renewable in perpetuity for additional periods of up to two years (ss. 21 & 28, MA). The Exploration Programme must be approved by the Council and minimum expenditure requirements will apply (ss. 25 & 26, MA; see also Schedule 2, MR). Applications for renewal must be made at least 90 days prior to the expiration of the existing term (s. 99, MA).

 

  • Mineral Development Contract (MDC): where the Minister is of the opinion that the size or distribution of a mineral deposit, the method of mining or treating it, the infrastructure required for it, or financial / economic considerations necessitate a MDC, the Minister has the right to require that the mining of the deposit take place under a Special Mining Lease (see below) and under the terms of a MDC (s. 18, MA). The development of a deposit which is the subject of a MDC must be undertaken in accordance with the MDC, though in the case of conflict of provisions the terms of MA will prevail (s. 19, MA).

 

  • Special Mining Lease (SML): only EL holders who have signed a MDC may apply for and obtain an SML (s. 33, MA). Applications must contain a map of the area and a survey carried out in accordance with Section 97, MA (s. 35(a), MA). The application must also be accompanied by the applicant’s proposal for operations (s. 35(b), MA). SML holders have various rights, including the right to enter and occupy the land for the purpose of mining the minerals and undertake such works as may be necessary for this purpose (s. 41, MA). SMLs may be granted for a period not exceeding 40 years, extendable on application for periods not exceeding 20 years (ss. 34 & 36, MA). Applications for renewal must be made at least 90 days prior to the expiration of the existing term (s. 99, MA).

 

  • Mining Lease (ML): available to EL holders and / or those to which an EL or interest in an EL has been transferred or, where the land is not the subject of an existing mineral tenement, any other person (s. 38, MA). Certain other restrictions apply in relation to an ML granted for the sole purpose of mining alluvial minerals (see s. 38(2), MA). Applications must contain the information specified under section 42, including a statement of the technical and financial resources available to the applicant and a proposal for operations (s. 42, MA; see also s. 43, MA). ML holders have various rights, including the right to enter and occupy the land for the purpose of mining the minerals and undertake such works as may be necessary for this purpose (s. 41, MA). A ML may be granted for a period not exceeding 20 years, extendable on application for periods not exceeding 10 years (ss. 39 & 46, MA). Applications for renewal must be made at least 90 days prior to the expiration of the existing term (s. 99, MA).

 

Rights may be transferred, mortgaged or sold on approval by the Minister, though in the case of an EL transfers are restricted for the first two years, save in exceptional circumstances (ss. 117 – 118, MA; see also s. 31, MA).

The MA also provides for Alluvial Mining Leases, which are granted exclusively to natural persons or land groups (see ss. 48 – 64, MA).

DEVELOPMENT CONSIDERATIONS

Two other types of mineral tenements are provided for under the MA, Leases for Mining Purposes (LMP) and Mining Easements (ME). LMP are granted in connection with mining operations for various purposes including the construction of buildings; installation of treatment plants; deposits of tailings or waste; and other purposes ancillary to mining or treatment operations (s. 68, MA), whilst ME are granted in connection with mining, treatment or ancillary operations for the purpose of constructing and operating various infrastructure such as roads, power lines, pipelines etc. (s. 83, MA). Applications for both tenements must include a proposal of operations (ss. 70 & 85, MA). Both are granted for a period which is identical in term to the SML or ML in relation to which the LMP or ME is granted or, in the case of an LMP, a term not exceeding 20 years (ss. 66 & 81, MA). Extensions are also possible (ss. 73 & 88, MA).

Activities defined as ‘Level 3’ under the EA require an Environmental Impact Assessment as mandatory and this includes activities under an SML and certain activities under a ML. In addition, both Level 3 and Level 2 activities require an Environmental Permit (see ‘Environmental Overview Commentary’ below).

Compensation must be paid to landowners for loss or damage suffered or foreseen to be suffered. Compensation must be agreed prior to entry or occupation and, where agreement cannot be reached, shall be determined by a Warden (as appointed by the Managing Director of the MRAB) (s. 16, MA) or, on appeal, by the National Court (see ss. 154 – 160, MA).

Fees, rents, security deposits and exploration expenditure requirements are provided for under Schedule 2, MR. Under the terms of section 16, the State has a right to a participating interest. The MR do not explicitly provide for a royalty rate, though currently this applies, as a matter of policy, at a rate of 2%. Production levies are also provided for under the MRAA.

Extensive reporting requirements apply for EL, SML and ML (see ss. 32 & 47, MA).

ENVIRONMENTAL REGULATION

See Papua New Guinea - Environmental Overview Commentary.

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Environmental Overview Commentary plus sign

PAPUA NEW GUINEA - ENVIRONMENTAL REGULATIONS

GENERAL

Papua New Guinea (PNG) is a large group of islands located between the Coral Sea and the South Pacific in the Oceania region. The country’s territory includes half of New Guinea island, which is the second largest island in the world after Greenland. PNG is located just south of the equator; its location on the so-called Ring of Fire means the country is highly susceptible to natural disasters such as earthquakes, volcanic eruptions, landslides and tsunamis which cause frequent devastation in the region.

The terrain is primarily mountainous, with great areas of rainforest covering large portions of the country. Swamplands can be found in the southern coastal regions and alongside PNG’s many lakes and rivers. The country has a tropical climate; temperatures vary little throughout the year though two separate monsoon seasons occur, one in the northwest that runs from December to March and the other in the southeast, which occurs between May and October.

PNG is recognised for its biodiversity. The island of New Guinea, which is divided between PNG and the Indonesian province of West Papua, is home to the third largest expanse of tropical rainforest in the world after those found in the Congo and Amazon Basins. Around 5% of the world’s species are to be found on the island and, according to a study by the WWF, over 1,000 species were discovered in New Guinea from 1998 to 2008 alone. Amongst PNG’s unique fauna are the Queen Alexandra’s birdwing – the largest butterfly in the world, the Papua monitor – one of the longest lizards in the world, and the hooded pitohui – just one of the species of poisonous bird found in the country.  

Deforestation from illegal logging and pollution as a result of mining activities are amongst key environmental concerns.

PRINCIPAL LEGISLATION AND REGULATOR

The Environment Act 2000 (EA), the Environment (Prescribed Activities) Regulation 2002 (EPAR), the Environment (Permits) Regulation 2002 (EPR) and the Environment (Fees and Charges) Regulation (EFCR) 2002 form the legal framework for environmental assessments in PNG. Also relevant are the Mining Act 1992 (as amended) (MA) and the Mining Regulations 1992 (as amended) (MR). The EA contains a general requirement that persons shall not carry out activities that cause or are likely to cause environmental harm unless they take all reasonable and practicable measures to prevent or minimise such harm (s. 7(1), MA).

The Minister for Environment, Conservation and Climate Change (Environment Minister) who heads the Department of Environment and Conservation (Department), has overall responsibility for environmental policy, as well as the approval of various matters provided for under the EA (s. 14, EA). That said, it is the Director of Environment (Director) who is responsible for the administration of the EA, the issuance of environmental permits and ensuring that Environmental Impact Assessments (EIA) are undertaken in accordance with the EA (s. 16, EA). An Environment Council (Council) is responsible for making recommendations and giving advice to the Minister and Director on various aspects of the EA and EIA process (s. 19, MA). The EA also established an Environment Consultative Group (ECG), to advise the Council on certain environmental policies, assist the Director in the review of Environmental Impact Statements (EIS) and generally provide advice on environmental issues (s. 26, EA).

EIA PROCESS

The application for a Mining Lease (ML) must be accompanied by a proposal for operations (s. 42(b)(i), MA). In making its assessment of the proposal, the Mining Advisory Council (MAC) will consider whether the proposal provides adequately for the protection of the environment, in which case evidence that the applicant has complied with the requirements of the Department will be conclusive proof of such protection (s. 43(1)(ii), MA).

In PNG, an Environmental Permit (EP) is required for all Level 2 and Level 3 activities (s. 44, EA) and it is a requirement of the EA that an EP be obtained before a permit or licence for such activities is granted by another authority (s. 46, EA).

Environmental Impact Assessments

Pursuant to Section 50, EA, an EIA shall be required as a mandatory part of the permitting process for Level 3 activities (s. 50, EA). Level 3 activities are listed under Schedule 2, EPAR and include mining activities which require a Special Mining Lease (SML) and mechanised mining under a ML involving chemical processing of more than 50,000 tonnes per annum (see ‘Sub-Category 17, Schedule 2, EPAR).

Level 2 activities, which include mechanised mining under a ML involving chemical processing of no greater than 50,000 tonnes per annum and mechanised mining under a ML involving non-chemical processing of more than 50,000 tonnes per annum (see ‘Sub-Categories 2 & 7, Schedule 1, EPAR for a full list) may also require an EIA as part of the EP process. This will only be the case where the activity:

  • involves an industrial or manufacturing process which has not previously been used in PNG; or
  • is specifically the subject of obligations under any international treaty, convention or instrument which PNG has ratified; or
  • poses a threat of serious environmental harm

and the Minister, on the recommendation of the Council, determines that the activity relates to matters of national importance (s. 50(2), EA). In such cases the project proponent will receive notice from the Director that an EIA is required.

The requirements for the EIA are clearly listed under Section 51, EA. Firstly, an inception report must be submitted listing the issues which an EIS will cover. Within 60 days of receipt of the inception report the Director will either approve the report (where satisfied that it contains all the relevant issues relating to the potential impacts of the activity on the environment) or refer the inception report back to the proponent for amendment and re-submission (s. 52, EA). Following approval of the inception report, the proponent shall prepare the EIS (s. 53, EA). The EIS must then be submitted to the Director for review. Within 30 days of receipt of the EIS, the Director will notify the proponent of the time period required for review, though note that this may be extended at any time (s. 54, EA). During the review stage the Director can take numerous actions including calling a conference of interested persons, referring the EIS to the ECG, or appointing a committee to conduct a public inquiry (s. 54(4), EA). Should there be a provincial environmental committee, it must also be given the opportunity to review the EIS and submit comments to the Director (s. 54(5), EA). All EIS must be made publicly available for review, in a manner and for a duration determined by the Director (s. 55(1), EA). As part of the public review, a proponent may be required to make a public presentation to affected persons (s. 55(2)(c), EA). The Director may request that the proponent amend the EIS to address any issues raised during the assessment or the public review (s. 55(6), EA).

Where the Director is satisfied that:

  • The EIS contains an adequate description of the physical and social environmental impacts of an activity; and
  • All reasonable steps will be taken to minimise environmental harm; and
  • The activity will be carried out in a manner which is consistent with all environmental policies and regulations,

the EIS shall be accepted (s. 56, EA).

Following acceptance, the EIS shall be referred to the Council for review (s. 57, EA). Within 90 days of referral, the Council shall accept the EIS where it is satisfied with the same standards as those listed above (s. 58(1)(a), EA) or reject the EIS and advise the proponent to amend and resubmit (s. 58(1)(b), EA). The factors which the Council shall consider in reaching its decision are clearly provided for under Section 58(2), EA, though note that several of the criteria are subjective e.g. the suitability of the applicant to hold a permit. Where the Council rejects the EIS, the proponent shall be given the opportunity to make representations (s. 58(5), EA).

The recommendation of the Council shall then be passed on to the Minister who has the discretion to approve or refuse to approve the activity (s. 59, EA). Such decision must be reached within 28 days (s. 59, EA). Where approval is refused a Working Committee shall be established to provide specialist advice (see ss. 59 & 24, EA).

Environmental Permits

The application for the EP must be submitted by the proponent, with the most senior person responsible for the supervision and management of the activities named in the application (s. 60, EA). Applications for activities that require an EIA (see above) shall not be accepted until an EIA has been conducted (s. 62(1), EA).

The application for an EP must be accompanied by:

 

  • Comprehensive details of the processes involved in carrying out the activity;
  • A statement of the risks of environmental harm;
  • A description of the sources and nature of any contamination which is likely to occur;
  • The steps proposed to minimise or prevent environmental harm;
  • A map of the site;
  • Any other information required by the Director (see r. 5, EPR; see also r.6 EPR).

 

The Director shall accept or reject the application in accordance with Reg. 8, EPR.

Following acceptance of an application and upon receipt of the requested copies, the Director shall, within 14 days, provide such copies to the relevant authorities as listed under Reg. 9, EPR. Authorities will be given 28 days to provide advice and make submissions to the Director (r. 9(2)-(3), EPR). The Director shall also publish a notice in a nationally circulated newspaper and via radio advising any interested persons to make written representations to the Director and proponent within 21 days of the notice and / or view the application (r. 10(1), EPR). Where objections are made that are not “…frivolous, vexatious or irrelevant…” and the Director is of the opinion that there is a real risk of environmental harm, a conference may be held (r. 11, EPR). The conference must be held within 21 days of the expiry of the period for making written representations and the applicant may be required to make a presentation (r. 11, EPR). The Director / Council may also require the engagement of an independent expert to consider certain issues relating to the application (r. 13, EPR). Note that this process (i.e. Regs. 9 – 13, EPR) does not apply where an EIA has been completed and approved by the Minister nor where an activity falls under Sub-Category 2, Schedule 2, EPAR (r. 12, EPR; see also Schedule 2, EPR).

A decision approving or refusing the EP must be made within 30 days if it concerns a Level 2 (Category A) or Level 3 Activity or 90 days if it concerns a Level 2 (Category B) Activity (r. 14, EPR). Extensions on the time limit are possible but limitations apply (r. 14, EPR). The factors the Director will consider when reaching a decision on the application are clearly provided for under Section 65, EA, though, as with the EIA process, several criteria are subjective. The Director must also be satisfied that the applicant will abide by the conditions of the permit (s. 65(1), EA). Permits may be issued subject to such conditions considered necessary or desirable by the Director to achieve the aims listed under Section 66, EA. The decision to grant a permit shall be published in accordance with Reg. 16, EPR.

Persons who are dissatisfied with a decision of the Director in relation to an application or activity may apply for a review by the Council (s. 68(1), EA). The application for review must be filed within 21 days of notice of the decision and the decision may or may not be suspended until a review has been completed (s. 68(2), EA; see also s. 69, EA). The subsequent decision of the Council may also be appealed to the National Court within 28 days, though this right is limited to an appeal on a question of law (s. 68(4), EA).

The EP confers on the holder the right to carry out the activities specified in the permit in accordance with any conditions imposed (s. 44(3), EA). The duration of the EP shall be specified in the terms; in the case of Level 2 (Category B) and Level 3 activities the duration shall be at least 25 years unless a shorter period is requested by the applicant and in all other cases the duration shall not exceed 10 years (r. 16(c), EPR). EPs may be renewed, transferred, surrendered or amended in accordance with the terms of Regs. 18 – 24, EPR. Fees for EIA and EP are set out under Schedule 1, EFCR.

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