Australia-listed Bougainville Copper Ltd. has been stripped of a license to redevelop a giant copper mine, known as Panguna, that has been closed for nearly 40 years and was once a flash point in a brutal civil war in Papua New Guinea.
Shares in the firm closed down nearly 36% on Wednesday, after it confirmed that the Autonomous Bougainville Government had rescinded its exploration permit.
The company is considering “what steps, if any, it will take as a consequence,” it said in a statement to shareholders. The ABG and landowners will now own all of a newly issued full mining license for Panguna through a local company called Bougainville Minerals Ltd., the statement added.
The decision comes as a little-known iron ore miner Lloyds Metals and Energy Ltd. is formally exploring ways to take part in the redevelopment of Panguna. In a major upset, the fast-growing Indian firm managed to beat off competition from Chinese mining giant CMOC Group Ltd. to emerge as the authorities’ favored partner for the ambitious project.
Lying beneath Panguna are an estimated 5.3 million tons of copper and 19.3 million ounces of gold, a deposit of metals that if extracted today would be valued at roughly $160 billion. Accessing those riches has been historically difficult and remains a risky undertaking today.
In 1989, local protests over environmental damage and concerns over mining profits led to the mine’s closure and ultimately to a civil war that left tens of thousands dead. Then-operator of the project, Rio Tinto Group, has since given up its ownership
The ABG aims to become independent from Papua New Guinea in the coming years and the Panguna mine would be key to its economic development. The government already controlled almost 74% of Bougainville Copper, with half of that stake held by Bougainville Minerals.
The mining lease has been granted to Bougainville Minerals for 25 years, a government spokesperson told Bloomberg by email. The license is the first awarded under recently amended mining legislation, according to the spokesperson.
A 2021 study by Bougainville Copper estimated that reopening Panguna would take around $6 billion and seven years to complete. A phased approach could be quicker and cheaper.
(By Paul-Alain Hunt and William Clowes)
