BARRY FITZGERALD | The Australian | Extracts
RIO Tinto is likely to quit its 53.8% stake in Bougainville Copper (BOC) after the listed subsidiary was stripped of its mining rights to the abandoned Panguna copper/gold mine in Papua New Guinea.
Panguna was abandoned in 1989 because of attacks on the operation by secessionist rebels on Bougainville island.
The response by Rio to the recent stripping of Bougainville Copper’s right to mine under new mining legislation passed by the Autonomous Bougainville Government is to “review all options’’ for its BCL stake.
That prompted speculation that Rio could look to gift its BCL stake to charitable foundations, as it did recently with a project in Alaska, or hand the interest to a trust for the long-lasting benefit of the local people.
BHP Billiton did the latter with its stake in the environmentally controversial Ok Tedi mine in PNG but now frets over control of that trust passing to the national government.
Rio demonstrated in the Alaskan situation that where it no longer feels welcome — and where the price of exiting is not too high — it is prepared to walk away.
The Alaskan deal involved Rio giving its 19.1% stake in Northern Dynasty to two local charitable foundations.
The project has emerged as a cause celebre for environmentalists worried about the impact of a development on the region’s famous salmon runs.
But because of Bougainville’s ongoing recovery process from its fractured past, quitting the BOC stake will not be simply a case of offering up the stake to the highest bidder.
Apart from Rio’s control position at BOC, the company is 19.06%-owned by the PNG government and 27.36% by the public through its ASX-listing. More than five million tonnes of copper and 19 million ounces of gold were left behind in the Panguna open-cut when it was abandoned.
The cost of returning the mine to its former glory would be several billions of dollars. But the main hurdle to a redevelopment remains support for the project at the regional level.