The Closure of Bougainville Copper Limited's Mine: Lessons for the Mining Industry

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The Closure of Bougainville Copper Limited's Mine: Lessons for the Mining Industry The Closure of Bougainville Copper Limited's Mine: Lessons for the Mining Industry by Allan Manning VICTORIA UNIVERSITY OF TECHNOLOGY 3 0001 00452 7661 firtf"" Supervisor: Robert Howard Victoria University of Technology Minor Thesis "The Closure of Bougainville Copper Limited's Mine Lessons for the Mining Industry" Student: Allan Manning ID Number: 9205017 ^ER THESIS 338.274309959 MAN 3000T004527661 Manning, Allan The closure of Bougainville Copper Limited's mine : lessons for the mining Victoria University of Technology City Campus October, 1994 Declaration The candidate hereby declares that the information reported in this thesis has not been submitted to any other university or institute for the award of a degree. Table of Contents MBA Minor Thesis 1 Literature Review: 2 2 Research Methodology: 3 3 Introduction: 5 4 Pre Independence History: 6 5 Independence to 1987 15 5.1 The Bougainville Initiative 16 5.2 Landowners' Concerns 16 5.3 Distribution of Payments 17 5.4 Road Mining Tailings Leases Trustee Ltd 18 5.5 "The Economic Coup" 20 6 1987-1988 21 7 Events - 22 November 1988 to 30 September 1989 23 7.1 Other Enquiries Not Reported in the Press 27 8 The Dilemma facing the Government of the Papua New Guinea 29 8.1 Political 29 8.2 Economic 29 9 Essential Qualities of Insurrection 29 9.1 The Existence of a Defined Group or 'Movement' 30 9.2 A Defined Purpose of Overthrowing the Government 30 9.3 The Use of Violence to Achieve the End 30 9.4 Crucial Date 31 10 The Managerial Question 33 10.1 Long Term Issues 35 10.1.1 Environmental 35 10.1.2 Landowner Liason 35 10.1.3 Staff Relations 36 10.1.4 Summary 37 10.2 The Last Opportunity 37 10.3 Correct Decisions 38 11 Conclusion 38 12 Bibliography 40 13 Table of Statutes 44 14 Table of Cases Cited 44 15 Glossary of Terms 45 16 List of Appendices 47 Minor Thesis Allan Manning "The Forced Closure of Bougainville Copper Ltd's Mine - Lessons for the Mining Industry" Literature Review: Since the beginning of history individuals or groups have dominated, and/or exploited other groups for financial gain. This domination can take the form of conquest. In more recent times the domination of one group may be covert rather than overt. Lx)gging, fishing and mining companies enter into partnerships with foreign governments and or local landowners to exploit natural resources. The genuine aim of the parties may be to have a pareto optimal or win-win partnership whereby all parties benefit by the project. However as with any marriage of convenience, tensions do arise. How the partners to such a contract handle the dispute, the concessions they are prepared to make, and the benefits they obtain are a very interesting study. Publications with titles such as "Plunder! Campaign Against Foreign Control of Aotearoa by RTZ/CRA" (Moody, 1991) demonstrate that not all arrangements for exploitation of raw materials progressed smoothly to the benefit of all parties. My review of the literature available on this topic, indicated that there are five main reasons for a dispute arising between two partners in one of these ventures. The five major issues are: 1. Environmental issues 2. Landowners dispossessed 3. Royalty payments 4. Use of local staff 5. Political & economic independence Taking each in turn: Until recently many of the companies which were exploiting natural resources, had little regard for the environment or what they were leaving behind. The recent case lodged by several landowner groups in Papua New Guinea against the giant OK Tedi Mine, partly owned by BHP, for environmental damage, suggests that some companies are continuing to ignore their responsibilities in respect of the environmental issue. Even people with, by our standards, little education, such as Papua New Guinea villagers from Western Province, or the Malaysian villagers who have huge stands of timber on their land, can appreciate the damage which is being done to their land in pursuit of development. These people can easily appreciate that once the project is ended and the resource has been removed, whether it be a mineral or other natural resource, they will be left with less than they had before; ie. a hole in the ground as opposed to fertile plains or eroded hills rather than dense jungle. Minor Thesis . Manning The Closure of Bougainville Copper Ltd's Mine - Lessons for the Mining Industry Page 3 The second issue is the dispossession of the original landowners. This is particularly the case with mines, although it also occurs with logging. The original landowners are often very attached to their land, much more so than Europeans. In the case of many native people, they have a spiritual link to the land which others who are not au fait with their customs and beliefs, some of which date back many thousands of years, cannot appreciate. The land disputes seen in Australia, highlighted by the recent Mabo & Others V The State of Queensland (No 2) (1992) 175 CLR 1 case, is an example of this. Papua New Guinea also provides many good examples. (Darin-Drabkin et al, 1977). The third issue which can be linked to the earlier two, is royalty payments. In some cases if the royalty payment made to the landowners is sufficient, it may be enough for them to overlook the first and second issues. However, if they do not receive what they perceive to be adequate royalties for their loss, then a dispute is sure to arise (Bedford & Manak, 1977). A fourth issue is the use of local staff and the way they are treated in comparison to staff brought in to manage or supervise the project. In some cases, companies have attempted not to use any indigenous people and rather have imported their entire workforce. In cases where the benefits provided to the expatriate workforce are greater than those received by locals, this can give rise to resentment (Domey, 1990). The final issue that can arise is that of political independence. Over the last few hundred years, first the Europeans and then later Americans have arbitrarily placed political borders around the world creating countries or states which often bring together people of completely different ethnic backgrounds. This problem is exacerbated if natural resources are found in the country with the benefits going to a group who may not have had any prior claim to that land. It could be said that the war in the Falklands was due to such causes. A conflict between partners often means that both parties suffer. If both parties to an agreement, such as a group of landowners and a multi-national mining company can appreciate these problems in advance and work towards resolving them, then both parties can work together for the good of all. Research Methodology: My association with Bougainville Copper Ltd (BCL) started in 1987 when I was transferred to Papua New Guinea as the resident director of a chartered loss adjusting firm. I was advised that BCL's insurer's had nominated our firm to attend any insured losses that the mine may suffer. I was also advised that BCL's insurance program had a PNK 10 million deductible. For this reason, I thought that the likelyhood of my attending a loss would be slight. I was of course so very wrong and from November 1988, when the first acts of violence against BCL started, until my departure from Papua New Guinea, delayed by the subsequent legal action taken by BCL against their insurers I studied the causes and actions of all parties very closely. The dates of my visits to Bougainville are recorded in Appendix 26. Minor Thesis Manning The Closure of Bougainville Copper Ltd's Mine - Lessons for the Mining Industry Page 4 My association with the island of Bougainville started several years before then with regular trips to the island for varying lengths of time from 1985. From 1987,1 travelled to Bougainville at least every eight (8) weeks and during this time I travelled over most of the island by both helicopter and road. I met and became friends with many of the inhabitants both local and expatriate. During the 15 months in which I carried out my initial research into the causes of the closure of the mine, 12 months of which included trips to Bougainville Island, I did not have the benefit of the education I received as part of my MBA programme. Having said this, the method I adopted in carrying out research of the books and papers written about Bougainville until that time, was not different to that which I was subsequently taught. My method of interviewing however, was somewhat different. I did not have the luxury of conducting a proper survey of either the indigenous people or the expatriates. I seized every opportunity possible to interview anyone I felt might conceivably be in a position to assist me in my investigation, some of whom I had great difficulty in locating while others such as Pius Kerepia, the Commissioner for Corrective Services, were fortunate, albeit chance encounters. During my enquiries I interviewed literally hundreds of people. Naturally, not all the information I obtained has found its way into my thesis. Those interviews which have been included have been identified, where the interviewee had no objection. I have recorded those instances where I was faced with objections. I would explain that many of my sources of information requested anonymity for one of two reasons: those that had or continued to work for Bougainville Copper Limited (BCL) or Conzinc Rio Tinto Australia Ltd (CRA), were naturally concerned for their positions within the company.
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