CASE NUMBER: 177
CASE MNEMONIC: PAPUA
CASE NAME: Mining in Papua New Guinea
During the 1980s, Papua ( New Guinea) experienced a proliferation of mining projects. With the third-largest gold reserves in the world, the country has become a magnet for giant multinationals seeking to exploit this rich resource along with extensive silver and copper deposits. However, the development of these mineral resources has been a mixed blessing. Toxic waste from the mines has polluted many areas of the country. Local residents, particularly those of the Bougainvillea region, have taken to armed resistance to protest the destruction of habitat and to express dissatisfaction with their lack of sharing in the mining benefits. (see COPPER case).
Papua is a study in contrasts. On one hand, it is well-endowed with mineral resources. Along the nation's volcanic spine in there are five operating copper and gold mines and another eight under development(McBeth 40). In addition to mineral wealth the nation offers one of the most biodiverse habitats in the world. An abundance of plants and animals reside in its rain forests, which cover most of its land mass. On the other hand the country suffers from a chronic lack of funds with which to properly manage and use its resources. Many in the population are ill-equipped to deal with the complex interactions required to build and maintain a modern state. "Most of the 3.7 million people live as their ancestors did, as subsistence farmers in jungle hamlets outside the cash economy. They have one of the world's highest infant mortality rates and lowest life expectancies."(Drogin 1.)
Surek Bordia, head of the Department of Mining Engineering at the University of Technology in Papua, says if all current mining projects remain productive, by the year 2000 the nation could move from 7th to 3rd place in ranking of the largest gold producers in the world. Bordia believes this jump in output will be accomplished by more efficient mining and exploitation of yet-untapped resources. Specifically he notes ore bodies on Lihir island. Bordia said with geological resources of 1,324 tons of gold, Lihir is the world's largest gold deposit outside South Africa.(Ehrlich 41) Other third-world nations also have experience with corporations based in other nations tapping their mining resources.(see BRAGOLD case).
Like many Third World nations, Papua is dependent on commodity export. The policy was encouraged under prior administration of Papua as an Australian colony following World War II. Since Papua's independence from Australian administration in 1975, exploration of the interior has drawn many firms. The Papuan government is desperate for cash to finance national economic development, leading it to woo potential miners. Increased racial tensions in South Africa encouraged gold producers to locate in an area which was seen in less danger of being torn apart by internal strife. However the presence of the new mining projects has caused great rifts in Papuan society.
Environmental degradation has alienated some locals, who protest they are not sharing the economic gains which the central government has accrued through the mining. A serious allegation of environmental degradation has been leveled by environmentalists and others against the Ok Tedt mine, run by BHP, an Australian mining conglomerate.
The Ok Tedt mining project initially was required to obey environmental laws of Papua. But the government relaxed the regulations with regard to such activities as tailings dumping. "The Ok Tedt project was exempted by the Papua New Guinea government from its 1978 Protection act because the 1982 Ok Tedt Environmental Study, a company-generated document, was considered to be more environmentally appropriate." (Johnston 89) Initially Ok Tedt was supposed to limit the disposal of useless ore (tailings) to the Ok Tedt river. But instead, both that river and the Fly river have become heavily polluted by the project. Further discharge occurred when a dam built to contain downstream flow of sediments collapsed. The government concluded it would have to halt the mining or change the laws to prevent the mining -- which it seeks for economic development -- from proceeding in a fashion that is actually illegal. However, other developments have made Ok Tedt's managers wary of investing in the surrounding area.
The price of copper began falling in the mid-1980s, causing the Papuan government to seek an increase in copper production to maintain income to the nation. The OK Tedt Ltd. mining company, a majority shareholder in the mine, balked at investing more money in the site on grounds the investments might not be economic. The government, however, is determined that the improvements be made. "Australian newspaper reports and news wire services stated that the Papua New Guinea government, which owns 20 percent of Ok Tedt, is insisting on a guarantee that Ok Tedt proceed with stage two of the mine's development, and has threatened to consider closing current gold mining there." (Andrew 1) In order for this second stage to proceed, the company in charge of OkK Tedt would have to invest an additional $400 million into the mine's operation. The money would be used to build a hydroelectric dam and a copper smelter. In addition, the government wants copper production to begin.
Local residents must live with the side effects of mining. Soon after mining began at Ok Tedt, area denizens reported a drop in the fish population. "A decline in the turtle population has also been seen as the sandy banks where eggs were laid have been replaced by particulate copper and mud. Prawns, lobsters, and bivalves have also declined, and birds that depend on riverine life (egrets, kingfishers, Brahmin kites) have also left. The water is no longer safe for bathing, washing clothes, swimming, or drinking." (Johnston 92)
In addition to the alleged environmental damage, there are charges the indigenous population has been treated unfairly by the government. Hyndman suggests this is a side effect of ethnocentrism among the British-trained bureaucrats who run Papua s government from Port Moresby. Some government officials have publicly described local citizens as incapable of making their own decisions. As one example, a group of Wopkaimin elders( representing the largest local native group) were taken to see an existing open pit mine before Ok Tedt was begun, the officials assumed they didn't understand what they were seeing.(Hyndman 85.)
Discontent has led to some violence against the government and mining companies. Perhaps the area of most unrest is the Bougainvillea mine, owned by Australia-based Bougainvillea Copper Ltd. The company began mining copper ore in 1972, when the area was still under colonial rule. Royalties were paid out with 58 percent to the national government, 5 percent to the provincial government, and 1 percent to indigenous tribes. The company, it is alleged, reneged on promises to develop remote villages by building roads and establishing hospitals.
"Anger boiled over in November 1988 when the company denied killing fish in the once-rich Jaba river. Mine tailings had turned the river into liquid mud." (Drogin 1) Since then many raids have taken place, forcing closure of the mine. Rebels have been responsible for ritual killings and the deaths of several provincial officials, among them Provincial Minister John Biks, killed in his home by masked rebels as his family looked on. (Drogin 1.)
Eventually Papuan Defence Forces attempted to shell the rebels into submission. The rebels had formed an army known as the BRA (Bougainvillea Revolutionary Army) and continue resistance as of the date of this publication. (Hyndman 167) Even if the central government is successful and manages to defeat the rebels, the causes of their insurrection still exist. While the central government seems more determined to hold mining companies to pledges of economic development, enforcement of environmental law is a lower priority.
Australia has not been pleased by recent developments. From World War II until the Papuan independence in 1972, Australia had dominated the area. Current policy announced by Papuan Prime Minister Paiae Wingti could dilute Australia's influence by seeking new sources of investment, especially from Asia. Though Australian officials are cold to the idea, there is little they can do beyond protesting Malaysian "poaching" of Papua s natural resources. (Gomez 2)
A local conservationist despairs of any environmental activism on the part of the mining firms. He attended a meeting with representatives from the mining company about the imminent opening of the Lihir island gold mine and questioned them on the environmental effects of the new mine. " I asked a couple of quiet questions before being told that the meeting was to discuss supply of materials, not the ecology. Like how much waste material will be tipped into the sea, that's easy: 10,000 tonnes, per day, every day for at least thirty-two years. What happens to the cyanide from the processing? It is turned into a special salt that is insoluble, so when it is dumped in the sea too, there won't be any cyanide leaching out ... One would think that the lessons of Bougainvillea would have been absorbed."(CRUNCH 39)
Despite internal opposition it seems probable that mining without enforced environmental controls will continue to be a pivotal wheel in the Papuan economy, as the nation has little else to draw upon.
Specific Mining Cases and Copper Especially
(1): Trade Product = METAL
(2): Bio-geography = ASIA
(3): Environmental Problem = Species Loss Land [SPLL]
The development of mineral resources is the cornerstone of the Papuan government s economic development policy; environmental protection is seen as a luxury which cannot be afforded.
In order for this situation to be resolved the central government, the mining companies, and the citizenry will need to reach some sort of accommodation.
a. Geographic Domain: Papua New Guinea
b. Geographic Site: western PACIFIC
c. Geographic Impact: PACIFIC
a. Directly Related to Product: YES
b. Indirectly Related to Product: NO
c. Not Related to Product: NO
d. Related to Process: YES Species Loss Land [SPLL]
Waste has been draining into rivers for the past 30 years. A quick halt to the worst pollution would help to clean up the environment but residual effects are likely.
The indigenous people are likely to be at a disadvantage in claiming their rights when arrayed against the more sophisticated government officials and corporations.
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Leahy, Michael J. Explorations into Highland New Guinea, 1930-195. New York: University of Alabama Press, 1991.
Ballard, J. A. Policy-Making in a New State: Papua New Guinea, 1972-1977. New York: University of Queensland Press, 1981.
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Hyndman, David. Ancestral Rain Forest and the Mountain of Gold: Indigenous Peoples and Mining in New Guinea. Westeview Press: San Francisco, 1994.
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Collier, Andrew and John Salek. "Papua Gov't OK Tedt Mine Talk mine dates." American Metal Market. 18 January 1985, pg. 1.