PM Marape: Porgera mine to reopen after signing of agreement with Barrick

April 9th 2021

Prime Minister James Marape today announced the conclusion of the Framework Agreement which sets the pathway for a new partnership with Barrick Niugini Ltd to reopen the giant Porgera Mine in Enga Province.

The agreement sets the parties’ collective sights on future ownership, operational arrangements and benefit split.
This is by no means a small matter considering the parties have come from a long way away to arrive at this point.
This breakthrough in negotiations between the two parties occurred after many months of engagement between the State and the Barrick Niugini Ltd, since the mine went into care and maintenance in April 2020.
Under the terms of the agreement signed between Mining Minister Hon. Johnson Tuke and Barrick Gold Corporation President and Chief Executive Mark Bristow, ownership of Porgera will be held in a new joint venture company to be owned 51 per cent by PNG stakeholders and 49% by BNL.
Barrick will remain the operator of the mine.
The Board of the operating entity will have an annual alternating chairmanship with the State nominating the Chairman in the first year of operation.
The New Porgera Joint Venture will be strengthened by State Directors being active participants and provide much value. Any variation of 5 per cent from an annual plan or budget must be brought back to the Board for approval.
All legacy issues have been clearly assigned to recognise legal responsibilities between the old Porgera and the new Porgera.
The Prime Minister, in recognising this significant event, said that it was always his objective to work out a better deal for the country and its stakeholders.
He recognised that there were enormous legal challenges along the way but he counted on very strong support from his Government, Enga Provincial Government, landowners and not the least, Barrick Niugini Limited.
He also added that within the current economic climate and challenges, with the support of Barrick, “we have worked out the best way to, on the one hand reopen the mine, but structure financing of the reopening in a manner which allowed the mine to itself pay for the required capital injections to the restart with minimal requirement for the Government to inject capital upfront”.
“Therefore, while the state licensee, Kumul Mineral Holdings Ltd, had the opportunity to identify a possible new partner, practical considerations meant that the State continued to stay engaged with Barrick as the partner for this joint venture,” PM Marape said.
The Prime Minister, in acknowledging benefits from the old Porgera,, noted that the new deal was better for all concerned.
” In the old structure, State parties, only had 5 per cent through Mineral Resources Enga (2.5 per cent Enga Provincial Government and 2.5 per cent SML landowners), while 95 per cent was held between Barrick Niugini Ltd (47.5% Barrick and 47.5% Zijin),” he said.
” Under the new deal, the equity split is 51 per cent and 49 per cent in favour of PNG stakeholders, and the opportunity for landowners to increase their equity beyond 15 per centwith the additional 10 per cent free equity paid for by Barrick.
” The royalty paid was 2 per cent to the SML landowners and the EPG, but the new deal secured an additional 1 per cent to 3 per cent.
” Up to 2019, the economic split stood at around 25 per cent for the PNG stakeholders with equity and taxes, where as the new deal will see that move to around 53 per cent in favour of the PNG stakeholders over the full life of the mine.
” The new agreement does not give away any tax concessions, which means the state is able to collect its taxes upfront.
” There is an applicable 30 per cent corporate income tax to the project.
“An additional 2 per cent is paid for fiscal stability, which had previously been conceded by the State, will now apply.
” In terms of community obligations, Barrick will pay US$3 million annually for 10 years to Porgera Sustainable Development Fund, and a further US$ 15 million upfront to appropriate categories of landowners.
” The biggest possibility in the agreement is that the State retains the right to acquire the full 49 per cent of the shares in 10 years’ time at fair value and that Barrick will finance the required start-up of the mine.
” Other key benefits that are captured in the agreement includes the immediate employment of citizens and significant personal income taxes inflows following the reopening of the mine, and the development of key leadership and technical capabilities for Kumul Mineral Holdings Ltd in view of their future involvement in mining projects in the country.”
PM Marape said that this announcement was a significant milestone in the Government’s effort to build strong frameworks within the resource sector,, which would benchmark future considerations for similar projects around the country.
He said that the Enga Provincial Government, the landowners and the State through Kumul Mineral Holdings Ltd was set to benefit greatly in this outcome.
He thanked Barrick Niugini Ltd for exercising utmost understanding through their willingness to work with his Government to reach this finality.
“The signing of the framework agreement now paves the way for the negotiations and finalising of other agreements including the shareholders’ agreements, the mining development agreements and other important arrangements involving landowners,” PM Marape said.
” But to come to this point is an important and significant statement about the willingness of both parties to stay engaged, despite the initial challenges of a year ago.”
PM Marape acknowledged that” what we have achieved today is unprecedented in the country’s mining history and in terms of Barrick’s global operations and experiences”.
He acknowledged Mark Bristow and the team at Barrick, the State Negotiation Team, and the large number of stakeholders including businesses and former employees of Porgera who had been patient for over a year to allow their Government to arrive at this juncture.
” While there are still important milestones to work through before the first machines start up again in Porgera valley, this point in the timeline is an important one, in that it is now possible to plan out the next phases with more certainty in terms of key details and dates,” PM Marape said.
” We will now move to immediately engage with all SML and LMP landowners with the Enga Provincial Government to discuss the benefit distribution at the development forum in Enga Province.
“I want to assure all stakeholders and Papua New Guinea that with the present circumstances, my team pressed on to get back more for Papua New Guinea, and in this deal all land owners and Papua New Guinea parties stand to gain more directly and indirectly. “

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