Offshore Minerals Policy Workshop, 22-26 February 1999, Madang, Papua

THE MADANG GUIDEUNES

ApPENDIX

Offshore Minerals Policy Workshop Report

SOPAC Miscellaneous Report 323

SOPACMisceilaneoHsReport 362 35 OFFSHORE MINERALS POLICY WORKSHOP

22-26February 1999 Madang,Papua New Guinea

SOPAC Miscellaneous Report 323 Revised Edition

December1999 [2]

ACKNOWLEDGEMENT

The Offshore Mineral Policy Madang Guidelines became a reality owing to the invaluable contributions of several committed organisations and individuals. We wish to acknowledge the Department of Mineral Resources, PNG for hosting the workshop; the Metal Mining Agency of Japan and the Forum Secretariat for sponsorship. Our gratitude goes to the authors of the papers who set the tone and developed the eclectic framework for the discussions. A special word of mention to Dr. Allen Clark, East West Center, Hawaii for playing a key role during the conference and helping compile and edit the papers. SOPAC is proud to have co-ordinated the workshop and to present the Offshore Mineral Policy Madang Guidelines. [3]

TABLE OF CONTENTS

Introduction 5

Workshop Recommendations 6

Addresses and Presentations

Welcome Address 8 Kuma Aua

Opening Address 9 Toyo Miyauchi

CHAPTER ONE: MARINE MINERAL RESOURCES

Offshore Mineral Resources Potential of Pacific Nations 11 Allen Clark

Marine Hydrothermal Mineralisation in the Lau and North Fiji Basins 20 Bhaskar Aao

Overview of Papua New Guinea Offshore Resources 31 Paul Kia and Joseph Lasark

The Mineral Wealth of the Bismarck Sea 37 Raymond Binns and David Dekker

The Offshore Mineral Resources of the Cook Islands 41 Ben Ponia

CHAPTER TWO: MARINE MINERAL POLICY, LEGISLATION AND GOVERNANCE

The International Seabed Authority and the Development of the Seabed Mining Code 44 Michael Lodge

Marine Mineral Policy Considerations for the Pacific Island Nations' Exclusive Economic Zone 50 Allen Clark

Introduction to the Papua New Guinea Green Paper on Offshore Mining Policy 57 James Wanjik

Fiscal Policy and Regime for the Economic Development of Offshore Mineral Resources 61 Allen Clark

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CHAPTER THREE: MARINE MINERAL DEVELOPMENT

Industry, Research and Government 68 Julian Malnic

Licensing Regime in Papua New Guinea 74 Nellie James

Stakeholder Issues in Papua New Guinea 78 Francis Lola

Papua New Guinea Fisheries and Marine Mineral Development 82 Ursula Kolkolo

CHAPTER FOUR: MARINE ENVIRONMENTAL ISSUES

Environmental Impact Assessment for Deepsea Mining 90 Charles Morgan

Review of Japanese Activities on Manganese Nodule Development and Marine Environmental Preservation 96 Yuji Kajitani

Summary of the Japanese Environmental Study for Manganese Nodules Development 104 Hirohiko Tesishima

Environmental Regime: Papua New Guinea Case Study 115 Katrina Solien

END SESSION

Closing Address 119 Hon. Masket Langalio CPE

APPENDICES

Appendix 1: Revised PNG Offshore Mining Policy Green .Paper 121

Appendix 2: Participants 132

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INTRODUCTION

The Offshore Mineral Policy Workshop (hereinafter "the Workshop") was held between 22-26 February 1999 in Madang, Papua New Guinea. The Workshop was hosted by the Papua New Guinea (PNG) Department of Mineral Resources, coordinated by the South Pacific Applied Geoscience Commission (SO PAC) and sponsored by the Metal Mining Agency of Japan (MMAJ) and the South Pacific Forum Secretariat.

The need for this Workshop to discuss issues surrounding offshore mineral development was initially discussed between the Papua New Guinea Department of Mineral Resources (DMR), SOPAC, MMAJ and other experts in July 1997. In addition, the discussions surrounding the need for more understanding of offshore mineral development issues resulted from two applications to PNG for marine exploration licences in the Manus Basin area of the Bismarck Sea by Nautilus Minerals Corporation limited (hereinafter "Nautilus"). The Papua New Guinea Government granted Nautilus the exploration licences in November 1997.

As part of the background work on building institutional competency to regulate offshore mineral development, the PNG Government determined that the Mining Act of 1992, which is the current mining legislation governing onshore mineral development, was inadequate to deal with offshore mineral development. In March 1998, an inter-agency committee within PNG was convened to formulate a policy framework for offshore mineral development. This policy framework for PNG was developed in an Internal Workshop on Seabed Mining from 31 August -02 September 1998 in Port Moresby and resulted in a draft PNG Green Paper on Offshore Mining Policy (hereinafter "Green Paper").

This Workshop combined national, regional and international expert presentations with working group sessions and plenary discussion.

One primary goal of the Workshop was to solicit comments and obtain input from international experts on the draft PNG Green Paper. The ensuing week's discussion points and proposals were discussed within working groups and used to revise the Green Paper. These revisions were then debated in the concluding session and agreed upon by the Workshop participants. The revised Papua New Guinea Green Paper is attached hereto as Appendix 1. This revised Green Paper is intended to undergo further development and refinement by the PNG inter-agency committee on offshore mineral policy and ultimately is to be forwarded to the PNG Cabinet of Ministers.

Another important goal of the Workshop was to develop a list of recommendations for proposed further work concerning offshore mining policy. To this end, each working group compiled recommendations in written and oral form and each was discussed and critiqued. A final list of 'Workshop Recommendations" was unanimously agreed upon by the participants. These Workshop Recommendations have been used as the basis for the Madang Guidelines for future work concerning national and international offshore mineral policy. [6]

OFFSHORE MINERAL POLICY WORKSHOP RECOMMENDATIONS

The following Recommendations are not listed in any order of priority. However, recommendations that are generally applicable for international offshore mineral development and the Asia-Pacific region overall are listed first. They are followed by those that would be more applicable to individual coastal states.

1. As appropriate, nations should take relevant measures to ensure the provisions of the 1982 Convention become fully implemented within their jurisdictions.

2. Nations should move forward rapidly to delineate the baselines from which the various jurisdictional zones under the United Nations Convention on the Law of the Sea (UNCLOS) ("1982 Convention") are measured and to deposit the appropriate charts and list of coordinates with the United Nations.

3. In the case of potential extensions of the continental shelf beyond 200 nautical miles, these data should also be gathered as soon as possible and the appropriate claims filed (bearing in mind the 10-year limit from the date of ratification by the coastal state).

4. Measures should be taken to designate archipelagic and other sealanes for the purpose of navigation in accordance with the 1982 Convention and other international conventions.

5. Nations should proceed to select their preferred dispute resolution mechanism as required under the 1982 Convention.

6. Nations should develop and promote a consent regime for Marine Scientific Research (MSR) in accordance with the provisions of the 1982 Convention and recommended international standards (e.g. the UN model guidelines on MSR) to ensure that research data and information may be obtained while protecting the confidentiality of investors' data regarding exploration of resources.

7. Recognising the appropriate instruments within the 1982 Convention regarding the conservation and management of the living resources within coastal states' EEls, measures should be taken to minimise adverse impacts to the marine environment and to traditional and non-traditional uses of the sea that may be caused by offshore mining.

8. Where appropriate, coastal states should consider making a declaration that the non-living resources beyond the 3-mile limit from the Provincia! coastlines are a "Common Heritage of the Nation".

9. In the interests of consistency and simplicity of administration, the unique nature of offshore mineral development activities and the diverse nature of stakeholder interests, coastal states should develop a comprehensive 'Offshore Mining Act,' where appropriate, as a distinct country-specific regime which is separate from their existing onland mining acts.

10. To ensure the long term capability of the coastal states to effectively monitor offshore mineral resources activities, relevant government representatives should participate in all at-sea phases of MSR, exploration and evaluation and that provision be made, either through appropriation or the creation of special use funds within the responsible agency(ies), to provide adequate human and fiscal resources required for needed data collection and collation, monitoring and enforcement activities.

11. Coastal states should adopt a proactive approach in all significant decision making activities related to environmental concerns associated with offshore mineral exploration and exploitation.

12. Recognising the unique nature of the biota associated with active hydrothermal zones, activities that ensure an adequate understanding of the biota communities and the impacts of any associated mineral exploration and exploitation should be undertaken by MSR and Industry. [7]

13. The collection of baseline environmental data should be a condition of any marine exploration licence. Collection of baseline data should begin as early as possible followed by systematic data collection throughout the term of the exploration licence.

14. The "risk" components associated with the exploration and exploitation of offshore mineral resources should be assessed and considered in the development of an appropriate licencing and fiscal regime.

15. Coastal states should adopt a policy that all commercia! operators in the offshore must carry appropriate insurance.

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WELCOME ADDRESS

Toyo Miyauchi Director Metal Mining Resources Information Centre, Metal Mining Agency of Japan

On behalf of the Metal Mining Agency of Japan (MMAJ), I would like to extend my sincere thanks to each of you for coming to Madang to participate in what I believe to be a very important and well-timed Workshop. With your expert contributions, I believe that this Workshop can achieve the results it has set out to achieve. I would also like to thank the other sponsors, the Papua New Guinea Government, the South Pacific Forum Secretariat and the members of SO PAC, for making the organisation of the Workshop possible. So, let us all work together to achieve some concrete results on the issue of offshore mineral policy, before we all find ourselves in "deep water".

But before focusing on the reason why we are here today, I would like to briefly discuss the MMAJ's experience with offshore mineral activities, and its history of offshore exploration in the South Pacific region. The MMAJ first began prospecting activities for mineral resources in the deepsea in 1975, and after the completion of the specialised research vessel "Hakurei Maru No.2" in 1980, carried out a large-scale survey for manganese nodules southeast of Hawaii. The MMAJ has also conducted exploration targeting seafloor hydrothermal deposits on the Eastern Pacific Rise (EPR) off the coast of Mexico between 1985 and 1994 and the Okinawan area from 1995. Exploration for cobalt-rich manganese crust deposits is also underway in the international waters between Marcus Island and the Marshall Islands. In short, the MMAJ has accumulated over 20 years of experience in deep-sea floor exploration for mineral resources.

Now I wish to turn briefly to the MMAJ's relationship with exploration in the South Pacific. The MMAJ has been closely involved with SOPAC since 1985, when in cooperation with the Japan International Cooperation Agency (JICA) it began a cooperative study project with SOPAC as part of the Japanese Government's Official Development Assistance (ODA) program. Phase I covered over 1.85 million km2 in countries including Western Samoa, the Solomon Islands, Vanuatu, Kiribati, the Cook Islands and PNG. Currently Phase III of this project is in operation in Tonga, the Marshall Islands, Micronesia and Fiji, and is scheduled to be completed later this year. The data gained from these basic exploration activities can be used as a base for mineral resources development by these countries in the future.

Which brings me to the purpose of this Workshop. As you are aware, we are here to help government policy-makers in the region understand the various issues involved in granting offshore mineral prospecting licences. Although the specific objective is to provide expert input to the PNG Government's Green Paper, the discussion will also provide an excellent basis for the development of similar regulatory regimes in other countries in the region. In this way, the importance of contributing to this Workshop cannot be underestimated.

In drafting offshore mineral policy, one aspect that needs to be emphasized is that seabed resources cannot be regulated in the same fashion as onshore minerals. Pre-existing minerals regulation cannot simply be transplanted, without proper consideration of the environmental risks and complex technology involved. Personally, I also believe that care must be exercised over the form of prospecting licences granted over offshore mineral deposits. As has happened on land, governments need to create a licencing system that promotes greater overall exploration, and not create a system that excludes either private or regional exploration.

In closing, I would like to remind you of the movie "Jaws", which had everyone getting out of the water. Over the next five days, let us cooperate to assist in the creation of an offshore minerals policy that allows everyone back in. Thank you. [9]

OPENING ADDRESS

Kuma Aua Secretary, Department of Mineral Resources, Papua New Guinea

Introduction

Let me first of all extend a warm welcome to representatives from overseas, in particular, Director Alf Simpson from SOPAG and his staff, representatives from the Metal Mining Agency of Japan (MMAJ) and of course, each one of you Workshop participants, invited guests from Manus Province, New Ireland, East and West New Britain Provinces and other observers, ladies and gentlemen.

It gives me great pleasure to have been invited to give a brief opening address as Secretary for Department of Mineral Resources to this important gathering of professionals. This Workshop has been staged at an opportune time for Papua New Guinea as we recently granted the first offshore mining exploration tenements in the world with respect to massive sulphide mineral deposits. In addition, our Green Policy Paper on this very subject of offshore mining which this Workshop will be reviewing, has been in circulation both internally in Papua New Guinea and externally as part of the consultation process. This Workshop will assist officers of my department and relevant agencies of the PNG government and institutions to finalise this Green Paper and provide an opportunity for other island states in the region to focus on the formulation of their own offshore mining policies and laws.

Your task this week will be to develop an appropriate and workable policy framework for seabed exploration and mining activities for an island state. Such a policy framework should result in adding wealth to the nation when the mining industry extends its activities from terrestrial-based exploration and development to the offshore. For Papua New Guinea, most of you already know that the mineral sector is a major contributor to the national economy in terms of foreign exchange earnings, internal revenue generation and gross national product. Of course we still have a few challenges to overcome and/or strengthen, such as community involvement in decision making and environmental issues resulting from mining operations.

Offshore mining is a relatively new activity in ocean affairs. I am sure that you participants at this Workshop will not only assist Papua New Guinea to finalise its offshore mining policy, but also this region of the world, consisting of many island nations, in developing an overall appropriate policy framework for this significant economic activity. No doubt, you will also gain for yourselves, relevant knowledge and skills and thus broaden your perspectives in this rather frontier and pioneering field.

As you know, PNG, like other nations in the region, is one of the archipelagic states that has been accorded special status under the United Nations Convention on the Law of the Sea 1982 (UNCLOS). PNG completed its ratification of this convention in January 1997; hence, it is incumbent on our country to realise our inherent benefits while still fulfilling our obligations.

Resources

Papua New Guinea like other island nations, is blessed with abundant natural resources. Our current mining projects attest to the mineral resources onshore and it is logical for these riches to extend to the offshore. Later today Dr. Binns and his local counterpart geologists will present papers which reflect this fact. Similarly after that presentation, the Fijian case study will follow which will outline the existing and the possible mineral resources prospects in that country.

The current interest in regional waters comprise a number of offshore resources such as sand and gravel, placer deposits, polymetallic sulphides, cobalt-rich manganese crusts, gas hydrates and manganese nodules. In addition to these non-living resources, we must consider the living resources such as biogenic materials, fisheries, fauna and flora and most importantly the unique environment [10]

which harbours them. The discussions throughout this week should enable an appreciation of the complexities involved when dealing with exploitation of mineral resources whilst conserving our marine environment for the benefit of other stakeholder interests and intergenerational equity. The UNCLOS provides an ideal framework from which to develop our management and coordination systems both at the national and consistently and importantly with our regional organisations.

Oceanographic and Environmental Conditions

Oceanographic and environmental conditions in the offshore also offer new challenges in developing or adapting technically feasible and environmentally acceptable exploration and mining technology. Examples of some new challenges will be highlighted today during some of the presentations on the unique aspects of our natural environment.

The costs of the development of such technological modifications and/or innovations will inevitably bear on the economics of an offshore mining project. Thus any fiscal regime and a regulatory framework that is designed must consider these issues.

Stakeholder Interests

The various stakeholders and their interests present a challenging perspective. Whilst encouraging exploration and exploitation of offshore mineral resources, we ought to be mindful of these stakeholders and their interests. Freedom of navigation and marine scientific research are just two of the interests which come to mind. The international seabed authority has interests in the deep seabed and resources therein outside national jurisdiction under the principle of "common heritage of mankind".

I believe its interest as well as others will be best addressed upon clear delimitation of national jurisdiction boundaries. This is a priority issue that another interdepartmental committee in PNG is currently handling.

In this context, this Workshop will give some insight into various international, regional and domestic regimes. Only then can we be fully conversant and appreciative of the inter-relatedness of various issues and interests relating to ocean affairs as embodied under the UNCLOS.

At each respective national level the domestic legal regime will be assisted by the establishment of demarcated boundaries as part of the delimitation exercise that is part of the UNCLOS implementation phase.

Challenge

I note that the program is very comprehensive. Your goal is to deliver an offshore mineral policy by the end of the Workshop this coming Friday. I challenge you to work hard to achieve this objective. The rewards are an awareness and appreciation of the complexities of issues in the offshore mineral exploration and mining and most importantly at the regional level, an ongoing commitment to regional cooperation. Consistency at the national and regional levels will enable effective coordination for important issues related to mining such as technology transfer, human resource development, marine scientific research and environmental monitoring and management.

Of course your tasks will not end here. The document outcome from this Workshop should prompt other regional representatives here to develop an offshore regime for their domestic requirements. Consequently, it is expected that ongoing consultations and coordination with SOPAC must continue.

With these few remarks it is my pleasure to declare the Offshore Mineral Policy Workshop open.

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CHAPTER ONE: MARINE MINERAL RESOURCES

Offshore Mineral Resources Potential of Pacific Nations

Based upon a paper presented by Allen L. Clark East-West Center, Honolulu, Hawaii, USA

Abstract

Because the world's oceans are largely unexplored, the potential for new discoveries of mineral deposits is very high, in both the near shore and deep-sea areas. New discoveries include new occurrences of known deposits, new deposits that have been postulated to occur but to date are unknown, and new deposits not yet imagined.

It has been postulated that large offshore gold placers associated with onshore epithermal gold and copper/gold porphyry systems may occur among the near shore deposits as typical beach placers and as offshore placers in basin areas reworked by ocean currents; entrapped in concentrating environments near reefs and bioherms; in near shore and offshore areas with high organic content; and far offshore in deep water sediments. Additionally, diamond placers are being discovered and exploited in offshore southern Africa, Brazil and Indonesia and are postulated to occur in offshore Australia and Antarctica. ( Deep sea areas outside the Clarion-Clipperton zone, such as the southeast Pacific, central Indian Ocean, offshore south Australia and the South Pacific (Cook Islands), may contain deposits of sufficient size and nodule grade that they may be considered alternative sites for possible mining. Manganese crust exploration in the future should consider alternative crust occurrences of possibly better economic potential in (a) areas below 2400 metres (m) with a more diverse but higher average metal content; (b) areas long associated with the Antarctic bottom water current (ABWC); (c) peripherally to ridge areas with hydrothermal activity; (d) on seamounts with a long history of activity; (e) crusts that occur in "collection basins"; and (f) tectonically displaced areas with prior crust deposition.

Polymetallic sulfide deposits of possible commercial value occur on ocean ridges and in areas where there are seamounts and calderas on young oceanic crust; in areas associated with fault scarps near spreading centers; and in areas of sediment-buried spreading centers. The last type, with a resource potential of 50 -250 million tonnes (t), based on modern corollaries, may occur in the Manus, Lau, Fiji, and Mariana Basins of the western Pacific.

Other deposit types that may occur in specialized marine environments, both near shore and offshore, are gas hydrates, uranium and rare-earth-rich phosphorites, deep-sea rare-earth-rich nodules, and slope/shelf silver deposits.

Introduction

Less money has been expended, a smaller area studied, fewer samples taken, and fewer analyses performed in the study of all the world's deep-sea mineral resources than has been dedicated to the research, exploration and development of the world's on-land nickel deposits. Yet, with this limited effort, one area of the world's oceans, the Clarion-Clipperton zone, was shown to contain more nickel resources than have ever been discovered on land. More importantly, active on-land exploration has been under way for over 200 years and new types of deposits are being discovered every decade. Active deep-sea mineral exploration has only been under way for approximately 40 years. The fundamental question therefore is "what would/will be the true mineral potential of the deep ocean given the same duration and intensity of on-land exploration?" Manganese nodules were the deposits of the 1950s and 1960s, cobalt-rich manganese crusts the deposits of the 1980s. and polymetallic

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sulfide deposits, particularly those high in gold, are now the deposits of the 1990s: In addition to the above, what will be the ocean mineral deposits of the twenty-first century?

Each research and/or exploration cruise significantly adds to the knowledge of the deep ocean and its mineral resources. In July 1989, an article in Science News (1989) reported that recent drilling on a newly discovered type of seamount showed that it was composed of serpentinite, rather than traditional volcanic material, and was being actively formed by cold intrusion. Similarly, in 1995 new information emerged of life forms, associated with polymetallic sulfide areas of venting, which did not exist by photosynthesis. A new type of seamount, a new type of life and all within the last decade--how much is really known of the deep ocean, its processes, and its mineral resources? Surely the answer must be that we know very few of the ocean's secrets. If this is the case, the resource potential of the deep ocean and near shore will be the source of new discoveries of both known deposit types and of new types of deposits.

This paper attempts to provide a brief overview of existing offshore mineral development activities and to present some basic concepts for new types of deposits. For the latter, the postulations are based on incomplete knowledge and many deposits discussed may never be of commercial value.

Near Shore Mineral Deposits

Near shore deposits of black sands, chromite, gemstones, gold, diamonds, metalliferous muds, oil and gas, phosphate, platinum, sand and gravel, salts, silica, sulphur and tin have been recognized and exploited for centuries and they continue to be explored for and developed worldwide. However, for purposes of this paper, the discussion of near shore mineral deposits focuses on new areas for conventional placer deposits and new types of near shore mineral occurrences that have not been recognized or previously described.

Near Shore Gold Occurrences

New occurrences of traditional placer gold deposits are an exciting new possibility for marine mining. In particular, placer gold deposits that are associated with epithermal gold deposits of the Pacific Island nations, Papua New Guinea, Indonesia, and the Philippines may represent a great untapped potential. At present, no fewer than 1000 epithermal gold occurrences are known in the Pacific Island nations, Papua New Guinea, Indonesia, and the Philippines, and many of them occur near shore or in small island areas. Such deposits have undoubtedly contributed large quantities of gold, through erosion, to the adjacent rivers and shoreline areas. Similarly, gold has been contributed to the near shore areas by occurrences not yet recognized or previously eroded.

To a large extent, based on the simple principles of hydraulics and placer concentration, it is anticipated that near shore and offshore placer deposits are primarily composed of fine-grained gold because (a) the onshore deposits are predominantly of fine-grained gold and (b) any coarse gold present would be concentrated either onshore or very near the shoreline.

A portion, and quite possibly a large portion, of offshore and near shore gold may be less than 50 IJm (270 mesh) or colloidal in form and consequently may not follow simple hydraulic concentration principles. In particular, it may move long distances prior to its deposition. As a result, placer gold deposits of fine gold may occur near shore in conventional placer deposits but far removed from the onshore general source, entrapped in concentrating environments of reefs and other living organisms, or as placer concentrations in reworked deep sediment units far offshore in deep-water sediments.

In particular, with respect to the above types of occurrences, several small to large gold/copper porphyries occur in Fiji, Papua New Guinea, Indonesia, and the Philippines. The largest of these is the giant Bougainville Mine in Papua New Guinea, which has reserves of 530 million tons of ore averaging 0.4% copper and 0.46 grams/t gold. The Bougainville Mine on Bougainville Island has deeply eroded and this author has estimated that erosion has yielded over 200 tons of gold into the surrounding streams and offshore areas, an amount equal to that estimated for all epithermal deposits.

An additional type of near shore occurrence of fine-grained or colloidal gold that may exist which is largely unexplored is that associated with reducing environments in areas with high carbon content (Clark and Lum, 1990). Among the most common high-carbon areas are coastal wetlands and

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mangrove swamps and shallow estuaries. Although such areas are environmentally sensitive and would require extensive environmental study and detailed rehabilitation programs, such high-carbon areas would be very favorable concentrating sites if they occurred in association with onshore and nearby epithermal gold deposits. Given the large areas of such high-carbon environments, it would seem that they deserve serious consideration as possible occurrences of coarse, fine, or colloidal gold.

Near Shore Diamond Occurrences

Equally interesting to speculate on, in terms of known deposit types, are the possible areas where diamondiferous placer deposits may occur. Diamondiferous placer deposits are of considerable interest because they are noted for producing large diamonds of gem quality. The work of Sutherland (1982) has shown that the size of diamonds occurring in placers decreases with the distance of transport, but with a corresponding increase in quality, and many diamonds may be transported several hundred kilometres (km) from their primary source. These observations indicate that diamondiferous placer deposits may occur over areas larger than previously postulated and may contain small but high-quality stones. As a result, the known offshore diamondiferous placer areas of the world, primarily in southern Africa and Brazil, should be reevaluated for additional placer deposits.

In addition to reevaluation of the above-mentioned areas of diamondiferous placers, several other areas should be evaluated based on geologic considerations. Based on a Gondwanaland reconstruction, diamondiferous placer deposits may occur in the offshore areas of Australia, Antarctica and, as have already been found, Indonesia. The presence of diamondiferous placers in Indonesia is permissive evidence that diamondiferous placers may occur offshore Australia and Antarctica.

The above discussion in no way intends to limit the spectrum of new placer occurrences that may exist in near shore environments. Rather, it is intended to draw attention to the vast potential of near shore mineral occurrences and the need to develop new concepts, exploration methods, and new technologies to evaluate and develop these deposits and new policies, legislation and fiscal regimes to promote their development.

Offshore Analogues of Onshore Deposits

McKelvey (1986) pointed out that "theoretically any mineral resource mined on the continents can occur on the continental margin". Indeed, more than 100 subsea underground mines, having shaft entry from the land, islands or artificial islands, are known. Beyond this specialized extension of on- land mining activities is a second distinct group of deposits: offshore analogs, and their associated secondary deposits, of deposits known on land.

Although the occurrence of near shore and undersea deposits has been casually considered by many geologists and mining companies, there has not been any systematic or concerted effort to identify such deposits. However, in the context of marine mining in the twenty-first century, it would seem that such deposits may well represent a prime exploration target. Philippine-type gold/copper porphyry deposits and their associated secondary deposits could be considered an excellent example of offshore analogues of onshore deposits. The proposed development of exploration and mining technologies applicable to deep-sea polymetallics will be equally applicable to more conventional near shore deposits and vice-versa.

Unique to the postulated occurrence of conventional mineral deposits under the sea will be an associated set of secondary deposits derived from the aerial erosion of a deposit near sea level and subsequent subaerial erosion, the subaerial erosion of the deposit after emplacement at sea level, or the subaerial erosion of a deposit formed under the sea. This differentiation is required in that the mode of occurrence and the erosional history results in the production of different types of deposits and different erosional products. It should be reemphasized that the primary deposit represents a viable exploration target and potential economic deposit.

Using a Philippine-type gold/copper porphyry deposit as a model, it can be seen that, as the distance from the primary source increases, subaerial erosion of the deposit may produce the following sequence of metalliferous sediments:

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1. Residual gold cap on deposit (coarse-grained); 2. Adjacent gold placer deposits with abundant quartz continuously reworked with deepening erosion; 3. Peripheral gold placers with copper sulfides; 4. Strataform copper deposits (detrital) in high-energy sediments (minor gold); 5. Fine-grained gold placers; 6. Stratabound copper/gold-bearing sediments in adjacent deep areas (with other base metals).

Obviously the distribution and thickness of these units, some of which may not exist because of physical factors, will vary considerably, but overall the types of postulated secondary deposits can be expected to exist. As such, the secondary deposits associated with the erosion/emplacement of conventional deposits offshore represent a new and largely, if not totally, unexplored set of occurrences. Although this discussion uses a gold/copper porphyry as the example, it should be emphasized that there is no sound geological reason why the majority of conventional mineral deposits that occur on land would not occur in near shore or deeper offshore areas. In particular, Kuroko-type deposits, which have a strong ocean-floor association in their genesis, should be considered as prime targets for near shore exploration.

Intermediate and Deep-Sea Mineral Resources

Manganese nodules

Manganese nodules were first discovered in the deep sea during the 1873-1876 expedition of the Challenger but remained little more than a scientific curiosity until the 1950s when large nodule fields were discovered in the Pacific Ocean. During the 1960s and until the late 1970s, manganese nodules were the subject of intense scientific research and exploration by private industry. Although manganese nodules occur in all of the world's oceans, the most famous area is the Clarion-Clipperton nodule field, which is an area of roughly 2.25 million square kilometres (km2).

McKelvey (1986) has estimated that within this area there are 2.1 billion dry t of potentially recoverable nodules. The mineable area would be 1.25 million km2, with a nodule concentration of 11.9 kilograms per square metre (kg/m1 of nodules containing 1.3% nickel, 1% copper, 25% manganese, 0.22% cobalt, and 0.05% molybdenum.

Recently, Clark, et al. (1995) estimated that the cobalt rich manganese nodule resources occurring within the EEl of the Cook Islands was approximately 7.5 billion tonnes of nodules containing 32.5 million tonnes of cobalt, 24.5 million tonnes of nickel and 14 million tonnes of copper (assuming a cutoff grade of greater than 5kg/m2 in an area of 652,223 km1. For the entire Pacific, Halbach and Fellerer (1980) have estimated there to be 8.1 billion t of recoverable nodules.

For the present discussion it is sufficient to point out that in the South Pacific only the manganese nodule potential of the Cook Islands is known with any degree of geologic certainty, in terms of overall resource potential, and reserve estimates are lacking worldwide. However, manganese nodules are known to occur within the EEl's of most Island nations and the long term potential of these resources is yet to be adequately investigated.

Polymetallic massive sulfides

Since the discovery of polymetallic sulfide deposits (PMS) in 1978, many authors have noted the similarity of PMS occurrences to deposits now being mined on the continents. In particular, the ophiolite-hosted massive sulfide deposits of Cyprus (Adamides 1979), Kuroko deposits of Japan (Halbach et al. 1989b) and the numerous massive sulfide deposits of Canada and Australia are all considered corollaries with specific types of PMS occurrences in the intermediate to deep ocean.

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The various types and occurrences of PMS deposits and their associated geological environments can be summarized as follows:

.Seamounts and associated calderas on young oceanic crust. Recent seamounts and associated calderas provide a complex area of volcanic extrusions, faulting, brecciation and alteration, thereby providing an ideal environment for sulfide entrapment and concentration. Extensive sulfide deposits have been found associated with calderas and summit slopes (Lonsdale et al. 1982; Hekinian et al. 1983a, 1983b; Kappel and Franklin 1989; Halbach et al. 1989b).

.Fault scarps bordering axial valleys associated with spreading centers. Major tectonic features such as fault zones provide opportunity for extensive convection and mineralisation of faulted and brecciated host rock and associated detrital material (Backer et al. 1985; Malahoff 1982; Kappel and Franklin 1989).

.Sediment-buried spreading centers. Deposits may form where the spreading axis is adjacent to a source of sediments either from the continents (as in the Gulf of California) or near island arcs (as in young back-arc basins of the west Pacific). In the Guaymas Basin of California, over 120 discrete sulfide mounds have been observed (Scott et al. 1983). Mounds of probable hydrothermal origin have been found associated with the Marianas Basin (Leinen and Anderson 1981), the Manus Basin (Both et al. 1986, Binns, et al. 1997), the Lau Back-arc Basin (Stackelberg et al. 1989) and the Okinawa Trough Back-arc Basin (Halbach et al. 1989b).

Based on the above, it was this author's belief (Clark, 1985) that the most prospective areas for the occurrence of large PMS were the basins of the west Pacific, particularly, the Manus, Fiji, Woodlark, Marianas, and Lau Basins. Indeed, the present areas of primary interest, because the favorable areas have been leased to private industry, are those discovered in the Manus Basin of Papua New Guinea (Binns, et al. 1997).

According to Binns, et al. 1997, the eastern Manus Basin contains three known active hydrothermal zones (PASCMUS, DESMOS and Susu Knolls) which are rapidly becoming recognized as regional- scale modern analogues of volcanic hosted mineral fields on land. In the PACMUS field, Binns, et al. (1997), reports that ".. .Chimneys dominated by chalcopyrite and sphalerite, with barite and some bornite, have average compositions of 11 wt% Cu, 27% Zn, 230ppm Ag, and 18 ppm Au " And in the Susu field " analyses of three Suzette chimneys average 19% Cu, 22% Zn, 125 ppm Ag and 23 ppm Au "

What is particularly interesting about the Manus Basin deposits and perhaps the deposits of the Okinawa Trough as well, is their high gold content. If the value of the known mineralisation in the eastern Manus is calculated on a per tonne basis it would be worth approximately US$500 to US$600/tonne in contained metal (gold, copper, zinc). It is doubtful that with further testing a deposit of sufficient size, which averaged this high a contained metal value, will be discovered. However, the evidence to date based on limited sampling clearly indicates that the known mineralisation is comparable to, or exceeds in value, that of many massive sulfide deposits on land.

Although the PMS are mineralogically and elementally similar to known mineral deposits, they appear to vary in one major aspect--size. To date, the majority of all known PMS occurrences are considerably smaller than that of deposits that have been, or are being, mined elsewhere in the world. To a large extent, however, this may be due to the lack of adequate three-dimensional data on these occurrences or, more likely, the answer to the question, "Where are the big ones, or at least the average-sized deposits?", may lie in Converse, et al.'s (1984), observation that only a very small proportion of the mass flux of any vented system is localized in the chimney of the "smoker" itself; the overwhelming proportion is lost to the water column as the hot solutions disperse.

Regardless of the above, the ridge-associated PMS are considered to be analogous with deposits in Cyprus and to some extent with the Kuroko deposits of Japan, whereas, deposits in the sediment- buried spreading zones may be considerably different from the above types and may more closely resemble deposits of the Iberian pyrite belt of southern Portugal, southwestern Spain or deposits in Canada. In the Iberian deposits, Strauss, et al. (1977), has estimated the reserves of the area to be in

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excess of 1 billion t. Individual deposits in the belt commonly exceed 25 million t and deposits of 100 million t are common. Alternately, the proposed deposits may be similar to those mined in the Bathurst district of Canada, where over 30 massive sulfide deposits, containing a total of 250 million t of ore, occur (Sangster 1980). Deposits in this area range from 1 million t to over 120 million t and over 15% of all deposits are 10 million t or larger.

Based on the above analogies, it can be postulated, perhaps optimistically, that if the Manus, Lau, Woodlark, Fiji, and Marianas Basins are similar to the Iberian pyrite belt, over 500 million t of ore may occur. Alternately, if they are similar to the Bathurst area, the potential reserves could be as high as 250 million t. Although this author does not believe the above basins will yield the quantities of ore found in the Iberian pyrite belt, it should be emphasized that if even one basin had a reserve potential equal to the Bathurst area of Canada, it would qualify as a world-class mineral district.

It would be inappropriate to conclude this discussion of PMS without a short discussion of the gold content of present and future polymetallic sulfide deposits. Harrington, et al. (1986), have provided an excellent overview of gold in marine PMS, which is of importance to this paper. In summary, Harrington, et al., made the following observations:

1. High gold content (up to 6.7 parts per million [ppm]) in PMS in the eastern Pacific are associated with late-stage, sinterlike, low-temperature sulfosalts of lead, arsenic, antimony, silver, and sulfur in a matrix of amorphous silica; 2. Gold at concentrations of about 0.2 ppm is associated with high copper (>1%) and molybdenum (up to 470 ppm); at concentrations >0.8 ppm with high zinc (>100 ppm), arsenic (>300 ppm) and antimony (50-100 ppm); and, 3. Hydrothermal areas in the Guaymas Basin are underlain by sediments enriched with gold relative to mid-ocean basalts but sulfide samples normally contain >0.2 ppm gold.

The western Pacific margin, from New Zealand to Alaska, is an area typified by a large number of epithermal gold deposits and gold/copper porphyry deposits--as such, it represents a major gold metallogenic province. This known association of high-gold deposits on-land, with high-gold-bearing deposits within the region's ocean basins (Halbach et al. 1989b), indicates that the western Pacific gold province (WPGP) may prove to be the area with the world's richest PMS with respect to gold and silver.

Manganese Crusts

Although the existence of manganese crusts has been known for over a century, interest in cobalt- rich manganese crusts (hereinafter "crusts") increased rapidly in the early 1980s as a result of studies in the Hawaiian Archipelago (Craig et al. 1982) and Line Islands (Halbach et al. 1982). These studies demonstrated that crusts occurred over large areas of seamounts and guyots, and that such deposits had cobalt contents of more than 1%. Subsequently, a resource assessment of the Hawaiian Archipelago (Clark et al. 1984) demonstrated that the crust has resources of roughly 10 million t of cobalt, 6 million t of nickel, 1 million t of copper, and 300 million t of manganese. Additionally, based on a geologic occurrence model, it was estimated that the Exclusive Economic Zone (EEZ) areas of the Marshall Islands, Johnston Island, and Kingman-Palmyra Island had an equal or greater resource potential than that estimated for the Hawaiian Archipelago (Clark and Johnson 1986).

More interest in crusts was generated by the discovery of platinum concentration of up to 1 ppm in many crusts (Halbach et al. 1984, Halbach et al. 1989a), by the discovery of crust thicknesses in excess of 10 cm in the Marshall Islands and by the discovery of crusts on broad, gently sloping surfaces, possibly of sufficient extent to support a proposed mining operation. All of these factors, in addition to new discoveries, have served to maintain a strong public and private interest in possible manganese crust mining.

In addition to the crusts that occur in the above-mentioned environments, other occurrences of crusts, which vary in thickness, metal content, and potential recoverability, would include the following:

1. Manganese crusts occurring below the 2400-metre zone proposed as a base for conventional crust deposits. These deeper crusts have a higher content of copper and nickel and a lower content of cobalt, and may lack the medial phosphate unit. Because of a more diverse, but equal distribution of metals, such crust deposits may be of higher

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economic value depending on future metal prices. Additionally, they are largely unstudied and future research may show heretofore unknown thickness and metal values of economic interest;

2. Crust deposits that have developed in unique geologic settings may ultimately be of the greatest interest from an economic perspective. In particular, crusts that have formed on seamounts that have been exposed to the influences of the Antarctic bottom water current (ABWC) may be found to have very thick and rich crusts. Alternatively, crusts that occur on seamounts peripheral to ridge areas may be found to be thicker and of a higher grade, and they may contain a wider spectrum of metals than normal crust deposits, primarily because of contributions of material from the ridge hydrothermal activity. These deposits would be somewhat similar to crust deposits that may occur in an associated environment, that is, on the seamounts that have undergone prolonged hydrothermal activity associated with calderas. Such environments would produce crusts derived both from normal crust formation processes and from those associated with volcanism and hydrothermal activity;

3. Unique geologic environments will be found in which a combination of normal geologic factors that produce crusts are amplified. In particular, small ocean basin areas ("collector basins"), such as those formed by guyots in the Marshall Islands where currents are amplified, waters recirculated and recharged, and abundant deposition surfaces occur, are ideal sites for crust formation. These collector basin environments, which would also include calderas on seamounts, occur throughout the Pacific and should be exploration targets for commercial crust occurrences; and,

4. Previously formed crust deposits may be tectonically elevated or depressed and therefore exploration for crust occurrences cannot be constrained to the aforementioned 800-2400- metre zone. Exploration should be undertaken below 2400 m in some areas, and, in the extreme, on land for crust occurrences that have been tectonically displaced.

In addition to the above-described known deposits and those postulated to occur, there is one additional type of deposit that should be considered for its geologic, economic, and mineable potential. These are the composite crust/nodule occurrences that have been observed throughout the Pacific but have not been actively considered as potentially mineable deposits. Specifically, many seamount plateaus, intervalley areas, and gently sloping areas demonstrate areas of both nodule and crust development that may be adjacent or overlapping. A better understanding of these types of occurrences may lead to the discovery of deposits that can be mined for both nodules and crusts; such composite deposits may contain more metal and have larger tonnages than conventional crust occurrences. Because composite crust and nodule areas are common throughout the Pacific, their potential should be evaluated.

Energy Resources

As a concluding comment on the potential of the deep ocean for producing heretofore unknown mineral deposits, some mention should be made of the potential for energy resources. Chief among these may be deep-ocean oil and gas deposits formed by ocean hot spots. These types of deposits have recently been postulated by Simoneit and Bidyk (1989) who noted the presence of oil on the ocean floor in the areas of hydrothermal activity and as discrete free-floating globules. It is postulated that hot spot areas elevate the temperature of organic sediments to over 350°C, a temperature at which hydrocarbons form rapidly. This is in contrast to the normal concept of oil and gas forming in stable basins over long periods and at temperatures determined by depth of burial. The new concept of oil formation over hot spots and in areas of rapid tectonic movement would, by necessity, require that the oil form rapidly--as it does. Second, it would require that the oil be formed in sediments that could trap and retain the oil (in the Guaymas Basin, for example, it escapes to the surface). Such areas may well occur in association with the basin-covered spreading ridges described elsewhere in this paper. Similarly, consideration should be given to oil exploration in near shore and onshore areas that fall on line with extensions of deep-sea hot spot areas. It should also be noted that oil and gas seeps have been reported offshore Antarctica and in several other areas. Such occurrences may indicate that "hot spot oil" may be much more common than postulated in this paper. Finally, consideration should be given to the possibility that the same processes that are forming "hot spot oil"

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at present most certainly existed throughout much of geologic time. As a result, Paleo-hot spot oil occurrences may occur on land and are yet to be discovered.

Summary and Conclusions

Centuries of on-land exploration for mineral deposits have shown that many areas of the continents contain commercial deposits of minerals. More importantly, modern exploration continues to find new deposits and deposit types. When this is compared to the world's oceans, where exploration has been active for less than 50 years and only a tiny fraction of on-land exploration research money has been allocated to ocean minerals, it can only be concluded that, although largely untested, the potential of the oceans to yield mineral resources is enormous -even if these resources are only one-tenth of those found on land.

For the future, the marine mineral deposits that will be discussed include new occurrences of known deposit types, new deposits that are postulated to occur but to date have not been discovered, and new deposits that are not yet imagined. The majority of the future discoveries probably belong in the last category. However, for the near term, based on economic, technological, and practical considerations, the major part of exploration and development planning will undoubtedly focus on expanding present knowledge of known deposit types.

Many factors, including world metal demand, metal prices, technology, legal regimes, government/industry activities, etc., will determine when and if deep-sea mining, or, indeed, shallower continental shelf mining, takes place. What is more certain, however, is that, as pointed out in this paper, the potential for new discoveries is enormous, and, more importantly, man's desire to explore and discover new deposits is perhaps even larger.

References

Adamides, N.G. 1979. The Form and Environment of Formation of the Kalawasos Ore Deposits--Cyprus. In Proceedings of the International Ophiolite Symposium, Geological Survey Department, Ministry of Agriculture and Natural Resources, Republic of Cyprus: 117-127. Backer, H., Lange, J. and Marchig, V. 1985. Hydrothermal Activity and Sulphide Formation in Axial Alleys of the East Pacific Rise Crest between 18 and 220S. Earth Planet. Sci. Lett. 72: 9-22. Binns, R.A., Scott, S.D., and Gemmell, J.B. 1997. Modern Analogue of a Mineral Field: Seafloor Hydrothermal Activity Hosted by Felsic Volcanic Rocks in the Eastern Manus Basin, Papua New Guinea. In Society of Economic Geologists Neves Corvo Field Conference, Lisbon, Portugal. Both, R., Crook, K., Taylor, B., Brogan, S., Chappell, B., Frankel, E., Liu, L., Stinton, J., and Tiffin, D. 1986. Hydrothermal Chimneys and Associated Fauna on the Manus Back-arc Basin, Papua New Guinea. Eos 67{21): 489-490. Clark, A.L., Johnson, C.J., and Chinn, P. 1984. Assessment of Cobalt-rich Manganese Crusts in the Hawaiian, Johnston and Palmyra Islands' Exclusive Economic Zones. Natural Resources Forum 8{2): 163-174. Clark, A.L., and Johnson, C.J. 1986. Cobalt-rich Manganese Crust Potential of the U.S. Trust and Affiliated Territories. In Proceedings of the Offshore Technology Conference, Houston, Texas. OTC-5233: 111-118. Clark, A.L., and Lum, J. 1990. Gold Potential in Mangrove Swamp Environments of the Southwest Pacific. East- West Center Occasional Paper 4-90. Clark, A.L., Lum, J.A., Li, C., Icay, W., Morgan, C., and Igarashi, Y. 1995. Economic Development Potential of Manganese Nodules within the Cook Islands Exclusive Economic Zone. East-West Center, Honolulu, Hawaii. Converse, D.R., Holland, H.D., and Edmond, J.M. 1984. Flow Rates in the Axial Hot Springs of the East Pacific Rise (210N): Implications for the Heat Budget and the Formation of Massive Sulphide Deposits. Earth Planet. Sci. Lett. 69: 159-175. Craig, J.D., Andrews, J.E., and Meylan, M.A. 1982. Ferromanganese Deposits in the Hawaiian Archipelago. Marine Geology 45: 127-157. Halbach. P., and Fellerer, R. 1980. The Metallic Minerals of the Pacific Seafloor. GeoJournaI4{5): 407-422. Halbach, P., Marchig, V., and Scherhag, C. 1980. Regional Variations in Manganese, Nickel, Copper and Cobalt of Ferromanganese Nodules from a Basin in the Southeast Pacific. Marine Geol. 38: 111-119.

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Halbach, P., Manheim, F.T., and Otten, P. 1982. Cobalt-rich Ferromanganese Deposits in the Marginal Seamount Regions of the Central Pacific Basin--Results of the Midpac '81. Zeitschrift fur Erzbergbau und Metallhuttenwesen 35: 447-453.

Halbach, P., Puteanus, D., and Manheim, F.T. 1984. Platinum Concentrations in Ferromanganese Seamount Crusts from the Central Pacific. Naturwissenschaften 71: 577-579.

Halbach, P., Nakamura, K., Wahsner, M., Lange, J., Sakai, H., Kaselitz, L., Hansen, R.D., Yamano, M., Post, J., Prause, B., Seifert, R., Michaelis, W., Teichmann, F., Kinoshita, M., Marten, A., Ishibashi, J., Czerwinski, S., and Blum, N. 1989a. Possible Modern Analogue of Kuroko-type Massive Sulphide Deposits in the Okinawa Trough Back-arc Basin. Nature 338(6215): 496-499.

Halbach, P., Kriete, C., Prause, B., and Puteanus, D. 1989b. Mechanisms to Explain the Platinum Concentration in Ferromanganese Seamount Crusts. Chemical Geol. 76: 95-196.

Harrington, M.D., Peter, J.M., and Scott, S.D. 1986. Gold in Seafloor Polymetallic Sulphide Deposits. Economic Geol. 81(8): 1867-1883.

Hein, J.R., Morrison, M.S., and Gein, L.M. 1991. Central Pacific Cobalt-rich Ferromanganese Crusts: Historical Perspective and Regional Variability. Circum-Pacific Council for Energy and Minerals, Earth Sciences Series.

Hekinian, R., Fevrier, M., Avedik, F., Cambon, P., Charlou, J.L., Needham, H.D., Raillard, J., Boulegue, J., Merlivat, L., Moinet, A., Manganini, S., and Lange, J. 1983a. East Pacific Rise near 130N: Geology of New Hydrothermal Fields. Science 219: 1321-1324.

Hekinian, R., Francheteau, J., Renard, V., Ballard, D., Choukrone, P., Cheminee, J.L., Albarede, F., Minster, J.F., Charlou, J.L., Marty, J.C., and Boulegue, J. 1983b. Intense Hydrothermal Activity of the Axis of the East Pacific Rise near 130N: Submersible Witnesses the Growth of Sulfide Chimney. Marine Geophys. Res. 6: 1- 14.

Kappel, E.S., and Franklin, J.M. 1989. Relationships Between Geologic Development on Ridge Crests and Sulphide Deposits in the Northeast Pacific Ocean. Economic Geol. 84(3): 485-505.

Leinen, M., and Anderson. R.N., 1981. Hydrothermal Sediment from the Marianas Trough. Eos 62: 914.

Lonsdale, P.F., Batiza, R., and Simkin, T. 1982. Metallogenesis at Seamounts on the East Pacific Rise. Mar. Tech. Soc. J. 16(3): 54-61.

Malahoff, A. 1982. A Comparison of the Massive Submarine Polymetallic Sulfides of the Galapagos Rift with Some Continental Deposits. Mar. Tech. Soc. J. 16(3): 39-45.

McKelvey, V.E., Wright, N.A., and Bowen, R.W. 1983. Analysis of the World Distribution of Metal-rich Subsea Manganese Nodules. U.S. Geological Survey Circular 886.

McKelvey, V.E. 1986. Subsea Mineral Resources. U.S. Geological Survey Bulletin 1689-A.

Rona, P .A. 1984. Hydrothermal Mineralizations at Seafloor Spreading Centers. Earth Sci. Rev. 20: 1-104.

Sangster, D.F. 1980. A Review of Appalachian Stratabound Sulphide Deposits in Canada. Ireland Geol. Survey Spec. Paper 5: 7-18. Science News. 1989. Vol. 136(1): 15.

Scott, S.D., Londsale, P.F., Edmond, J.M., and Simoneit, B.R.T. 1983. Guaymas Basin, Gulf of California: Example of a Ridge Crest Hydrothermal System in a Sedimentary Environment. Geol. Assoc. of Canada Program with Abstracts 8: A61.

Simoneit, B.R.T., and Bidyk, B.M. 1989. The Quick Recipe for a Soup of Black Gold. Science News 135(19): 295.

Stackelberg, U.V., and Shipboard Party 1989. Active Hydrothermalism in the Lau Back-arc Basin (S.W. Pacific): First Results from the SONNE 48 Cruise (1987). Marine Mining 7: 431-442.

Strauss, G.K., Madel, J., and Alonzo, F.F. 1977. Exploration Practice for Stratabound Volcanogenic Sulphide Deposits in the Spanish-Portuguese Pyrite Belt, Geology, Geophysics and Geochemistry. In Klemm, D.D., and Schneider, H. J. (eds), Time and Stratabound Ore Deposits. Springer-Verlag, New York. pp 55-93.

Sutherland, D.G. 1982. The Transport and Sorting of Diamonds by Fluvial and Marine Processes. Economic Geol. 7: 1613-1620.

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;, ;:i3!'::. CHAPTER ONE: MARINE MINERAL RESOURCES

,Co':,,"'}"'." ";;

',:,': iA Marine Hydrothermal Mineralisation ; :!"'"'""~":'( in the Lau and North Fiji Basins :,,':,C "':.' oj'; ; Based on a paper submitted by Bhaskar Rao Director, Department of Mineral Resources, Fiji

Introduction

Polymetallic Sulfide Deposits (PSD) on the ocean floor are a relatively recent discovery (1978) and have often been referred to as modern-day analogues or corollaries of onshore deposits. Initially discovered on the East Pacific Rise, these sulfide deposits are thought to be hydrothermal precipitates from seawater enriched in metals by circulation through hot oceanic crust. Extensive literature now documents the widespread occurrence of these deposits along the East Pacific Rise, the Galapagos spreading center, and the Mid-Atlantic Ridge implying that such deposits are widespread perhaps over most these ridge systems. Within the western Pacific, smaller centers of spreading exist behind the active arcs within the so-called back-arc basins. PSD's were first discovered in the South Lau Basin in 1984 (Stackelberg et al. 1985) and subsequently in the northern Lau Basin, Okinawa Trough, the North Fiji and the Manus Basins. Halbach, et,al. (1989), drew attention to similarities between PSD of the Okinawa Trough and the Kuroko deposits of Japan.

This paper summarises information on marine PSD's from the Lau and North Fiji Basins based on a survey of existing literature.

Geological Setting

Back-arc or marginal basins (Karig 1970) are thought to have formed as a result of crustal extension behind presently active island arcs. Present day volcanic activity is concentrated along narrow elongate spreading centers roughly central within the basins. Often spreading is offset by sets of transform faults and spreading itself may be discontinuous. Spreading involves extrusion of new oceanic crust and is symmetrical about the main axis. Due to this symmetry, basins are elongate features, parallel to spreading and generally to the arc. The rate of spreading varies between and within a given basin from moderate (7-9 centimetres/year (cm/yr)) to slow (3-5 cm/yr). Spreading rates determine topography and to a lesser extent the depth of the axial graben (slower rates mean rugged topography and greater depths of the axial neovolcanic zones). An example of this is seen in the North Fiji Basin where moderate spreading (7-9 cm/yr) in the central and southern parts of the basin are coupled with smooth and even topography while slower rates in the north (4-5 cm/yr) mean a more rugged and well de-fined axial rift valley.

Sinton and Fryer (1987) and Hawkins and Melchior (1985) have postulated the existence of varied magma-types within back-arc basins ranging from types similar to normal Mid-oceanic Ridge Basalts (MORB) to enriched-MORB (called Back-arc Basin Basalt or BABB). Enrichment is principally within the larger ion-lithophile elements (K, Rb, Ba, Sr and LREE), and volatiles (CI, S, H2O). The most likely source of these elements is thought to be the subducting slab. Mapping of basalt types within Back-arc basins suggest that there is a temporal change in rock type from enriched or BABB-like within the early-rifting period through into more MORB-like rocks during advanced or mature stage of basin development. Another feature likely to affect chemistry of erupted rock-types is the rate of spreading (slower rates mean slower magma supply, more pronounced magma chambers and hence more differentiated rock suites).

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Submarine Hydrothermal Deposits

Several discoveries of hydrothermal fluid emissions, hydrothermal Fe-Mn crusts, and massive sulfide deposits within the Western Pacific Back-arc basins (the Manus, North Fiji, Mariana, and Lau Basins, and the Okinawa Trough) have now been reported. Approximate locations are shown on Figure 1. Many of these were discovered in the mid to late 1980's and extensions to these fields are being reported to the present day. The studies for the most part are in their infancy, and several have been rather accidental discoveries as an aside to marine geophysical studies on the evolution of back- arc basin systems. Little detailed geological information about the deposits themselves have been published, although published literature on the petrology of arc volcanic suites and their structure abound, highlighting the fact perhaps that they were not the initial targets for exploration. Information most lacking is data on background contents of precious elements within arc suites, size, extent of fields, and the bulk tonnage and grade of ore deposits: the latter two are important if any serious discussion of a resource can be made.

The discovery, occurrence and major features of the western Pacific back-arc submarine polymetallic sulfide deposits are summarized in Table 1 with averaged compositions listed in Table 2. The deposits can be grouped into five types: (a) chimneys and broken chimney deposits; (b) massive polymetallic sulfide layered or stratiform deposits; (c) sulphide mounds with chimney overgrowths (d) stockwork and vein sulfide deposits; and (e) Fe-Mn precipitates and native sulfur deposits. In general deposits (a)-(d) are localized close to vent fields, while Fe-Mn hydrothermal deposits are more extensive aerially but restricted in thickness.

Known deposits within the Lau and North Fiji Basin are briefly described below.

North Fiji Basin

The North Fiji Basin (Figure 1) is a marginal basin, with the active zone restricted to the central part halfway between Fiji and Vanuatu. It owes its creation to the switch in subduction from southerly dipping and along the Vitiaz arc, to northerly dipping along the Vanuatu arc. A triple junction is present in the northern part of the basin, although bathymetric features are complicated by tectonism along the North Fiji Fracture Zone. Activity commenced somewhat earlier than in the Lau Basin, around 5 Ma. (Magnetic data in Malahoff et al. 1982) with the triple junction migrating eastwards to its present position (approximately 173° 45'E, 16° 40'S) with time. Interpretation is complicated however by the presence of the Fiji Fracture Zone, and more recent spreading activity close to the Fiji Platform (west of the Yasawa Island chain, Fiji). The ridge and triple junction is thought to have been quite unstable with frequent adjustments (Lafoy et al. 1989). Extensive surveys within the Basin have centered on the axial rift zone and involved detailed multi-beam bathymetry, dredging, fluid sampling and submersible dives. Basalt types sampled have varied from N-MORB to E-MORB and material with Ocean Island basalt characteristics.

Hydrothermal activity. Major current hydrothermal activity appears limited to the axial graben that cuts through a dome-like structure at the northern tip of the north-trending spreading axis between 16° 58' Sand 17°S and its immediate vicinity with the main identified hydrothermal fields lying immediately to the south of the triple junction. Historical data on investigations are summarised below and locations of the various fields are located in Figure 1.

Cruise/s [Date] Discoveries/Activities/Area 8EAP80 and 8T ARMER cruises Location of White Lady Hydrothermal Field (WL) - [1985-1989] 160 59'8 Location of Pere Lachaise Field (PL) -160 58'8 Nautile and Shinkai 6000 Dives -1989 HYFIFLUX 1&11 [1995-1998] Location of 8099 field (16° 58'8-160 57'8) Restudy of the 8099 field -Cruise 80134 MMAJ [1999] Planned cruise in the WL, PL, S099 areas

Data on the geochemistry and mineralogy of hydrothermal mineralisation from within the White Lady and the Pere Lachaise hydrothermal fields is available in Bendel, et al. (1993), with substantial more detail in Bendel (1993) whilst Halbach, et al. (1995), summarise data on the S099 field.

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Deposits along the Central Lau Spreading Center occur within a large caldera on the central volcanic high of the axial graben. Volcanics sampled range in composition from MORB like basalts to andesites (SiO2 range from 50-69%) and both pillow lava and sheet flows are reported.

Chemistry and mineralogy of North Fiji Basin and Lau Basin deposits

Bulk chemistry and related data for marine PSD's from the Pacific back-arc areas together with comparative data from other areas are listed in Tables 4-5.

Regional comparisons and generalisations

Hydrothermal mineralisation is now noted from within all western Pacific back-arc basins although extensive development of polymetallic massive sulfide deposits is restricted to the North Fiji, Mariana, Okinawa, Manus and Lau back-arc Basins. The similarity in rock types and tectonic setting between these regions and the other back-arcs suggests that such deposits are probably more widespread than presently thought: their absence in some locations is therefore probably more a reflection of gaps in exploration.

The better developed occurrences appear related to regions characterised by bimodal volcanism along spreading centers (Okinawa Trough, Mariana Trough, Valu Fa Ridge, Manus Basin) and compositionally this volcanism is either Large Ion Lithophile (LIL) element enriched MORB (enriched in elements like Ba, K, Sr as compared to MORB from the Mid-Atlantic Ridge) or part of the island arc tholeiite series (Gill 1970). Both have in general higher volatile contents compared to normal MORB. This LlL and volatile enrichment can be linked to the presence of a larger amount of the slab component within these lavas (Jenner et al. 1987). The lavas of the North Fiji Basin triple junction region are further removed from subduction influence (more distant from slabs of the Vanuatu and Lau arcs), and should have therefore lesser of the slab component (Ba, Sr, etc.) with consequently less- extensive mineralisation.

Many, if not most, occurrences appear intimately related to fracture zones and normal faults and to areas of extensively brecciated and vesiculated lavas (including pumice, e.g., Valu Fa Ridge, Manus Basin) bounding the active spreading centers or along the axial grabens. Collapse structures within the lavas are common. The relation of these structures to mineralisation suggests that they play an important part in the mineralisation process through the facilitation of fluid flow. Some mineralisation is associated with caldera or caldera-like structures.

Exploration potential

Exploration techniques for hydrothermal deposits at present involve identification of active spreading ridges, neovolcanic zones and sites of hydrothermal venting through geophysical, geochemical and geological means. Prominent amongst these is the recognition of helium and methane plumes in the water column as well as anomalies in water chemistry (dissolved manganese). Venting sites are further evaluated by TV camera, TV grab-sampling and dredging. Submersible evaluations follow in areas of greater promise.

Study techniques outlined above have several disadvantages in that: (a) they concentrate on the neovolcanic zone and areas adjacent which have the youngest and therefore the most immature deposits; (b) only surficial expressions of the deposits (chimneys and mounds) and at best thicknesses of up to 30m (along faults) are sampled; and (c) large scale hydrothermal "plumes" or anomalies used as locators are only observed for actively venting sites, rarely do they accompany fossil sites of mineralisation. In short, what one sees are deposits being formed, not formed, preserved deposits like those of a major mineral province.

Much is made in exploration circles about the high gold content of PSD's, particularly those of the SW Pacific back-arc basins. There is some reason to believe that this may be so (e.g., data in Hannington et al. 1989 and others). It is important to realise however the material that one is sampling and relative volumes involved. Chimneys and mounds are "living" or rather continuously evolving structures and materials may undergo several stages based upon fluid chemistry, temperature and flow (Haymon 1983). Gold may concentrate within the late stage phases within chimneys. Chimneys

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are the most readily apparent feature in new or recently dead hydrothermal fields and the most easily sampled and therefore provide a biased view. Therefore, bulk sampling of more massive units is needed before an accurate assessment of their Au potential is possible.

Exploration should therefore consider the possible location of relatively large deposits, and as spreading and triple junctions like those of the S099 and Valu Fa Ridge are not static but move with time, it must be that these are now under the cover of some centimetres if not metres of sediment and other debris. Structural studies to determine the most long-lived of volcanic systems on the ocean floors associated with hydrothermal activity and their demise would no doubt help. Seafloor sediment geochemical sampling would be yet another useful technique.

Kappel and Franklin (1989) and Clark (1990) suggest that structural traps and/or sediment cover (as in the Guyamas Basin) are requirements for generation and preservation of the big sized deposits. The Okinawa Trough, parts of the Mariana Trough and the Manus Basin could therefore have the best potential with regard to sediment input from nearby large landmasses.

Exploration versus marine scientific research

An examination of existing published information on back-arc basins in the North Fiji and Lau back- arc basins indicates a lack of adequate exploration data upon which reasonable resource and economic analyses can be made. In particular, there is a general lack of information on the three dimensional structure of the deposits. Given water depths, the relatively small size of the deposits (based on current size descriptors given), and the lack of existing technology it may be some time yet before economic possibilities can be realized.

With consideration of the above, and given the prevailing commodity prices, it is apparent that Marine Scientific Research will continue be the predominant information source. Research and exploration are not mutually exclusive and in some minds are the same things. Existing policy regimes must be adaptable and allow that the owners of these curious deposits and the peoples of the Pacific realize results and benefits from both.

References

Auzende, J.M., Urabe, T., Delpuc, C., Eissen, J.P., Grimand, P., Huchon, P., Ishibashi, J., Joshima, M., Lagabrielle, Y., Mevel, C., Naka, J., Ruellan, E., Tanaka, T., Manabu, T. 1989. Le Cadre Geologique dun Site Hydrothermal Actif: la Campaigne STARMER 1 du Submersible NAUTILE dans Ie Bassin Nord-Fidjien. C.R. Acad. Sci. Paris 309: 1787-1795 (in French). Bendel, V., Fouquet, Y, Auzende, J.M., Lagabrielle, Y., Grimaud, D., Urabe, T. 1993. The White Lady Hydrothermal Field, North Fiji Back-arc Basin, Southwest Pacific. Economic Geol. 88: 2237-2249. Bendel, V. 1993. Cadre Geologique et Composition des Mineralisations Hydrothermale on Contexte Arriere-Arc. Exemple de la Dorsale de Bassin Nord Fidjien (Sud-Ouest Pacifique). Doctoral Thesis L'universite de Bretagne Occidentale, France (in French). Clark, A.L., 1990. Marine Mineral Resources for the Twenty-first Century. Materials and Society 14(3/4): 253-280. Fouquet, Y., Stackelberg, U.Von, Charlou, J.L., Donval, J.P., Erzinger, J., Foucher, J.P., Herzig, P., Muhel, R., Soakai, S., Wiedickie, M., Whitechurch, H. 1991. Hydrothermal Activity and Metallogenesis in the Lau Back-arc Basin. Nature 349: 778-781. Fouquet, Y., Stackelberg, U.Von, Charlou, J.L., Donval, J.P., Erzinger, J., Foucher, J.P., Herzig, P., Muhel, R., Soakai, S., Wiedickie, M., Whitechurch, H., 1990. Hydrothermal Activity in the Lau Basin, First results of the NAUTILAU cruise. Inter Ridge Newsletter71: 678-679. Halbach, P., Nakamura, K., Wahsner, M., Lange, J., Sakai, H., Kaselitz, L., Seifret, R., Michaelis, W., Telechmann, F., Kinoshita, M., Marten, A., Ishibashi, J., Blum, N. 1989. Probable modern analogue of Kuroko-type massive sulphide deposits in the Okinawa Trough back-arc basin. Nature 338: 496-499. Haymon, R.M. (1983). Growth history of hydrothermal black smoker chimneys. Nature 301: 695-698. Hannington, M.D., Peter, J.M. and Scott, S.D. 1986. Gold in Seafloor Polymetallic Sulfide Deposits. Economic Geol. 81(8): 1867-1883. Hawkins, J.W., Melchoir, J., Lonsdale, P. 1987. Petrology of the axial region of the Mariana Trough. (abstract). Eos 68: 1530-1531.

[SOPAC Miscellaneous Report 323 -Revised Edition] [25]

Herzig, P.M., Fouquet, Y., Petersen, S. 1990. Hydrothermal mineralization from the Valu Fa Ridge, Lau Back-arc Basin (SW Pacific). Marine Mining 9: 271-301.

Karig, D.E. 1970. Ridges and basins of the Tonga-Kermadec island arc system. Journ. Geophys. Res. 75: 237- 254.

Kappel, E.S. and Franklin, J.M. 1989. Relationships between geologic development on ridge crests and sulfide deposits in the northeast Pacific Ocean. Economic Geol. 84(3):485-505.

Lafoy, Y., Auzende, J.M., Ruellan, E., Huchon, P., Honza, E. 1990. The 16°40'S Triple Junction in the North Fiji Basin (SW Pacific). Marine Geophys. Res. 12: 285-296.

Malahoff, A. and Falloon, T. 1991. Preliminary report of the Akademik Mstislav Keldysh/MIR Cruise 1990 (Lau Basin Leg). SOPAC Cruise Repolt 137.

Malahoff, A., Feden, R.H., and Fleming, H. 1982. Magnetic anomalies and tectonic fabric of marginal basins north of New Zealand. Journ. of Geophys. Res., 87: 4109-4125.

Morton, J.L and Sleep, N.H. 1995. Seismic reflections from a Lau Basin magma chamber. In Scholl, D.W. and Vallier, T.L. (eds) Geology and Offshore Resources of Pacific Island Arcs. Circum-pacific Council for Energy and Mineral Resources Ealth Science Series 5: 441-453.

171 E 175E 175W

15S

Figure 1. Main tectonic, structural and mineral resource features of offshore Fiji and surrounding areas

[SO PAC Miscellaneous Report 323 -Revised Edition]

[27]

Table 2. Averaged compositions for some Western Pacific, submarine polymetallic sulphide deposits

Hydrothermal PACMANUS North Fiji Basin Mariana Trough Valu Fa Ridge, Jade Field, Field East Manus 18" Lau Basin Okinawa Trough Basin No of Samples 26 24 II ~7 17 Host Dacite Basalt Andesite .Basalt, Andesite, Dacite, Rhyolite Dacite Wt%

Cu 10.9 7.5 1.2 4.6 3.1 Zn 26.9 6.6 10.0 1~.1 24.5 Pb 1.7 0.06 7.4 0.3 12.1 Fe 14.9 30.1 2.4 17.~' 4.8 SiO, 0.8 16.2 1.2 12.5 10.2 Ca 0.3 0.2 3.7 0.6' na Ba 7.3 0.8 33.3 11.6 3.4

ppm Cd 1155 260 465 482 620 HI! 17 na 22 >1 na As 11000 na 126 2213 31000 Sb 1130 na 190 ' 51 na AI! 230 151 184 256 ! 1160 Au 15 1.0 0.8 1.4. 3.3

From Scot & Binns (1995)

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[SOPAC Miscellaneous Report 323 -Revised Edition] [30]

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[SOPAC Miscellaneous Report 323 -Revised Edition] [31]

CHAPTER ONE: MARINE MINERAL RESOURCES

Overview of Papua New Guinea Offshore Resources

Based on a presentation by Paul Kia, Geologist and Joseph Lasark, Senior Geologist Department of Mineral Resources, Papua New Guinea

Introduction

Papua New Guinea's (PNG) natural resources offshore include both finite and renewable resources. The sea flora and fauna, near shore beach heavy mineral sands, hydrocarbon (gas/oil) deposits, base metal massive sulfide seabed deposits, subsurface geomorphological structures, seabed sediments, wreck-sites, spawning grounds, the physio-chemical properties of the sea water and air are resources that require careful utilisation and proper management.

PNG is one of the last frontier countries in the world where onshore there remain vast tracts of virgin tropical rainforest stretching from coastal plains to the mountainous hinterland and offshore pristine coral reefs and a rich and varied biota occurs. Although Papua New Guinea's population is relatively small, the economy is developing and is largely dependent on the exploitation of natural resources.

Infrastructure developments and the exploitation of PNG's natural resources inevitably leads to pressures on the onshore and offshore environment. An understanding of the natural processes controlling the often pristine environment may help policy and decision makers to mitigate these pressures.

Almost all the known offshore resources of viable economic value have been discovered within PNG's territorial waters making PNG one of the best, if not arguably the best, region in the world for resource development because of terrestrial and offshore resources of equal magnitude.

Regional Tectonic and Structural Features

Plate tectonics is a unifying concept that draws seafloor spreading, continental drift, crustal structures and the world patterns of seismic and volcanic activity together as aspects of one coherent picture. The main tectonic and structures features of PNG (Figure 1) play an important role in the placements of the offshore hydrocarbon (oil/gas) and massive sulphide deposits in this region. The major features are:

.The Indo-Australasian plate subducting beneath the PNG mainland is very deep seated .The westward moving Pacific Plate is propagating into continental crust (mainland PNG) at a rate of 2-3 cm/yr, triggering the opening of Woodlark Basin. The Woodlark Basin, which began opening 6 million years ago, is itself opening at a rate of 6-7 cm/y. .The inactive Manus-Kilinailau (Caroline) Trench that divides the New Ireland Basin from the Ontong Java Plateau .The Bismarck microplate that opens obliquely as a transform suture in the Manus Basin

Offshore Area

Papua New Guinea's major offshore areas (Figure 1) consist of the Gulf of Papua, including the Coral Sea in the southwestern portion; the Solomon Sea Region consisting of the Huon-Gulf and Woodlark Basin enclosed by New Britain to the northeast and the Pocklington Rise in the south and the Bismarck Sea in the north-northeast comprised of the New Ireland, Manus and New Guinea Basins. A large broad subsurface submarine plateau called the Ontong Java Plateau, northeast of New Ireland, constitutes an important part of PNG's subsurface landmass.

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Gulf of Papua

The Gulf of Papua region is an area of great economic importance as the structures within the Papuan Fold Belt, which make up the region and serve as traps for hydrocarbon reserves onshore, extend offshore and form a huge landmass with high petroleum potential.

The Pandora Basin occupies an area of 500 km2 while the Eastern Fields Fold and the Pattock Trough have an area of 50,000 km2 (Phillips 1970). The size of this area offshore is huge compared to the area for similar prospects onshore. The waters of the Gulf are very warm, receive a great deal of sunlight and support a large amount of sea biota. The Gulf is famous for its prawn resources, fresh water crocodiles, barramundi, turtles and boast a fertile coastline. Like all mangrove communities, it plays a major role in the coastline ecosystem.

Huon Gulf

To the northern margin, along the Huon Gulf there is no continental shelf development owing to the strong and continuing uplift of the Huon Peninsula. The absence of continental shelf development poses a major natural hazard for the coastal population of the region.

Woodlark Basin

Woodlark Basin situated in the southern part of the Solomon Sea within a small region, 90S, 151°E- 156.5°E is arguably a unique area with a continuum of active extensional seafloor spreading processes that propagate into the continental landmass.

Seafloor spreading is presently active within this area and associated heat flow is currently the target of geophysical research to (a) further characterise the heat flow characteristics of the region and (b) to map extent of hydrothermal fields in the area.

Bismarck Sea

The Bismarck Sea (Figure 1) is possibly the best known of the small ocean basins that surround New Guinea and consists of two distinct sub-basins, the Manus and New Guinea Basins, separated by the NW-trending Willaumez Rise. The Bismarck Archipelago, New Ireland Basin and the Solomon Sea regions are referred to as part of the "Pacific Rim of Fire". Volcanic and seismic activity is a norm of life for the New Guinea Islands inhabitants. Such natural geologic phenomena has resulted in the development of the PACMANUS (Figure 1) hydrothermal fields in the Manus Basin which vent relatively high grade base metal assemblage of Zn-Pb-Cu-Ag and native gold onto the seafloor. Recent studies in the New Ireland Basin have discovered similar subsurface mineral deposits that may prove to have economic potential for development.

Manus Basin

The Manus Basin is a typical Back-arc basin, transected by an oblique spreading axis broken by several large transform faults (Brooks 1998). Since the discovery of hydrothermal activity in the Manus Basin in 1986 it has attracted worldwide attention and in recent years has been the focus considerable international research directed toward increasing scientific understanding in the relatively new fields of geodynamics, seafloor hydrothermal activities and mid-oceanic ridge environments.

The above research lead to commercial interest in a part of PNG's seabed which resulted in an overseas based consortium, Nautilus Corporation (Nautilus), being awarded two exploration licences (EL-1196 and EL-1205). These exploration licences encompass more than 5000 km2 of seafloor within the territorial waters of PNG.

Analyses of samples from the hydrothermal fields of the Manus Basin have yielded relatively high values. Samples from PACMANUS and SuSu fields yield values of 10% and 15% Copper, 26% and 3% zinc respectively. Additionally, PACMANUS has 15 grams of gold and 200 grams of silver to the tonne, while the figures at SuSu are 21 gft and 130gft (PNG Resources First Quarter 1998).

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The awarding of EL-1196 and EL-1205 in PNG's territorial waters prompted the Department of Mineral Resources, which did not have a proper offshore mining policy in place, to liaise with other departments to formulate a comprehensive offshore seabed policy to safeguard PNG's offshore resources while utilising the available resources in an ecologically sustainable manner.

New Guinea Basin

The topography of the eastern part of New Guinea Basin is complicated. It consists of a submarine ridge, with a spreading centre, that is composed of a series of seamounts (Milsom 1986, Crook 1990). Further exploration in the New Guinea Basin will in time reveal its deep sea secrets and riches.

New Ireland Basin

The New Ireland Basin (Figure 1) occupies a fore-arc position with respect to the once active Manus-Kilinalau arc-trench system and hosts a series of Pliocene to Recent alkaline volcanoes (Tabar-Lihir- Tanga-Feni Island chain) which are built on rifted Miocene sedimentary basement (Herzig et al. 1994).

The New Ireland Basin and the Bismarck Archipelago are known for several high-level porphyry stocks epithermal systems, both subsurface and on land, including the world-class Ladollam gold deposit on Lihir Island.

During the cruise SO-133/1 (1994) by the German Research Vessel FS Sonne twelve new subsurface volcanoes were discovered within the Tabar-Lihir- Tanga-Feni Island Chain. A follow-on cruise by the FS Sonne (cruise SO-133/2, July 10-August 10, 1998) focused on four volcanic zones discovered in 1994 at water depths from 1000m-1500m on the southern flank of Lihir Island. The discovery of high grade gold contents (much higher than PACMANUS samples) associated with amorphous silica and alunite in hydrothermal precipitate at one of the seamounts, the Conical seamount (1,050m), is located only 25 km south of the Ladolam gold deposit on Lihir. The close proximity to the Ladolam gold deposit may indicate that the Conical seamount is the first example of a shallow marine seafloor epithermal system, analogous to similar gold-producing systems on land.

The biological vent fauna community recovered at Edison seamount hosts a unique biological community which consists of bivalves, clams, white shrimps, crabs, barnacles, tube worms and soft- bodied tube-like creatures and a red skeletal coral which are endermic species never discovered anywhere else. The vent fauna survives in reducing dysaerobic (low oxygen) conditions. The organisms culture bacteria in their gills and guts that break down hydrogen sulphide (H2S) and methane (CH4) to derive their food (Turkay, personal comm. 1998).

Ontong Java Plateau

The Ontong Java Plateau (OJP) is a broad mid-oceanic submarine plateau striking northwest and trending parallel to the Solomon Islands to the south. The OJP is extensive being over 1600 km long and 80 km wide and rises to an unusually shallow depth of less than an average of 2000m over the central region (Krienke 1972, Coleman and Kroenke 1982, Kroenke et al. 1991).

The OJP has long been a focal point for palaeoceanographic studies for several reasons, e.g., its remarkable combination of geographic location (close to the equator) and bathometry, its unusually vigorous production of biogenic sediments over a long time and the fact that it rises above the carbon compensation depth (CCD). The latter issue is of particular interest in that the OJP contains clues to the saturation history of the deep Pacific and hence to the global ocean carbon cycle and consequently contains global and regional signals of ocean productivity (Kroenke et al. 1991).

The OJP is also of interest in that PNG citizens live on the Morlock and Pompei Islands and on some of the exposed atolls.

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Discussion

Papua New Guinea is one of numerous countries that are confronted with the conflict of economic development and ethnic values concerning the environment. In particular, there is a need to ensure that the economic development and use of the ocean and its offshore resources must be ecologically sustainable to minimise adverse effect. The need to fully develop and implement policy and legislation for offshore resource development resources is particularly pressing with the increasing focus on offshore prospecting for hydrocarbon and mineral exploration. The urgency is further increased in that such exploration is being conducted with modern innovations in technology which make it possible to explore one of the last frontiers of the earth, for its deep sea secrets and riches.

The need to formulate a comprehensive legal policy document, to enable Papua New Guinea to face its new challenges in drafting offshore policy guidelines, is imperative as PNG is geologically a unique and special region in the world. Sustainable use of the environment and its offshore resources will only be attained when a comprehensive legal policy is drafted and the utilisation of the resources available is monitored and managed properly by this generation.

ReferenceS

Aki, K. 1960. Further Study of the Mechanism of Circum-Pacific Earthquakes. Rayleigh Waves Journ. of Geophys. Res., 65(12): 4165.

Berkmanda, D.A. 1972. Report on Mineral Exploration in PA 155 (P) for the Quarter ended 31st December, 1972. Unpublished report submitted to the Government of Papua New Guinea.

Binns, R.A., Scott, S.D., Burne, R.V., Chase, R.A., Cousens, D.R., Denton, A.W.S., Edwards, R.S., Finlayson, E.J., Gorton, M.P., McConachy, T.F., Poole, A.W. and Witford, D.J. 1986. Ridge Propagation into continental crust: The April 1 986 PACLARK Cruise to Western Woodlark Basin. Eos 67(44).

Both R.; Crook K., Taylor B., Chappel B., Brogan S., Frankel, E., Lu, L., Sinton, J., Tiffin, D. 1986. Hydrothermal Chimneys and Associated Fauna in the Manus Back-arc Basin, Papua New Guinea. Eos 67(21): 489-490.

Brooks K. 1998. Overview of the Geology of Papua New Guinea. Unpublished paper presented to ODP Leg 180 Cruise Participants in Woodlark Basin, Papua New Guinea, Dansk Lithosfaerecenter, (DLC). pp 5-9.

Buka Rabac Explorations N.L. 1973. Report on the base metals and beach sands potential of Ferguson Island. Unpublished report submitted to the Government of Papua New Guinea.

Bureau of Mineral Resources, PNG October 1970 -January 1973. Geophysical Surveys of the Continental Margins of Australia, Gulf of Papua and the Bismarck Sea. Capo No. 560663 and 560585, Data Quality and Distribution.

Boyd, B.R. 1971. Exploration progress in P.A. 78 (PAPUA) April to June, 1971. A.O.G. Minerals pty Limited File # 2/9/5. Unpublished report submitted to the Government of Papua New Guinea.

Carman, J.G., and Carman, Z., et al. 1993. Petroleum Exploration and Development in Papua New Guinea. In Miller, G. and McCovern (eds), Proceedings of the 2nd PNG Petroleum Convention: The Kubutu Project. Construction of the marine pipeline and terminal. pp 643-649.

Chappel, B. and Shipboard Party MW 8517/181986. Petrology, magmatic budget and tectonic setting of Manus Back-arc Basin Lavas. Eos 67(16): 377-378.

Clare, R.C. 1973. Prospecting Authority Application No. 168 (P) "Popondetta", Northern District, Papua New Guinea Beach Sand Investigation--Final Report. Unpublished report submitted to the Government of Papua New Guinea.

Cook, J.P. 1974. Prospects for finding offshore phosphate deposits in the southwest Pacific. Bureau of Mineral Resources, Geology and Geophysics, Canberra Australia.

Construction Materials for Port Moresby (Project 7110). Progress of Investigations German-PNG Technical Co- operation Project. Unpublished report submitted to the Government of Papua New Guinea. Coulson, I.F. 1985. Solomon Islands: The Pacific Ocean; Ocean Basins and Margins, Vol. 7A. British Geological Survey, Keyworth, Nottingham NG125GG, England. pp 607-675.

Crook, A.W.K. 1990. CRUISE REPORT Manus Basin Leg 21st Cruise of RN "Akademitt" Mstisha Keldysh. Department of Geology, Australian National University, Canberra.

Cruise Report No. 53 Guise PN-81(2) 1981. Papua New Guinea Offshore Hydrocarbon and Phosphate Survey. Unpublished report submitted to the Government of Papua New Guinea.

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Exon, T.,. Taylor, B. and Shipboard Party 1983. Young Volcanic Crust of the eastern Woodlark Basin, and its subduction and associated Volcanism (Abstract). In Proceedings of the Sixth Australian Geological Convention, Canberra. Grainger, J.D. 1971. The Oceanological Cruise of the Soviet Research Vessel "Viti 92" December 1970 (Investigations No. 71201). PNG Geological Survey Investigation 71-001. Gregory, R.M. 1982. Ross Sea Hydrocarbon Prospects and the IXTOC 1 Oil blowout, New Zealand. D.S.I.R Antarctic Division Antarctic Record 4(2).

Herzig, M.P., et al. Jan 1994-July 1996. Tectonics, petrology and hydrothermal processes in areas of alkaline island-arc volcanoes in the southwest Pacific. The Tabar-Lihir- Tanga-Feni Island Chain, Papua New Guinea. Unpublished report submitted to the Government of Papua New Guinea.

Johnson, R.W., Arculus, R.J. 1978. Subaerial Volcanic Rocks of Willaumez-Manus Rise, Papua New Guinea: A key to the origin of the Rise? Bulletin Australarian Society of Exploration Geophysics 9(3):98.

Jongsma, D. 1972. Marine Geology of Milne Bay -Eastern Papuan Extract # 6. In BMR, Canberra, Bulletin # 125.

Kroenke, W.L., Berger, H.W., Janecek, J.T. et al. 1991. Ontong Java Plateau. In Proceedings of the Ocean Drilling Program, Initial Reports 130:5-12.

Lock, J. Solomon Sea Structure from seismic reflection data. Bureau of Mineral Resources, Canberra Geological Survey Australia (AGSO) Abstracts No. 12: 336.

Lowenstein, P.L. 1974. Mineral Sands. In DME, GSPNG Report # 7/114.

Marchant A., 1997. Report on a visit to Papua New Guinea Geological Survey. British Geological Survey, Technical Report Information and Data Resources Series.

Montgomery, W.C., 1988. Physical Geology. Northern Illinois Univ., W.C. Brown Publisher. pp 170- 180.

Nairn, E., Alan, G., Francis, S., and Uyeda, S., et al. 1986. Milsom John, New Guinea and Western Melanesian Arcs. The Pacific Ocean; Ocean Basin and Margins 7A: 552-553. Parr, J.M. and Binns, R.A, et al. 1997. Report on the PACMANUS -III Cruise, RV "FRANKLIN", Eastern Manus Basin, Papua New Guinea. CSIRO Division of Exploration and Mining, North Ryde, NSW, Australia. An unpublished report submitted to the Government of Papua New Guinea.

Pipeline Policy Paper 1998. Papua New Guinea, Department of Petroleum and Energy.

Sakai, H. 1990. CRUISE Report KH90-3 Aquarius Expedition, Leg II November 24 -December 14, 1990. Ocean Research Institute, University of Tokyo.

Taylor B. 1979. Bismarck Sea; Evolution of a back-arc basin. Geology Vol. 7:171-174. Lamont-Doherty Geological Observatory of Columbia University, Palisades, New York.

Taylor, B., Sinton, J. and Shipboard Party MW 8517/10, Crook, K. 1986. Extensional Transform Zone, Sulphide Chimneys and Gastropod Vent Fauna in the Manus Back-Arc Basin. Eos 16(4/22): 377-378.

Tiffin, D.L. 1981. New Ireland Basin Hydrocarbon potential: Submarine phosphate deposits in northern Papua New Guinea. Cruise Report PNG Offshore Hydrocarbon and Phosphate Survey, 9-22/3/81 Cruise PN-81 (2). Unpublished report submitted to the Government of Papua New Guinea.

Von Der Borch, L.C. 1972. Marine Geology of the Huon Gulf Region New Guinea. Department National Development Bureau of Mineral Resources Geology and Geophysics Bulletin # 127.

Woods, R.L., IGNS and NIWA 1998. Update-New Zealand and the United Nations Convention of the Law of the Sea. Geological Society of New Zealand, Newsletter 116(7/1998): 6-12.

Yanagiya,K. and Ishikawa, T. 1993. Sea Area of Papua New Guinea. In Ocean Resources Investigation in the Sea Area of SO PAC Report on the Joint Basic Study for the Development of Resources Vol. 3.

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CHAPTER ONE: MARINE MINERAL RESOURCES

The Mineral Wealth of the Bismarck Sea

Based upon a paper presented by Raymond A. Binns, Chief Research Scientist, and David L. Dekker CSIRO Exploration and Mining, Australia

In November 1998 the Government of Papua New Guinea granted a private company permission to prospect for minerals on the floor of the adjacent Bismarck Sea. Other mineral deposits on the bottom of the ocean had drawn attention during the 1960s and 1970s, when people talked about mining zinc-rich oozes two kilometres (1.2 miles) down on the bed of the Red Sea or of harvesting nodules with nickel and copper from five-kilometre-deep abyssal plains in various parts of the world. In more recent years, some have considered mining volcanic seamounts encrusted with oxides thought to contain cobalt and platinum. Yet none of those submarine deposits proved sufficiently valuable to make their extraction worthwhile. So why have the deposits under the Bismarck Sea sparked commercial interest now?

The difference is that the newly found sources of ore on the seabed are massive sulfides, dense minerals rich in copper, zinc, silver and gold. To prospectors, massive sulfides are a familiar prize, because these minerals are often mined on land for their metals. Unlike other deep-sea deposits previously considered for mining, the massive sulfides of the Bismarck Sea occur at relatively shallow depths (less than two kilometres). They also lie in calm waters within an archipelago of Papua New Guinea, which thus owns the right to mine them under international law. These attributes, along with the richness of the deposits, make them much more attractive than any deep-sea mineral prospect ever before contemplated.

Scientists first discovered massive sulfides on the seafloor two decades ago in the eastern Pacific using the research submersible Alvin. Marine geologists have since found more than 100 similar sites in the Pacific, Atlantic and Indian Oceans, all located on ridges where hot magma rises and tectonic plates spread apart. But the massive sulfides of the Bismarck Sea are found in a completely different geologic setting. There metal-rich minerals occur at a subduction zone, where one plate thrusts below its neighbour. The descending slab heats up and gives rise to magma that may erupt onto the ocean bed. Although geologists have only just begun to examine the seafloor for its mineral wealth, they believe that ores in subduction zones may be much richer in valuable metals than those found at mid- ocean spreading centers. Curiously, until about a dozen years ago no one knew that the seafloor near subduction zones contained economically interesting deposits at all.

A Lucky Find

In 1985 marine researchers from the U.S. set sail to the southwest Pacific to study plate tectonic movements. In the course of their expedition, they towed an underwater camera close to the seafloor and were lucky enough to photograph a patch of massive sulfides in the middle of the Bismarck Sea, well away from the major oceanic spreading ridges. Their serendipitous discovery was later dubbed the Vienna Woods because the deposits form a dense forest of narrow chimneys called black smokers, which exude hot water and clouds of black particles superficially resembling smoke. The hot water leaches metals from deep in the crust and deposits them in the walls of the chimneys as it cools.

The Vienna Woods site has since been visited by a German research vessel, which collected large pieces of the massive sulfide chimneys, by Russia's two Mir submersibles (now famous for their role in the movie Titanic) and by Japan's Shinkai-6500 submersible. Scientists do not yet know the full extent of these "woods". However, this locus of hydrothermal activity must hold an appreciable amount of metal, with its countless towering smokestacks--many 10 to 20 metres high--set on massive sulfide mounds that are 20 to 30 metres across. And this site is not the only metalliferous zone in the region.

In 1991 one of authors (Binns) set off with a group of scientific colleagues on an expedition to a depression on the bottom of the Bismarck Sea called the eastern Manus Basin. We were not seeking to discover exploitable mineral deposits but rather to find a natural laboratory where we could examine

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how this type of massive sulfide ore forms. Our ultimate goal was to facilitate the search on land for such deposits, which can be found buried within slices of former seafloor that had long ago thrust onto the continents.

At the beginning of this expedition, our strategy was to dredge pieces from various submarine volcanoes and pick out those samples that best matched the rocks hosting such ores on land. We also towed an underwater video camera over the sea bottom at many sites and lowered special instruments in hopes of detecting the plumes of cloudy water emitted from black smokers. We scrutinized hours and hours of video recordings, searching for the characteristic shape of hot spring chimneys or for concentrations of sea life known to form biological halos around deep-sea vents.

The first video sighting of volcanic chimneys in the eastern Manus Basin occurred about 170 kilometres east of the Vienna Woods. The view lasted only a few seconds, but it was unmistakable. People mumbled words like "EI Dorado" as excitement spread through the ship, galvanizing both scientists and crew for the four days of dredging and deep-sea photography remaining in our tight schedule.

In the time allowed us, we mapped deposits scattered over several kilometres and named the site PACMANUS, after the nations involved in the expedition (Papua New Guinea, Australia and Canada) and the Manus Basin. Our attempts at dredging failed, but we managed to recover a gram of these massive sulfides before our expedition came to an end. The results of that initial foray prompted us to go back. In the course of six more research cruises, including two that employed piloted submersibles, we--along with an expanded group of colleagues from France, Germany and Japan--have been able to inspect these remarkably rich deposits at close range and to collect numerous samples containing high concentrations of copper, zinc, silver and gold.

After mapping the area in detail with the help of many other investigators, we now know that these accumulations of metallic minerals extend for 13 kilometres along the top of a volcanic ridge made of dacite, a type of lava that is rare on the ocean floor. The greatest concentration occurs within a two- kilometre part of the ridge, where several fields of active chimneys dot the bottom. The people involved in their discovery have given them playful nicknames such as "Roman Ruins" (where fallen chimneys are especially common), "Satanic Mills" (where the chimneys belch out particularly thick clouds of black particles) and "Snowcap" (where a white bacterial mat coats a small hill). To those fortunate enough to see them, the diversity of sights in the Manus Basin is indeed tremendous.

In 1996 we participated in the discovery of yet another accumulation of massive sulfides, 50 kilometres east of our previous find and not far from the port of Rabaul, Papua New Guinea. Having improved our techniques for finding black smokers, we rapidly homed in on the site by tracking a large plume of sulfide particles emanating from the twin peaks of an undersea volcano named Su-Su. (This is apt if unoriginal moniker means "breasts" in Melanesian Pidgin). Densely packed chimneys cover a 200-metre-long strip of seafloor on the flanks of one summit. These massive sulfides proved to be more richly endowed with previous metals than any we had sampled before at PACMANUS.

Money Matters

Current evaluations suggest that each cubic metre of rock in these deposits is worth about $2,000, which almost certainly means that ore could be extracted, raised to the surface and processed at a tidy profit. But Nautilus Minerals Corporation (Nautilus) (based in Port Moresby, Papua New Guinea, and Sydney, Australia), which obtained the licences to explore for minerals on the floor of the Bismarck Sea, has much work to do before it can begin deep-sea mining operations. We and our co-workers at the Commonwealth Scientific and Industrial Research Organization in Australia are now doing studies under contract from Nautilus to help the company face the many challenges ahead.

First, Nautilus must carry out a thorough examination of the area to determine the extent of the massive sulfides and to estimate the amount and grade of ore available at each deposit. This work will initially involve dredging samples from the bottom with high precision in many places and perhaps drilling into the seafloor at selected spots. Geologists hired by the company will have to study the ore carefully to evaluate the density, porosity, abrasiveness and mechanical properties of this sulfide-rich rock. Mining engineers can then begin the task of developing special methods for excavating, hoisting and processing the ore.

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Remotely operated equipment like that used to dig trenches or shovel ore in an open pit mine presumably offers the most straightforward means for scooping up the minerals. Hoisting ore to the surface by cable would work but might be prohibitively time-consuming and expensive, given the 1,000 tons or so of rock the company would probably want to raise each day. Perhaps the engineers will favour a scheme similar to the one used in 1978 on board the Glomar Explorer, which successfully deployed a series of buckets on huge conveyors to retrieve metal-rich nodules from the floor of the Pacific. Lifting a slurry of crushed ore with pumps might also be a workable tactic.

Siemag Transplan, a German firm, has in fact developed just such a system. It can lift particles of rock or coal from deep in a mine using a U-shaped tube, with water pumped down one leg and a wet slurry of ore rising up the other. Similar devices might perform even better under the sea, because the pressure at the bottom of the pipe could be adjusted to match that of the seafloor. If the velocity of water in the pipe is maintained at several metres per second, the upward force would be sufficient to lift small chunks of rock that are a few centimetres across. But whatever methods proves best, before seeking approval from the government of Papua New Guinea, Nautilus must first show that the mining it plans to do will not harm the biota living in this unusual seafloor environment.

Some Like it Hot

The active chimneys on the floor of the Bismarck Sea are teeming with marine life of extraordinary and stunning variety. At these depths, no sunlight penetrates, so photosynthesis of the kind that sustains life near the surface is impossible. The energy source for the communities living around the chimneys is chemical.

These and most other deep-sea hydrothermal vents emit hydrogen sulfide, which nourishes specialized bacteria living around them. The microbes form the bottom link of a strange food chain coupling them to bacterial-mat grazers, symbiotic organisms, carnivores and scavengers. Such deep- sea vent communities were first recognized in 1977 and 1979, when Alvin descended to hot springs west of Ecuador on the Galapagos Ridge and the nearby East Pacific Rise. The scientists found heat- resistant microbes, such as Pyrolobus fumarii and other so-called hyperthermophiles, growing in the walls of these vents and thriving at searing temperatures of about 105 degrees Celsius (221 degrees Fahrenheit).

Of the more than 300 species of organisms since recognized at such sites, the vast majority proved to be new to science. Although tube works and clams predominate at the hydrothermal vents of the east Pacific and mid-Atlantic, the dominant animals around the active chimneys of the Bismarck Sea are gastropods (snails). On the outside of some chimneys, a square metre of surface can be covered by as many as 400 gastropods, accompanied by bresiliid shrimp, carnivorous bythograeid crabs, scavenging zoarcid fish and galatheid crabs. On the cooler fringes of the hot springs, there are mussels, several newly recognized kinds of anemones and long-necked barnacles, which until recently were thought to have died out with the dinosaurs at the end of the Mesozoic era, 65 million years ago. At Vienna Woods, Russian biologists have measured as many as 5,000 animals packed onto a single square metre of chimney wall.

Clearly, mining these sites would be unacceptable if it threatened this unique biological assemblage. The diversity of these organisms and their potential value to biomedical research or as a source of pharmaceuticals remain largely unknown. But a number of observations suggest that the environmental effects of mining this habitat may not be especially worrisome.

The fauna in question normally tolerate highly acidic waters containing sulfur, thalium, arsenic and mercury. So the release of these substances from mining into the surrounding water should not harm the local biota. Indeed, when the venting of hot water carrying these seemingly toxic elements ceases, the colonies either die or migrate to a more active site. What is more, these vent creatures live quite happily on conditions in which the seawater is thick with particulate smoke as well as clouds of dead and partly mineralized bacteria. And, they are perfectly capable of surviving the strong earthquakes that repeatedly disrupt these volcanic fields, snapping tall chimneys like matchsticks and raising tons of sediment into suspension.

Although the vent communities appear quite resilient, great care is still warranted. One cautious strategy would be to mine progressively up-current, selecting sites where the flow would carry clouds of fine particles and other mining debris away from the intact deposit. In this way. if only part of the

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area is mined, the rest of the deposit and its fauna will remain undisturbed. The creatures living there could then recolonize nearby mined-out areas that were still actively venting.

Hidden Treasures

Even if it were deemed desirable to preserve the vent communities in their entirety, it may still be possible to extract valuable minerals from formerly active chimneys that are now largely devoid of life. The challenge is finding such sites. We have learned how to come in on active hot springs quite readily by following their plumes with special detectors. Yet this method will not lead us to dormant vents. Nor will detailed photographic surveys of the seafloor necessarily reveal older deposits: many of these extinct chimneys are completely covered by the ooze that is forever settling on the bottom.

Fortunately, a variety of geophysical techniques routinely employed to hunt for concealed ore deposits on land can be adapted for use on the seafloor. Gravimetric mapping should detect the larger deposits, and magnetic or electromagnetic techniques could pinpoint smaller accumulations of massive sulfides. Measurements of the resistivity of crust might also delineate buried sulfides (assuming that engineers can find a way to inject electric currents into the seafloor for such surveys). And the natural radioactivity of potassium, uranium and thorium in exposed but inactive chimneys might be sufficient to signal their presence to prospectors towing sophisticated sensors over the seafloor. This technique could provide an easy way to find dormant chimneys without having to conduct laborious video or photographic surveys of the bottom.

Although we are optimistic that the necessary procedures can be worked out so that the vent communities of the Bismarck Sea will not be endangered, we believe mining should not proceed on the basis of what some might call hopeful speculation. Instead, a rigorous program of research and testing should precede any decision to move forward with mining, even in a limited way.

At this early stage, as with most ambitious new endeavors, the proposition of mining deep-sea hydrothermal vents is fraught with questions. Yet plucking valuable metals from the bed of the ocean is a tantalizing concept, one that intrigues us immensely. Sizing up the threat to the biota and the true economic potential of these deposits will require an immense effort -but it may ultimately yield immense rewards.

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CHAPTER ONE: MARINE MINERAL RESOURCES

The Offshore Mineral Resource of the Cook Islands

Based upon a presentation by Ben Ponia Director of Research, Ministry of Marine Resources, Cook Islands

The Cook Islands

The Cook Islands are 15 islands located in the Southwest Pacific (between 8-23°S latitude and 156-167°W longitude). The Cooks are often divided geographically into the northern and southern group. The former are mostly atolls and the latter are younger islands with "high island" characteristics. The total land area is about 200 km2. However, because its islands are widely scattered, the EEZ of the Cooks encompass an area about 2 million km2.

The population of the Cook Islands is 19,000 with an annual growth rate of 0.4% (1998 demography). Half the residents are located in the capital of Rarotonga. The Cook Islands is a self- governing nation, in close association with New Zealand. Tourism is the main industry and the most valued export product is the cultured black pearl. Other important economic sectors include agriculture and offshore banking. Gross domestic product per capita was estimated (in 1995) at AUS$7,000.

Exploration

Manganese nodules, valued for their cobalt content and for lesser amounts of nickel and copper, are the basis of the Cook Islands' offshore mineral resource potential. Cobalt is mainly used as a superalloy in the aerospace industry.

The Cook Islands' nodule resource is high in abundance and cobalt content. This is possibly due to the unique tectonic setting and ocean circulation environment within which they formed. Specifically, the deep Antarctic current (concentrated in cobalt, nickel and copper) flowing north is channeled through the Aitutaki passage into the broad expanse of the Penrhyn Basin. In the southern to central regions of the Basin, the strong current encourages nodule formation and the oxygen rich waters favour cobalt deposition. In this area an abundance of up to 60 kg/m2 of nodules has been reported, whereas >5 kg/m2 is considered minimum cutoff point for mining purposes. Cobalt levels of 0.8%, twice that found in the Clarion-Clipperton nodule reserve area (north of the equator) have also been measured. The estimates of the quantity of nodule resources are staggering. For example, in the area where nodules exceed 5 kg.m2 (about 1 million km2 of the Cook Islands' EEZ), there are 7 trillion tonnes of mineable nodules. This represents 32 million tonnes of cobalt, the equivalent of 520 years of the current world demand.

Exploitation

A major physical constraint to mining the Cook Islands' nodules resource is that it occurs in depths of approximately 5,000 metres. A feasibility study for the Cook Islands Government has examined exploiting the nodule resource. The scenario has an output of about three thousand tonnes of cobalt, the equivalent of around ten percent of the world cobalt consumption. Mining need only take place in a small area north of Aitutaki, chosen for high nodule abundance, cobalt composition and relatively flat terrain (for harvesting). Nodules will be gathered using small beam trawlers. Large transport vessels will ship the nodules to a processing plant, assumed to be in New Zealand. The nodules will be stored and reclaimed for smelting and refining at the plant. Alternative systems of nodule mining and processing have been developed in countries elsewhere.

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Economic Returns

The average price of cobalt has ranged between US$4-$30/lb over the past twenty years, mainly due to supply disruptions from major producers. Some price stability has occurred with improvements in supply and demand being fueled by the aerospace and an emerging rechargeable battery industry. Financial sensitivity analysis of the earlier feasibility study suggests modest economic returns at the current prices.

The Cook Islands Government does not have a fiscal regime dealing with offshore mining. A report prepared for the Government has outlined possible mechanisms (comparable to other international fiscal arrangements) to derive revenue. The elements of the package discussed include payment of royalty, income tax (and variable income tax), a bonus payment and area rentals. Careful taxation consideration must also be made in view of the fact that processing and marketing will take place outside the Cooks' EEZ.

Investment considerations in offshore mining involve untried technology, a volatile cobalt market and difficulties in forecasting project economics. The goal of the Cooks fiscal package is to attract investment and produce a return to Government that is fair and progressive.

Legislation

Under the Law of the Sea Convention (UNCLOS) 1982, the Cooks, as a coastal state, may pass laws relating to the exploration and exploitation of seabed minerals within its EEZ. The Cook Islands have an overlapping EEZ with American Samoa, the Tokelaus, French Polynesia, Kiribati and Niue, (the boundaries have only been resolved for French Polynesia and American Samoa).

Other international maritime conventions that have force of law in the Cook Islands include, MARPOL (1973/78); London Dumping Convention (1972); SPREP Convention (1986); Intervention on the High Seas in cases of Oil Pollution Casualties (1969); CLD and protocols (1969); FUND Convention and protocols (1971) and; SaLAS Convention and protocols (1974) and the STCWand amendments (1995).

The present legislative regime of the Cook Islands relating to its EEZ is incomplete. The Continental Shelf Act (1964), an act of the NZ Parliament, implies that the Cook Islands' laws extend to its EEZ. It appears inconsistent with the Territorial Sea and EEZZone Act (1977) that implies that it is the Queen's Representative that determines its application. This is being addressed through a draft bill, the Territorial Sea and EEZ Zone Act, 1999.

There is a Marine Resources Act (1989) which is mainly to provide for regulation and management of fisheries within the EEZ and A Prevention of Marine Pollution Act (1998) to deal with marine pollution, dumping and transportation of wastes in Cook Islands' waters, and to give effect to various international conventions. Lacking is specific legislation to cover exploration and exploitation of offshore minerals. A draft bill is under preparation, the Deep Sea Mining Act, 1999.

Environmental Concerns

In an age of environmental concern, the weighting assigned to environmental values cannot be underestimated. As a result, there is an inherent need for scientific baseline studies to be conducted in the Cooks' EEZ.

The environmental issues may be related but not necessarily restricted to the following: (1) mining activities--extent of impacted substrate, extent of the sedimentation plume generated and wastewater discharge; (2) impacts on the abyssal ecosystem--changes to the biodiversity of the benthic fauna, rates of recolonisation by the pre-mined benthic community; (3) impacts to the epipelagic zone--effects on phytoplankton, disturbances to commercial fish stocks (tuna, billfish) and migrating species (e.g., whales, turtles) and (4) onshore processing--gas emissions and slag disposal.

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Nodule Research and Development

Over the past twenty years various information has been generated with respect to the nodule potential of the Cook Islands. Prominent institutions include the Fiji-based South Pacific Applied Geoscience Commission (SOPAC), the Metal Mining Agency of Japan, the East-West Center, (Hawaii), the U.S. Trade and Development Agency (Washington, D.C.) and the Commonwealth Secretariat (London).

The present policy with regards to research is that a full discussion must first take place prior to research being undertaken and that the Cook Islands may appoint a person(s) to actively participate in any activities. Following any research, preliminary findings must be made available to the Ministry within three months and a prearranged copy of the final report as soon as possible.

References

Clark, A.L., Lum, J.A., Li, C., Icay, W., Igarashi, Y., Morgan, C. 1995. Economic and Development Potential of Manganese Nodules within the Cook Islands Exclusive Economic Zone (EEZ). East-West Center, Honolulu, Hawaii. Kingman, S. G. 1998. Manganese Nodules of the Cook Islands. South Pacific Applied Geoscience Commission (SOPAC), Fiji.

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CHAPTER TWO: MARINE MINING POLICY AND LEGISLATION

The International Seabed Authority and the Development of the Seabed Mining Code

Based upon a presentation by Michael Lodge Chief, Office of Legal Affairs, International Seabed Authority, Kingston, Jamaica

The International Seabed Authority is an autonomous international organization established under the 1982 United Nations Convention on the Law of the Sea (UNCLOS), hereinafter referred to as the "Convention") and the 1994 Agreement relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea (A/AES/48/263 (17 August 1994), Annex, 48 GAOA, agenda item 36). In accordance with the Convention and the Agreement, the Authority is the organization through which States Parties to the Convention organize and control activities in the seabed and ocean floor and subsoil thereof beyond the limits of national jurisdiction ("the Area"), particularly with a view to administering the resources of the Area. The Area and its mineral resources are the common heritage of mankind (Convention, Arts. 133, 136). All rights in the resources of the Area are vested in mankind as a whole on whose behalf the Authority shall act. These resources are not subject to alienation. The minerals recovered from the Area, however, may only be alienated in accordance with Part XI of the Convention, as modified by the 1994 Agreement, and the rules and regulations and procedures of the Authority (Convention, Art. 137).

The Authority also has other responsibilities under the Convention such as those concerning the promotion and encouragement of conduct of marine scientific research in the Area and coordination and dissemination of the results of such research and analysis when available (Convention, Art. 143). The Authority, with the cooperation of States Parties, may take measures in accordance with the Convention to acquire technology and scientific knowledge relating to activities in the Area and promote and encourage availability of such technology and scientific knowledge so that all States Parties may benefit therefrom (Convention, Art. 144). The Authority is to ensure effective protection of the marine environment from harmful effects that can arise from activities in the Area. To this end it must adopt appropriate rules, regulations and procedures for the prevention, reduction and control of pollution and other hazards to the marine environment (Convention, Art. 145). Under article 82 of the Convention, it has the responsibility to receive certain payments and contributions from the exploitation of non-living resources of the continental shelf beyond 200 nautical miles from the baseline from which the breadth of the territorial sea is measured and to distribute them to State Parties to the Convention.

The Authority came into existence on 16 November 1994, upon the entry into force of the Convention. The Agreement relating to the Implementation of Part XI of the Convention was adopted by the General Assembly of the United Nations on 28 July 1994 and entered into force on 28 July 1996. The Agreement fundamentally changes the deep seabed mining regime of Part XI of the Convention. In so doing it met the principal objections of industrialized countries to Part XI and was instrumental in achieving near-universal participation in the Convention.

The Authority has 130 members at this time; its membership being the same as the number of States Parties to the Convention. The Authority consists of three main organs: the Assembly, which comprises all member States of the Authority, a 36-member Council and the Secretariat. In addition, the Convention and the Agreement provide for a Legal and Technical Commission, which provides technical advice, and a Finance Committee, which deals with financial and budgetary matters. The members of these subsidiary bodies are experts in their respective fields and are elected in their personal capacities. It should be noted that the election of the Economic Planning Commission which was to be established under the Convention has been deferred in accordance with the Agreement and, in keeping with the evolutionary approach required by the Agreement, its task has been assigned to the Legal and Technical Commission. The powers and functions of the various organs and subsidiary bodies are defined in the Convention and the Agreement.

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The Assembly, as the sole organ of the Authority consisting of all members, is considered the supreme organ of the Authority to which the other principal organs are accountable as specifically provided in the Convention. It has the power, in collaboration with the Council, to establish the general policies of the Authority in conformity with the provisions of the Convention on any question or matter within the competence of the Authority (Convention, Art. 160/1; Agreement, Annex, Sec. 3, para. 1). There are a number of specific powers and functions that are defined in article 160 of the Convention. In particular, it has the responsibility to consider and approve upon the recommendation of the Council the rules, regulations and procedures relating to a variety of functions of the Authority. These include the consideration and approval of the rules, regulations and procedures of the Authority relating to prospecting, exploration and exploitation in the Area (i.e. the Mining Code) the financial management and internal administration of the Authority, and the operations of the Enterprise (Convention, Art. 162, para. (o)(ii)). The Assembly has a number of executive functions such as the election of the Secretary- General, the members of the Council, the members of the Finance Committee, the governing Board of the Enterprise and the Director-General of the Enterprise (when the Enterprise becomes operational). It has to consider and approve the annual budget of the Authority recommended to it by the Council, and determine the assessed contributions of members to that budget. Decisions of the Assembly on any matter for which the Council also has competence and on any administrative, budgetary or financial matters shall be based on the recommendations of the Council. If the Assembly does not accept the recommendation of the Council on any matter, it shall return the matter to the Council for further consideration. The Council shall reconsider the matter in the light of the views expressed by the Assembly (Agreement, Annex, Sec. 3, para. 4).

The Council is the executive organ of the Authority and has the power to establish, in conformity with the Convention and the Agreement, and the general policies established by the Assembly, the specific policies to be pursued by the Authority on any question or matter within the competence of the Authority (Convention, Art. 162). It has a number of specific powers and functions that are prescribed in the Convention and the Agreement. These include responsibility to supervise and coordinate the implementations of the provisions of the Convention and the Agreement on all questions and matters within the competence of the Authority, and to invite the attention of the Assembly to the cases of non- compliance (Convention, Art. 162, para. 2(a)). In particular, it is to recommend to the Assembly rules, regulations and procedures on the equitable sharing of financial and other economic benefits derived from the activities in the Area, and the payments and contributions made pursuant to article 82, taking into particular consideration inter alia the interests of developing states (Convention, Art. 162, para. 2(0)(i)). It is to adopt provisionally, pending approval by the Assembly, the rules, regulations and procedures of the Authority, taking into account the recommendations of the Legal and Technical Commission. These rules, regulations and procedures shall relate in the first instance to prospecting, exploration and exploitation of polymetallic nodules in the Area and the financial management and internal administration of the Authority. Rules, regulations and procedures for other resources are to be adopted by the Council within three years from the date of request by any member of the Authority. All rules, regulations and procedures adopted by the Council shall remain in effect on a provisional basis until approved by the Assembly and or amended by the Council in the light of any views expressed by the Assembly (Convention, Art. 162, para. 2(0)(ii)). An important function of the Council is to approve plans of work for exploration submitted to it by prospective operators and upon approval to issue a contract, i.e. a licence to the applicant in respect of the plan of work (Convention, Arts. 153, 162(2)0); Agreement, Annex, Sec. 1, para. 6).

The 15-member Finance Committee makes recommendations to the Assembly and the Council on all matters having financial implications for the Authority and the decisions of the Assembly and the Council shall take into account the recommendations of the Committee (Agreement, Annex, Sec. 9, paras. 1, 7). The Finance Committee is to make recommendations to the Council and the Assembly on the financial rules, regulations and procedures of the Authority, financial management and internal financial administration, the administrative budget of the Authority and assessed contributions of members to the administrative budget.

The Secretariat is the administrative arm of the Authority. It is headed by a Secretary-General who is the chief administrative officer of the Authority and acts in that capacity for all the component bodies of the Authority (Convention, Art. 166). In addition to the normal administrative functions, the Secretary-General is entrusted with a number of specific responsibilities of a substantive nature and acts on behalf of the Authority in accordance with its rules, regulations and procedures. The Secretary- General is required to make annual reports to the Assembly on the work of the Authority. Two such reports have already been issued (ISBA/3/A/4 and ISBA/4/A/11).

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The Legal and Technical Commission is the technical arm of the Council comprised of 15 members (currently expanded to 22) who have legal and technical expertise relevant to ocean mining. The Commission makes recommendations to the Council on technical matters and generally assists the Council in the supervision of activities in the Area. A number of such matters are specified in Article 165 of the Convention. They include the protection of the marine environment, the formulation of rules, regulations and procedures relating to exploration and exploitation of resources of the Area taking into account all relevant factors including the assessment of environmental implications, the review of written plans of work for activities in the Area submitted to the Council and a review of the annual reports on activities under the approved plans of work (Convention, Art. 162, para. 2(e), (f)).

The major legislative task before the Authority is the adoption of the rules, regulations and procedures relating to prospecting and exploration of polymetallic nodules. Article 162, paragraph 2(o)(ii) of the Convention and paragraph 15 of Section 1 of the annex to the Agreement require the Authority to elaborate and adopt the rules, regulations and procedures required for the conduct of activities in the Area as they progress, as well as rules, regulations and procedures incorporating applicable standards for the protection and preservation of the marine environment. Priority shall be given to the adoption of rules, regulations and procedures for the exploration for and exploitation of polymetallic nodules. These are commonly referred to as the Mining Code. One consequence of the approach taken in the 1994 Agreement is that the draft regulations prepared over a number of years by the Preparatory Commission were overtaken by the Agreement, which specifies an incremental approach to the development of regulations.

The Legal and Technical Commission began the task of drafting a Mining Code at the beginning of the second session in f\,1arch 1997 and completed its work in March 1998. The draft proposed by the Legal and Technical Commission was submitted for the consideration of the Council at the end of the March 1998 session of the Authority and the Council is currently undertaking a first reading of the draft (ISBA/4/C/4/Rev.1, hereinafter referred to as the "draft Code"). Once adopted, the draft Code will apply provisionally pending its approval by the Assembly in accordance with article 162, paragraph 2(0), of the Convention.

The draft Code addresses prospecting and exploration for manganese nodules and includes a standard form contract. The goal of the Legal and Technical Commission was to produce a coherent document which gives effect to the provisions of the Convention, particularly Annex III, and the 1994 Agreement. The draft Code also reflects the priority given to environmental considerations in the 1994 Agreement, including the new requirement that applications for mine sites include an environmental impact assessment and a programme for baseline environmental studies. It does not, however, deal with the exploitation of manganese nodules, nor with other types of minerals.

In its present form, the draft Code consists of 33 regulations which set out the framework for the exploration regime, while annexes contain a model contract and standard clauses. Its terms are based on provisions in the two basic instruments governing the Authority's work, particularly Annex III of the Convention. The draft text prescribes the manner in which interested parties can become contractors by obtaining the Authority's approval of their plans of work for exploration in specific geographical areas of their choice. Applicants must be sponsored by States, and must possess certain financial and technical capabilities. They would have to provide certain required information in support of their plans and pay a fee of US$250,OOO for obtaining the contract. Plans of work will require the recommendation of the Legal and Technical Commission and the approval of the Council.

Once a plan of work is approved, the Authority will issue a 15-year contract granting recognized security of tenure to the contractor. This contract will incorporate schedules giving the geographical coordinates and an illustrative chart of the exploration area, as well as a work programme that would be reviewed every five years jointly by the Authority and the contractor. Each contract would provide for a training programme for personnel of the Authority and developing countries.

Parts I, II and III of the draft Code, and annexes 1 and 2, deal with prospecting and the process of application for and approval of a plan of work for exploration. These provisions are based substantially on the work done between 1984 and 1993 by the Preparatory Commission, particularly Special Commission 3, albeit with a certain amount of streamlining to avoid repetition and to give effect to the principle of cost-effectiveness embodied in the Agreement. Thus certain prescribed periods for processing applications, acknowledgements, notifications etc. have been removed and the draft now provides for such processing to be done at the next meeting of the Legal and Technical Commission and the Council, without the need for special meetings of these bodies. In addition, to prepare a text

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that is coherent and understandable, several provisions found in earlier drafts have been merged to simplify the text and eliminate areas of overlap. Similarly, matters that relate exclusively to the internal procedures of the Secretariat have been deleted.

The draft Code also sets out more precisely the information that must be provided by applicants. Recognizing the uncertainty associated with exploration, the applicant is required only to submit a general description of the proposed exploration programme with a more detailed programme of work covering the first five-year period. This flexible approach may be contrasted with the approach found in many jurisdictions that require not only a detailed exploration plan, with associated financial obligations, but also that the applicant demonstrate that there is a reasonable likelihood that, by the time the exploration contract comes to an end, he will be in a position to proceed to commercial recovery.

Parts IV to VII of the draft Code deal with the form and content of the contract for exploration. In accordance with the scheme set out in the Convention and the Agreement, Part IV of the draft Code provides that after a plan of work for exploration has been approved by the Council, it shall be prepared in the form of a contract between the Authority and the applicant. In accordance with the Convention and the Agreement, such a contract shall be valid, in the first instance, for a period of 15 years. It will confer upon the contractor the exclusive right to explore for polymetallic nodules in the exploration area in accordance with the terms of the contract.

The structure of the draft Regulations is very simple and practical. It provides that certain standard terms and conditions shall be incorporated in every contract. These standard clauses are set out in annex 4 to the Regulations. The contract itself consists of a short, approximately two page document, containing certain basic elements establishing the contractual relationship and incorporating the standard terms and conditions by reference. The coordinates of the exploration area, the programme of work and the training programme, required pursuant to article 15 of Annex III to the Convention, would be attached as schedules to the contract. This approach helps to clarify the relationship between the contract and the Regulations and ensures that contract terms are uniform among contractors. It also ensures that the provisions of the Convention, the Agreement and the relevant regulations are incorporated as terms and conditions of the contract and at the same time it minimizes duplication and possible omissions. The differences in the circumstances between the different contractors will be reflected in the schedules to the contract that will include their respective plans of work in which will be indicated, inter alia, the level and pace of their activities.

One of the most difficult matters the Legal and Technical Commission had to deal with was the question of how to give effect in the draft Code to the provisions of the Convention and the Agreement relating to the protection and preservation of the marine environment. These provisions form the basis for the regulations that the Authority, as regulator, is obliged to implement. The Commission viewed these provisions as being of fundamental importance to the work of the Authority.

Part V of the draft Code deals with the protection and preservation of the marine environment. The Authority is required to establish and keep under review environmental guidelines or standards in order to ensure the protection and preservation of the marine environment. However, in view of the current lack of detailed knowledge of the deep sea environment, the draft Code recognizes that such guidelines and standards must be progressively developed. As activities in the Area progress, and more knowledge and experience is gained, it is envisaged that the principles and procedures contained in the draft Code will provide a framework for the development of further environmental guidelines or standards by the Authority.

To enable the Authority to progressively develop environmental guidelines, it is essential to build a reliable database of the results of oceanographic studies and monitoring programmes. The regulations will require contractors to avoid serious harm to the marine environment and provide for the monitoring of any effects on the marine environment from activities in the Area. It will require that the contractors establish environmental monitoring programmes for this purpose and report on the results of such programmes. It is on the basis of these data and information that environmental baselines can be established as exploration proceeds and becomes more intense. These baselines, developed in conjunction with the Authority, will later be used as the basis for further environmental monitoring programmes to be undertaken by the contractor at the stage when it is ready to conduct "pilot mining and processing operations".

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The Commission on the elaboration of the respective responsibilities of the contractor and the Authority as regards the establishment of environmental baselines spent much time. The draft Code states that every contract shall require the contractor, in cooperation with the Authority and the sponsoring State or States, to establish such environmental baselines and a programme to monitor and report on the effects on the marine environment of its activities. In this regard, it should be noted that, consistent with the requirements of paragraph 7 of section 1 of the annex to the Agreement, the draft Code would require every contractor to include in its plan of work a "description of a programme for oceanographic and environmental baseline studies that would enable an assessment of the potential environmental impact of the proposed activities".

The standard clauses of contract also require the contractor to prepare a contingency plan to respond effectively to incidents that are likely to cause serious harm to the marine environment and to report to the Authority any incident arising from its activities which is likely to cause such serious harm. Regulation 30 of the draft Code deals with emergency orders and establishes a procedure for the exercise by the Council of the powers set out in the Convention. In the event that the Secretary- General is notified of an incident causing serious harm to the marine environment arising from a contractor's activities in the Area, he shall report immediately to the Council and the Legal and Technical Commission. In accordance with article 162(2)(w) of the Convention, the Council may, on the basis of such reports, issue emergency orders, including orders for the suspension or adjustment of operations, to prevent serious harm to the marine environment arising out of activities in the Area. While it is not anticipated that such emergencies will arise during the exploration phase, the Convention is nonetheless explicit in requiring the Authority to put in place procedures to deal with emergencies.

Part VI of the draft Code deals with one of the major concerns of any mining interest; that is, confidentiality. The draft Code distinguishes between proprietary data and information, commercially sensitive data and information and data which are not confidential, i.e. that which are generally known or publicly available from other sources or has been previously made available by the owner to others without an obligation concerning its confidentiality. Proprietary data and information remain confidential at all times. Commercially sensitive data and information are kept confidential for a period of at least 10 years from the date of submission to the Authority or until an area is relinquished by the contractor. In addition, the Secretary-General is placed under an obligation to maintain the confidentiality of all data and information submitted or transferred to the Authority pursuant to contract and to develop appropriate procedures to ensure such confidentiality. The provisions of the draft Code complement the provisions of articles 163 and 168 of the Convention by imposing strict obligations regarding non-disclosure of industrial secrets and proprietary data on the staff of the Authority and the members of the Legal and Technical Commission.

In its present form, the draft Code is comprehensive and seeks to strike an appropriate balance between the interests of the Authority, as regulator, and custodian of the common heritage of mankind, and the interests of contractors, who are faced with the practical and commercial realities of investing substantial sums of money in an extremely high-risk venture. Nevertheless, problem areas remain and, in spite of the fact that much of the ideology and mistrust that characterized the days of the Preparatory Commission has dissipated, it is likely that the draft Code will endure a difficult passage through the Council.

One of the critical problem areas is environmental regulation. There is general consensus that further research needs to be undertaken before the Authority is in a position to establish definitive standards for the protection of the marine environment, but there remain significant differences of approach to the nature and extent of the environmental standards and guidelines which should be applied to the contractor by the Authority. On the one hand, there are those who favour stringent environmental regulation from the outset, based on the application of the precautionary principle. Under this approach, it is argued that action must be taken to control or abate environmental interference even though there may still be scientific uncertainty as to the effects of the activities. On the other hand it is argued that the Code should recognize the fact that previous environmental studies have determined that there is limited potential for significant environmental harm from seabed mining activities up to the point of large-scale prototype equipment tests. While much progress has been made, there remain significantly different views on key issues, such as the question of what constitutes serious harm to the marine environment and the precise stage at which the contractor should implement environmental monitoring programmes.

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The fact that so little is known about the potential for adverse impacts on the marine environment has also created a dilemma for the framers of the draft Code. It is universally accepted that it is impossible, at this stage, to foresee all future developments and to establish firm guidelines for the protection of the marine environment up to 15 years ahead. Accordingly, it was foreseen by the Legal and Technical Commission that it would be necessary to supplement from time to time the terms of the contract through the issue of additional environmental guidelines. The contract would require contractors to observe such guidelines. Although such an approach is by no means uncommon in national legislation, it is strenuously opposed by some potential contractors, who wish to see the terms of the contract fixed once and for all at the date of signature.

To overcome this dilemma, the Legal and Technical Commission suggested that it should have the power to issue guidelines of a technical nature for the implementation of the regulations. Such guidelines would not be binding upon the contractor, but would create a de facto standard to which contractors should adhere. In addition, the draft Code expressly foresees the subsequent introduction of environmental regulations, universally applicable to all contractors and having binding force, which would be incorporated into the contract in due course. It remains to be seen whether this approach will be acceptable to the Council.

The precise relationship between the various activities in the Area, including prospecting, exploration and exploitation, and marine scientific research also needs to be further elaborated. The draft Code makes it clear that its provisions do not in any way affect the freedom of scientific research, pursuant to article 87 of the Convention, or the conduct of marine scientific research in the Area pursuant to articles 143 and 256 of the Convention. However, the question of when marine scientific research ends and prospecting begins, and the distinctions between prospecting and exploration remain problematic.

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CHAPTER TWO: MARINE MINERAL POLICY AND LEGISLA TION

Marine Mineral Policy Considerations for the Pacific Island Nation's Exclusive Economic Zones

Based upon a presentation by Allen L. Clark East-West Center, Honolulu, Hawaii, USA

Abstract

Few if any nations in the Asia-Pacific region have a national marine mineral resource policy that deals with all aspects of marine resource research, exploration, development or exploitation. Because of the pioneering nature of marine mineral resource activities, it is imperative that nations put in place the basic structure of a national marine mineral resource policy that will ensure that all activities are conducted in such a way so as to maintain national sovereignty, self-sufficiency, and self-determination while promoting the development of the valuable resources of their EEZ's. The keystone of any national policy will be to optimize the economic returns from a marine mineral mining enterprise--both for the nation and the investor--within the constraints of such a pioneering activity. A critical consideration in many countries will also be how to balance national and international deep ocean research in the EEZ with the interests of economic development by the private sector.

Introduction

Marine mineral occurrences include a large number of metallic, nonmetallic and energy minerals which occur throughout the ocean, ranging from shallow (sea level) beach deposits to deep ocean (5,000 metres) manganese nodules. Although many of the marine minerals have been and continue to be commercially exploited, many others require changes in economics and/or technology before they can be commercially developed. Hereinafter in this paper the term resource, defined by McKelvey (1972) as "a concentration of naturally occurring solid, liquid or gaseous material, in or on the Earth's crust in such form that economic extraction of a commodity is currently or potentially feasible" will be u$ed to denote both present and potential economic concentrations of marine minerals. When both present and future resource developments are considered, the role of marine minerals in the international mineral supply may increase significantly in the next two decades and beyond. To expedite, encourage, monitor, and control these developments, a coherent marine mineral policy will be required by those nations with territorial regimes extending into the oceans of the world.

Coincident with the recognition of the economic potential of marine mineral resources, in particular oil and gas, there came a national and international recognition of the need to establish legal jurisdiction over these resources. As a result, a series of legally defined regimes has evolved, within which exploration and development rights are or can be allocated. The recognition of a national need for exclusive jurisdiction of the near shore environments for marine mineral resources was a major factor (among several) that led national governments to define a territorial sea (mean high tide to 3 miles offshore) with a larger contiguous zone (9 miles offshore). Following discovery offshore of oil and gas in the United States, the 1945 Truman Declaration asserted U.S. sovereignty over mineral resources on the continental shelf. Similarly, the recognition of the resource potential of deep-ocean manganese nodules led to serious questions concerning the ownership of all deep-ocean resources. In 1967 Ambassador Arvid Pardo of Malta, in a speech to the General Assembly of the United Nations, proposed that such resources were the "Common Heritage of Mankind'. As a result, the United Nations established an Ad Hoc Committee on the Peaceful Uses of the Seabed and the Ocean Floor Beyond the Limits of National Jurisdiction, from which nearly a decade and a half later was to evolve the United Nations Convention on the Law of the Sea (UNCLOS) which in turn provided for the formation of the International Seabed Authority.

A particularly significant outcome of the UNCLOS convention was the designation of the Exclusive Economic Zone (EEZ) as "a zone normally extending not more than 200 nautical miles from the baselines from which the breadth of the territorial sea is measured" (United Nations 1981). This is of critical importance from a resource perspective in that within the EEZ a coastal state has sovereign

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rights over the natural resources of the seabed, subsoil, and superjacent waters. The present paper emphasizes the development of a national mineral resource policy for the marine mineral resources occurring within the expanded zone of national jurisdiction, the EEZ, in general and a nation's territorial sea specifically.

The rapid expansion of interest in ocean resources both on a scientific and a political level, coupled with new scientific concepts such as plate tectonics and the origin of ocean basins, has resulted in a major expansion of knowledge regarding marine minerals. Historically, exploration and development of marine mineral resources have shown the commercial viability of several types of resources. Future activities may lead to increased exploitation of conventional deposits and, ultimately, to the exploitation of new types of deposits. Although no commercial deposits of deep-ocean marine minerals have been exploited, nodules and metalliferous muds (which have been mined experimentally), cobalt-rich manganese crusts, and polymetallic massive sulfides all represent mineral resources for possible future economic exploitation.

In the near term, it is to be expected that mineral resource exploitation will take place principally within the territorial seas of most nations, and in certain circumstances within the EEZ, and be based on already known reserves of marine mineral resources. Oil and gas are presently being produced from the continental shelves of over 60 nations. Several placer minerals, in particular, titanium, tin, magnetite, chromite, zircon, monazite and staurolite are recovered by dredging. Similarly, gold, platinum group metals, and diamonds are being recovered from offshore beach deposits and large low-grade concentrations still exist that may be mined in the future. More common resources such as sand, gravel, lime, aragonite, and phosphorite are recovered from the near shore areas of many nations. Recent advances have led to the quarrying of barite and underground mining of iron ore from the subsea utilizing on-land entry or artificial islands.

Regardless of the actual sequencing of exploration and exploitation, it is imperative that individual nations now address the establishment of a rational mineral resource policy and move to develop and implement appropriate legislation to monitor and profit from such activities. The remainder of this paper is directed toward (a) defining the basic concepts upon which a mineral policy might be formulated and (b) discussing some of the major problem areas associated with such a policy.

Elements of a Rational Marine Mineral Policy

The primary element in defining a rational marine mineral resources policy is to first establish the territorial boundaries to which the policy will be applied. The recently proclaimed EEZs of many, if not most, nations are not presently legally surveyed or defined to the point that exact territorial boundaries are known and accepted for individual countries. Nowhere is this more apparent than with respect to many of the island nations of the Pacific and within the South China Sea where 14 of total 17 boundaries are presently disputed. Regardless of the difficulties involved, legally defined and accepted territorial boundaries are the first element of establishing a rational marine mineral resource policy for the EEZs of nations. In particular, as will be discussed later, a stable and assured area for exploration and development is a deciding factor in an industry's decision to explore and develop alternative areas.

Once the issue of territorial boundaries has been clarified, a nation can begin to establish its marine mineral resource policy for which the basis for formulation and implementation depends on three key elements, i.e. sovereignty, self- sufficiency and self-determination.

The extent to which the development of marine mineral resources contributes to national self-sufficiency and long-term self-determination depends in large part on the magnitude of the resource development and on the acquisition and utilization of appropriate resource rents from exploitation. Nevertheless, with the concepts of sovereignty, self-sufficiency and self-determination in marine mineral resource development, it is possible to address many of the individual issues that will face a nation in the development of its overall offshore mineral policy.

Basic Objectives of a Marine Mineral Policy

Once the territorial boundaries of a nation have been established it can begin to define the basic

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objectives to be achieved with an offshore mineral policy. Although the specific desires and individual endowment of a nation are important, there are certain objectives that are universal. These are as follows:

.Promote efficient and timely exploration, development, and production .Encourage diversification in resource development .Ensure conservation in exploitation of the resources .Maximize economic return on resource exploitation .Protect the environment .Contribute to overall national development in multiple sectors

In essence, it must be remembered that the exploitable marine mineral resources are a nonrenewable national asset. As such, the major objectives of a marine mineral resource policy are all directed toward the common goal of optimizing the economic, social, and technical benefits for present and future generations while simultaneously preserving the environment and traditional values of the nation.

Characteristics of a Marine Mineral Policy

In achieving the objectives of a national marine mineral resource policy it is necessary to address the characteristics of the marine minerals industry with respect to exploration, development and exploitation of the resources. In particular, there are five major attributes of the industry and its activities that are critical to understand:

.High-risk and costly means of exploration .Highly advanced technology or research for the development of needed technology .Capital intensive in development and exploitation .Subject to market instabilities .Requirement or desire for national support

Because of these attributes there are virtually no developing nations, and only a few developed nations, that could undertake the total development of their marine mineral resources without technical collaboration and outside funding. As a result of these unique attributes of the marine mining industry, it is imperative that a national marine mineral resource policy recognize and be responsive to these factors if it is to attract foreign investment. At the same time, the nation cannot modify its overall marine mineral resource policy to such an extent that it does not achieve its major objectives. Therefore, it is imperative that industry and government understand each other's respective resource development objectives.

Achieving Government and Investor Objectives in Marine Mineral Resources Development

In large part both the government and the investor have a common objective to develop the marine mineral resource base of the nation at a profit. The means and regulations under which such exploitation may take place, however, are usually the source of both difficult and protracted negotiation. Nevertheless, agreement can be reached and is normally facilitated by recognizing that the government's objectives are primarily achieved by maximizing the following:

.Economic benefit through control over contractual terms that ensure the capture of optimum economic rents at a level commensurate with the risk inherent in the industry .Efficient resource development and exploitation through control over production and marketing activities .Human resource development through control over recruitment, training, and staffing of projects

Similarly, the investor's objectives are somewhat parallel to those of government in that the investor wishes to achieve the following:

.An adequate return on investment that is proportional to the risk incurred in exploration and development

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.Access to production, downstream utilization and marketing of production .Minimizing economic exposure by diversification of sources of production .Utilization of home-country goods and services to the extent possible .Utilization of exploitation facilities as training grounds for international staff .Expansion of existing operations into other sectors of the national economy.

Recognizing both common and competing objectives of the government and the investor is (a) an important first step in the implementation of a mineral resource development program and (b) critical to developing a rational marine mineral resource policy within which development can occur.

Within the basic policy framework described--which attempts to meet the objectives of both the nation and the investor--there must be the necessary and sufficient data upon which an investor can make a decision as to whether or not to pursue implementation of an exploration program. There remains, however, one additional and often overlooked factor that has a strong effect on investors' decision-making, i.e. the perceived government-investor relationship within the nation.

Factors Influencing the Government-Investor Relationship

An investor's overall perception of the investment climate of a nation is in large part dependent on the following:

.Political/economic stability of the nation .Consistency in decision-making .Ability to maintain reasonable control of project .Compatible tax systems (no double taxation) with the investor's nation .Ability to negotiate and resolve disputes .Historical perspective regarding mining and development.

Although there are a number of additional factors that influence investors and enhance government-investor relationships, those mentioned above are considered among the most important. Obviously, critical elements not specified above include the actual marine mineral resource policy and attendant legislation of a nation. The previously discussed broad concepts of a marine mineral resource policy would require considerable expansion and specification before actual exploration (and perhaps subsequent development) would take place.

Exploration Policy for Crusts, Nodules And Sulfides within Territorial Seas and the EEZ

Key elements of the policies and licencing procedures under which exploration and development can take place within a nation's EEl have been largely established on the basis of policies and procedures that govern exploration and development of the better-known commodities (oil, gas, placers, and phosphorite). Few, if any, nations have developed similar procedures for deep-ocean marine mineral resources. The following discussion is directed specifically toward defining some of the elements of exploration policy and licencing that should be considered in developing exploration agreements with respect to nodules, crusts, and polymetallic sulfides within territorial seas and EEls. Because no development is presently underway or planned for the near future, the present discussion will concentrate on the exploration phase that is presently underway, with development agreements to be discussed later in this paper.

In the following, seven basic parameters are briefly discussed with respect to formulating an exploration policy. Normally, these would be included in an exploration licence/lease given by an individual nation. These parameters include: commodities sought, exploration area, exploration area shape, duration of exploration licence, revenues, performance control, and retention and relinquishment.

Commodities Sought

A clear statement is necessary with respect to the individual commodities sought (and eventually developed and marketed) within an exploration area. Because ores derived from any of the three

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occurrences (crusts, nodules, and polymetallic sulfides) will be mineralogically complex, a definition of individual commodities upon which a royalty (or other payment) is made is essential to ensure an optimum economic return to the nation. Additionally, by defining a broader spectrum of individual commodities, the investor has a greater potential for developing a profitable mining enterprise. The number of commodities should be bounded, however, to prevent exploration for all commodities which will pose problems of ownership and tenure of leases.

Exploration Area

The exploration area allocated within a nation's territorial sea or EEZ is normally dependent on two factors: (1) geologic spatial distribution of the resource and (2) total exploration area (normally expressed in km1 available. Geologic spatial distribution controls on the occurrence of the mineral resource strongly influence the area of an exploration licence. As an example, crust and nodule deposits tend to occur as thin veneers covering seamounts or abyssal plateaus. As a result, exploration areas most normally encompass several thousand km2 in order to have sufficient area for discovery of a viable mine site. Polymetallic sulfides on the other hand, tend to be much more restricted in size and have higher ore grades and lower tonnage. Therefore, exploration areas could conceivably be considerably smaller than that of crust and nodules. However, because of the limited knowledge concerning the occurrence and distribution of all three occurrences, it is probable that initial exploration will require much larger areas than might normally be considered.

The total exploration area is a secondary control on the size of any individual exploration area. The main factor with respect to the size of the exploration area is the decision whether to grant the entire area as a single licence or to divide the area into several smaller exploration areas. If the area is sufficiently large to provide several exploration areas that are attractive to industry based on geological spatial distribution data, then it is in the interest of the licencing nation to proceed with several exploration areas rather than one large area. Such a procedure encourages competition among investors and provides a broader base of data upon which the nation can make development decisions. In very large areas the licencing nation can grant licences in a checkerboard or alternate the licence pattern-thereby reserving some areas for future licencing when more detailed knowledge is available with respect to the resource. In cases when the total exploration area is quite small, a nation may need to grant the entire area as a single licence in order to attract investor interests.

Exploration Area Shape

Normal licencing procedures are designed to offer exploration areas that are essentially equidimensional. This practice is more or less appropriate for both crust and nodule occurrences. Polymetallic sulfide occurrences, however, tend to be associated with linear underwater mountain ranges or rifts. Therefore, exploration areas for polymetallic occurrences would perhaps best be defined by long narrow tracts either parallel (providing maximum area of similar geology) or perpendicular to the axis (providing maximum variation in the geologic setting) of the ridge or rift.

A possible alternative to either the equidimensional or the elongate shape is to issue licences to cover whatever areas the investor may wish to define (within the lease size limitations previously set). Such a procedure has both benefits and drawbacks to the licencing nation and is generally not recommended without strict controls and relinquishment regulations.

Duration of Exploration licence

The duration of an exploration licence is highly variable and is determined by a number of factors. Normally, however, the duration is set to provide sufficient time to explore the area to the point of defining specific economic targets for development. Licences can be extended based on performance criteria defined by the nation issuing the licence. Such extensions are usually tied to a sequential relinquishment of a portion of the total exploration area. In all cases the time frame should be set and clearly stated so that both the government and the investor can fulfill their obligations without dispute. As a general rule, exploration licences would be considered short term (5 years) or long term (20 years) but would not exceed these limits without exceptional reasons.

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Revenues

Exploration licences are normally granted with the provision that if an economic deposit is found the investor has the right to develop and exploit the deposit under the nation's marine mineral resource policy and legislation. As a result, several methods are used to secure the appropriate revenues (economic rents) to the government. Among the most common methods are the following:

Bonuses -Normally a payment made to the government to secure exploration rights to a given area.

Royalties -A specified share of the value of the minerals produced that accrues to the government; normally based on current market value or as a fixed amount of the value produced.

Rentals Fees -Normally annual fees assessed by the government for the investor's use of the exploration area

After Profits Tax (APT) -An escalating tax, imposed on profits, which increases incrementally with increasing profits from the resource produced

Performance Control

Regulations are added to exploration licences to ensure that the investor will proceed with the proposed work plan in a timely and professional manner. Such regulations are enforced by (a) requiring that the investor post a performance bond that is forfeited if work is not done or (b) by suspension of the exploration licence(s) if work does not proceed. Normally performance criteria are set in terms of money spent, area explored, work completed, or various combinations of the above. Performance controls are essential to ensure that a nation's resource endowment is not tied up by investors for long periods of time without exploration taking place.

Retention and Relinquishment

Exploration licences should provide a set schedule for both the amount of area that can be retained and the portion that must be relinquished on a yearly basis. In standard practice the relinquishment of an area proceeds to a specified level at which time the investor is allowed to retain rights if (a) a yearly-and normally escalating-rent is paid per unit area, (b) a specified area is transferred to either a development or mining licence (the remaining portion of the exploration area reverts back to the government), or (c) exploration continues as long as it continues to meet performance criteria.

Specified retention and relinquishment procedures are essential from the government's perspective to ensure that large areas of the national domain will continuously be available for exploration and possible development. Additionally, it ensures that exploration will proceed in a timely and professional manner.

The brief discussion above of the seven basic parameters that should be considered in an exploration policy/licence is neither comprehensive nor sufficiently detailed to develop a national policy and should be considered as general guidelines only.

Development Agreements

The previously described framework for the development of exploration policy/licencing procedure discussed the necessary elements in fostering the potential development of marine mineral resources. Nevertheless, once a policy or exploration is in place and exploration proceeds to the point of identifying a potentially economic occurrence, there is a need to have in place a defined development policy agreement. In particular, the development agreement will address the specific aspects of:

.Terms and conditions for investment .Fiscal regime for development and exploitation

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.Ownership and control over data and assets .Accounting and monitoring procedures .Repatriation o~ profits .National participation.

Because no deposits have received serious consideration for development within the last 3 decade the discussion of development agreements has not been of major concern to most nations. However, the licencing of two exploration areas by the Government of Papua New Guinea has necessitated that the issue of development agreements receive high priority and that such agreements will need to be developed in detail.

Summary and Conclusions

The rapidly evolving and expanding concepts of national sovereignty with respect to large areas of the oceans and recent discoveries of new mineral resources necessitates that most nations develop and implement a rational marine mineral resource policy. The development of such a policy must accommodate the multiple desires of both potential investors and individual nations. From a national perspective, marine mineral resource policy should assure a nation's sovereignty, self-sufficiency, and self-determination. As a critical first step, the legal definition of a nation's EEl boundary and the resolution of conflicts is essential.

In general terms, both the nation's and the investor's objectives are met by a marine mineral resource policy that (a) maximizes economic benefits, (b) promotes efficient exploitation, (c) provides a stable and known investment climate, and (d) allows for resolution of disputes in an amicable environment. A fundamental need in virtually all nations is for the development of an exploration policy/ licencing procedure that defines the commodities sought, exploration area, exploration area shape, duration of exploration licence, revenues, performance control, and retention and relinquishment.

Although development of crusts, nodules and polymetallic sulfides is still perhaps a decade or more away, marine mineral resources such as oil, gas, placer minerals, and phosphorite are presently being developed and exploited. Therefore, there is both a present and a future need to develop national marine mineral resource policies to ensure the orderly development of these resources for all mankind.

References

McKelvey. V.E. 1972. Mineral resource estimates and public policy. American Scientist60{1): pp 32-40. Ostreng. W. 1985. Joint development of hydrocarbons in the South China Sea: Opportunities and Constraints. In Proceedings of the Workshop on Joint Exploration and Development of Offshore Hydrocarbon Resources in South East Asia, Bangkok, Thailand, CCOP Proceedings 55. pp 46-58. United Nations 1981. United Nations Convention on the Law of the Sea, DOC.A/CONF.62/L.28.

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CHAPTER TWO: MARINE MINERAL POLICY AND LEGISLA TION

Introduction to the Papua New Guinea Green Paper on Offshore Mining Policy

Based on a presentation given by James Y. Wanjik Principal Policy/Legal Officer, Department of Mineral Resources, and Chairman of the Papua New Guinea Offshore Mining Policy Committee

Introduction

The aim of this paper is to give an overview of the draft policy and the processes that the Government of Papua New Guinea (PNG) went through in drafting its draft Green Policy Paper ("Green Paper"). Our ultimate objective in formulating the "Green Paper" was to ensure that the final policy safeguarded our national interest while at the same time encouraged investment in exploration and eventually mining in the offshore. In the end, PNG's policy must be consistent with PNG's rights and obligations as an archipelagic state under the United Nations Convention on the Law of the Sea 1982 (UNCLOS) which PNG ratified in January 1997.

In the following, the rationale for the policy is outlined and the steps taken by PNG to develop its Green Paper is reviewed. This is followed by a review of the circulation of the draft policy with a discussion of the comments and/or responses that were received. In conclusion, future needs to more clearly define the "Green Paper" is discussed.

Rationale for the Policy

The present Mining Act of 1992 is the principal policy and regulatory document governing the regulation and management of the mining industry in Papua New Guinea. However, this legislation is heavily biased towards onshore exploration and exploitation of mineral resources. As to the offshore, the legislation seems to extend only to the outer edge of PNG's territorial sea. For instance "land" is defined under this Act to include "the offshore area being the seabed underlying the territorial sea from the mean low water springs level of the sea to such depth as admits of exploration for or mining of minerals". One interpretation was that the exploitability criterion in this definition was restricted to the territorial sea while the other was that land included at least the continental shelf as the exploitability criterion was codified in the United Nations Convention on the Continental Shelf of 1958. There is no clear cut interpretation, thus in this sense, PNG does have a policy and regulatory vacuum so far as exploration and exploitation of mineral resources in the offshore is concerned.

Notwithstanding this, two exploration licences were granted to Nautilus Minerals Corporation in November 1997 pursuant to the current Mining Act 1992. It should be noted that these licences were issued with respect to mineral resources within PNG's internal waters. The granting of these licences generated worldwide attention that continues today. Although the interest within the investment communities has been limited the interest in the marine research community and by BBC in London (which is in the process of making a documentary on the subject) has been very high. This high level of interest has provided the impetus for the development of an offshore mineral policy for PNG before further exploration and/or mining is licenced, if we come to that stage.

The other compelling reason is that PNG ratified the UNCLOS in January 1997. This meant that PNG's domestic laws were to be construed subject to the UNCLOS. Thus it is an opportunity to develop a specific offshore minerals policy in order to gain the benefits provided under UNCLOS and also to effectively discharge its obligations therein.

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Development of Draft Policy

The following steps were taken to develop the draft policy. First, a decision was made that such a policy was needed. Secondly, such a policy required a multidisciplinary approach given the complex multitude of interests covered under the UNCLOS. The next step was to organize such a group and formally establish an inter-agency committee. When the inter-agency committee was formed a set of relevant issues were identified at a brainstorming meeting early in the process. These issues were subsequently divided and meetings held on each issue. For each issue a member of the Committee was required to take a lead role in the discussions. This meant preparation of short papers on the subject to ensure discussions were focused. After all the core issues were covered, an internal workshop was held in August 1998, the outcome of which is the draft policy.

The issues were divided into three core areas: licencing regime; fiscal regime; environmental regime and three other issues. These other issues included offshore legal regime under the UNCLOS, offshore resources and exploration, and mining technology. Also, in order to provide the basis for such a policy, benefits distribution mechanism and other relevant issues of national importance were included.

Without going into the details of the draft policy, it is important to outline some of the key issues that have impacted on the draft policy. First, the implication of UNCLOS was, and is, not well understood. Of particular significance are the issues of sovereignty, sovereign rights and jurisdiction. What do these terms mean and signify and which maritime zones are affected by these different levels of authority? Secondly, the draft policy needed to accommodate different resources that may be found in the offshore, although the search for polymetallic sulfides was probably the main driving force. Thirdly, given the unknown variables, e.g., extent of offshore mineral resources, available offshore exploration and mining technology and the cost of such technology, the fiscal regime is not definitive. However, the current regime as a minimum is designed to guide an investor in offshore exploration to make an investment decision to invest.

Fourthly, exploration costs in the offshore may be high, if cost data for scientific cruises is any indication and add to this a lack of offshore exploration and mining technology and the result may be that the usual terrestrial licencing arrangement may not be applicable. However, the question is, what is the appropriate balance to be drawn so that investors' interests are taken account of while, at the same time, safeguarding the sovereignty of PNG? Fifthly, although the environmental aspect may seem open-ended it is intended that a specific offshore environmental policy or regulation would be subsequently promulgated after the enabling Environmental Bill is enacted by Parliament. Sixthly, the draft policy recognises potential conflicts between Marine Scientific Research (MSR) and private sector exploration. In this regard, two critical questions are "What is MSR?" and "What is offshore exploration?". Our understanding is that MSR is undertaken under a consent regime while exploration is undertaken pursuant to a licence. However, regardless of the definitions, the bottom line is to ensure that the exploration licencee is undertaking its approved work program. Further, the privilege of MSR should not be used as a conduit to undertake work programs pursuant to the exploration licence. Perhaps there would be no difficulty if the licencee actually contracts a research organisation to undertake its work program under the licence.

Finally, mention must be made of the landowner issue. Although it is believed by some that this issue may be of limited importance in the offshore, it is doubtful that the issue will be as simple as some assume. In PNG, the Fisheries Act recognises traditional fishing rights and reef claims of coastal and island communities. That obviously will be an issue. Their position and that of the relevant Provincial Governments is further reinforced under the Organic Law on Provincial Governments and Local level Governments. The extent and nature of any such claims by these entities are yet to be addressed by government.

Consultation and Feedback

This draft policy was circulated widely both within and outside PNG. In PNG, the draft policy was circulated to various national departments, statutory authorities, provincial governments and the private sector. Similarly outside PNG the draft paper was circulated to a broad range of individuals and organisations. In the following some of the shorter representative comments (without attribution) are summarised.

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Summary of Views and Comments Received

UNCLOS aspects

1. "With regard to its UNCLOS aspects, the paper [should] be reviewed formally, soon, and in its entirety by a UNCLOS expert who is both legally and scientifically qualified";

2. "The State has jurisdiction over the [Exclusive] Economic lone, under... UNCLOS, which extends for 200 nautical miles to seaward";

3. "Since PNG has ratified the above Convention, ...the State must provide relevant laws and regulations that are compatible to the extent of the EEl. This had been sufficiently established for it to form the basis for Fishing Licences. This can now be used for mineral exploration licences";

4. "Under E.3B, Continental Shelf and the EEl, it is worth [considering] that while the Government of PNG may not claim 'ownership' of seabed resources within the EEl, it nevertheless has jurisdiction over them under the UNCLOS, and can regulate, licence and tax all activities in the EEl Oust as it does in the waters of EEl)";

5. "I have noticed that the paper is uncertain of PNG rights to economic resources within 200 mile and the continental shelf. Under the 1982 Law of the Sea Convention, PNG has sovereignty over resources in those areas. Another area of importance to PNG is the Archipelagic waters and its seabed subsoil and mineral resources found therein";

International Seabed Authority

6. "The Green Paper is far too open-ended with respect to the relationship between PNG and the International Seabed Authority. It gives, or offers, too much to the ISB, unnecessarily";

Environment

7. "The Green Paper makes no mention of the London Convention on Dumping of Waste, the environmental provisions of the UNCLOS..., or The MAR POL 73- 78 Conventions on dumping of waste from ships. All these are applicable to nations that have signed the UNCLOS.. .";

8. "Under H. Offshore Environmental Regime, it is extremely important to define and exclude areas of high biological values from potential seabed exploration activities of oil drilling and mining, which are not always compatible with marine conservation";

Stakeholders

9. "There will be various stakeholders. We leave the National Government and others as determined by our Constitution, existing mining laws and the UN Convention on the Law of Sea to you. We are, however, interested more on the stakeholders in the Province. These are the Provincial [Governments] and LLGs as per the Organic Law [on Provincial Governments and Local level Governments], the owners of the pelagic waters, the use rights of various fishes and sedentary resources within waters to be affected and onshore owners of land where certain mining activities may necessarily take place. For these stakeholders, we feel adequate time is required to study environmental, social, cultural and tenure systems in order that flexible and uniform approaches can be designed into the policy prior to legal framework and regulations to be finalised";

1 O. "Although there is no "physical presence" of any landowner in the area, it is most [certain] that the local population will claim fishing and other traditional rights over the area. This must be anticipated and possible measures to approach this scenario must be in place";

11. "Regarding the rights of navigation and regulation of navigational lanes or routes, especially in the Bismark Sea, relevant articles under ...UNCLOS may apply, should

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possible restrictions [be] imposed on off-shore Seabed Mining Zone/Area, during the mining phase;

12. "The following should be taken into account: Merchant Shipping Act, 1975; Prevention of Pollution from Ships; National Policy on Wrecks and Salvage; and National Oil Spill Contingency Plan";

13. 'When the policy is finalised and legislated there may be need to have amendments made to the OLPGLLG to accommodate benefits sharing interests of relevant Maritime provinces within whose waters mining may take place";

Marine scientific research

14. "I was pleased to have the opportunity of reading the [draft policy] document and seeing the initiatives you have taken and are planning. The only section I was wondering about is Section 54 under J.4 Marine Scientific Research. I take it the wording of this is not intended to preclude a research organisation like CSIRO accepting contracts from commercial tenement holder to carry out research in aid of the latter's operations. As you know, CSIRO Exploration and Mining is at present contracted by Nautilus Minerals Corporation to undertake research and provide advice on the technologies of seafloor mineral exploration and mining, and we are expecting this activity to expand";

15. "The term "strategic arrangement" is occasionally used by companies to describe such relationships with research organisations, but I expect they do not represent the kind of activities the final sentence of Section 54 is designed to discourage";

Dispute settlement mechanisms

16. 'What is missing is ...that PNG has to make a declaration as to which options under the dispute settlement mechanism it will resort to under UNCL OS ".

These comments and those arising from the Madang workshop on "Offshore Mineral Policy" will be included, where appropriate, in a revised "Green Paper" to be prepared by the PNG government.

Conclusion

In the further refinement of PNG's policy, we welcome constructive comments while attempting to avoid any colloquialism. It is only through direct and frank discussions with regard to all issues and with the recognition that offshore mineral exploration and/or mining is new, complex and multidisciplinary in nature that an effective policy be developed.

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CHAPTER TWO: MARINE MINERAL POLICY AND LEGISLA TION

Fiscal Policy and Regime for the Economic Development of Offshore Mineral Resources

Based upon a presentation by Allen L. Clark East-West Center, Honolulu, Hawaii, USA

Introduction

Casey Stengle, the long-time coach of the New York Yankee baseball team who was noted for mixing metaphors and logic, was once asked what it was like to have appeared in so many World Series Games and his response was "It is like deja vu allover again". In many ways I had the same feeling when I began to undertake the writing of the present paper in that I was asked to prepare a similar paper for discussion over 25 years ago. At that time, however, the topic under discussion was the economics of mining the nodule resources of the Clarion-Clipperton zone (Clark, 1973). In 1986 (Clark and Johnson, 1986) my colleagues and I at the East-West Center undertook perhaps the first comparative analysis of the economics of deep-ocean mineral resources (manganese nodules, manganese crusts and polymetallic massive sulfides). Again in 1991 (Clark, 1991 a) a further analysis of the economics of manganese crusts, the popular resource at that time, was undertaken. At about the same time (Clark, 1991b) I also prepared an analysis of the possible economics of the most recent of the deep-ocean resources to be discovered and considered for development--deep-sea polymetallic mineral resources. Perhaps the present paper will, at least in part be "deja vu all over again", however, it is hoped that it may also cover some new ground.

In any discussion of deep-ocean mineral resources there are three key factors that arise and must be addressed, i.e. (1) is mining practical and does existing technology allow for the economic recovery of the resource to be exploited? (2) is the proposed exploitation of the resource in keeping with the basic principles of (a) resource conservation and (b) environmentally responsible? and (3) will it provide a sufficient return on investment to be profitable for the company and provide the government with an acceptable return to the treasury? All of the key issues are inter-related in the context of defining a fiscal regime for the development of deep-ocean resources.

The "bottom line" of deep-ocean mineral resource development has been, and for the foreseeable future will continue to be, whether or not the deposit is economically viable. Economic viability will, to a greater or larger extent be determined by the fiscal regime within which exploration, development and exploitation will take place. It is to this issue, with respect to deep ocean mineral resources in general and polymetallic massive sulfide deposits specifically within the Manus Basin, that I will now direct my attention.

Mineral Sector Fiscal Regime

In general, the fiscal regime of any nation can be viewed as the totality of that nation's economic policy and the economic instruments for implementing that policy, which impact on a mining enterprise. Normally, these instruments are in the form of direct and indirect taxes and tax incentives that determine the profitability of the enterprise and the return to the government from resource utilization. In the following a brief overview of the major fiscal instruments of a fiscal regime are briefly reviewed. It should be noted, as pointed out by Fortin (1992) the fiscal policy and regime of one nation cannot be easily "borrowed" from another nation since fiscal regimes, in particular, are the product of specific circumstances--which will undoubtedly be the case with respect to the development of deep ocean mineral resources.

Components of a Mineral Sector Fiscal Regime

Mineral taxation methods vary in form and application within individual Governments, however, in the final analysis the taxation structure of a nation often determines (a) whether or not a given project

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is economically viable and (b) the Government's share from the exploitation and utilization of the nations resources. For the majority of nations the taxes levied on a mineral development are either direct or indirect. Among the most common direct taxes, taxes paid directly by the company to another entity (normally the Government) are the following:

Direct taxes

Income tax. Often called a profit tax, an income tax is normally a percentage of the profits of an enterprise.

Royalty tax. Often called a production tax the royalty tax is normally a percentage levied against the amount of a commodity produced or the sale price of the commodity produced. There are, however, many variations used in the calculation of the royalty tax.

Import duty. A tax levied against the value of imported equipment and materials used in a mining enterprise. Normally, not all imports are taxed and this tax is often highly discretionary.

Export tax. A tax normally levied against the value of the commodity exported. If the commodity is sold domestically it is normally subject to a sales tax in lieu of an export tax.

Withholding tax. A tax levied on the remittance of profits or dividends abroad. This tax is normally levied on nonresidents but may also apply within certain corporate structures.

Local taxes. In many nations the provincial and or local levels of government often have vested rights to tax mining activities--these taxes are often called use taxes as they include taxes for education, roads and property.

Fly In -Fly Out tax. A tax levied by the government on the value of the travel and related costs associated with flying personnel from their home base to their duty station (mine) in a country.

Other taxes. In addition to the above there are normally a large number of other direct taxes that are levied against a mining activity. These include, but are not limited to the following: rental fees, registration fees, transportation, water, environment (compensation fees) and in special circumstances a value added tax (VAT).

Indirect Taxes

Landowner compensation. Normally a fee paid directly to the owner of the land upon which the mining activity will take place or, in rare instances, paid directly to the national government.

Local component rules. In many nations there are strict rules with respect to the use of domestic goods and/or labor, normally a percentage of the total, which may result in increased costs. Additionally, many nations have a requirement for the company to participate in overall development that is an additional cost.

Foreign exchange rules and regulations. Normally imposed in such a way that the company experience foreign exchange losses or encounters increased transaction costs when exchanging or transferring foreign exchange. In specific cases of borrowing within the country, additional taxes may also be imposed.

Equity participation. Normally takes the form of free equity participation in a project in extreme cases but usually is a carried equity interest, also known as deferred equity, which allows the government to put up its equity share from future earnings.

Transfer of technology and know-how. Most commonly applies to the cost of acquiring and transferring patents or other proprietary property to the host country as a condition of undertaking the mining activity. This was a particularly contentious issue in negotiations under UNCLOS.

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Tax Incentives

Tax holiday. An initial period of time in which a mining enterprise is not subject, or only partially subject, to all types of tax liabilities. Normally this period is approximately five years and, in special cases, ten years or more.

Deductions against income tax. Covers a range of issues such as depreciation, amortization and depletion allowances which can be deducted as costs, thereby, reducing taxable income. Deductions are commonly only allowed for certain types of equipment or for specific expenditures. Special approaches have been developed in many countries to either speed up (accelerated depreciation) or slow down (defined number of years) individual deductions.

Interest deduction. As mining enterprises are capital intensive, the common practice to finance the ventures is through loans. Therefore, most nations have provisions for allowing the deduction of all or part of the interest on borrowed money.

Loss carry forward. Largely because of the cyclical nature of the mining industry companies enjoy profitable years and endure years of loss. In the years of loss the amount of the loss can be "carried forward" as a cost and deducted from taxable income in subsequent profitable years. The terms of loss carry forward, particularly with respect to the applicable time, is often specified. The converse of loss carry forward is "loss carry back" which requires an amended tax return.

Tax credits. A deduction from taxable income allowed by the government specifically for investment of profits in the country. The amount of deduction is normally a percentage of the amount invested domestically.

The preceding brief overview of the components of a fiscal regime is intended to emphasize two key points. First, the number of direct and indirect taxes that face a mining enterprise are both numerous and, in the aggregate, dramatically impact the profitability of a mining enterprise. Second, as the taxes are set by the government they can also be changed by the government in order to encourage or discourage investment in the mining sector.

Although the number of direct and indirect taxes is large, it is encouraging to note that the number of potential tax incentives, which can also dramatically impact the profitability of a mining enterprise, are also quite numerous and are very important. Overall, the fiscal regime of any nation must have sufficient flexibility to be able to accommodate the national policy with respect to mineral development while, at the same time, assure the government of a reasonable "take" from the exploitation of the nation's resources.

Components of the Proposed PNG Fiscal Regime for Offshore Minerals

As noted previously, the offshore areas of Papua New Guinea range from near shore occurrences of sand, gravel and placer deposits to deeper ocean occurrences of manganese nodules, gas hydrates and polymetallic massive sulfides. The polymetallic massive sulfide (PMS) occurrences, two areas of which have recently been licenced to private industry, are currently of the most interest to the Government, industry and the international community. At present a major effort is being made by the Government of Papua New Guinea to establish a proper fiscal regime under which exploration, development and possibly mining of PMS's could take place.

Deep ocean mineral occurrences of PMS deposits on the deep ocean floor have not been mined, indeed, it can be argued have not even been successfully explored. As a result, the actual economic viability of such deposits is untested. However, it must be emphasized that similar types of deposits, which occur onland, have been successfully exploited in many countries worldwide. Therefore, certain aspects of the PMS occurrences (processing, metal recovery, waste disposal) are reasonably well known. Overall, the size of the potential deposits (tonnage, grade) and mining method remain two major and critical uncertainties with respect to determining the economic viability of the PMSs. Without these critical data, however, the development and implementation of an appropriate fiscal regime for the exploration, development and mining of such deposits remains problematic at best. Nevertheless, there is a need to define at least a general fiscal regime in order to provide a basis for further investment in exploration and development to take place. This fiscal regime will, however, have to

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accommodate a number of issues, some of which have on land analogues and others that appear unique to PMS deposits.

As previously noted, the PMS deposits of primary interest today, in terms of possible commercial development, are those in the Manus Basin of Papua New Guinea which lie in water depths of approximately 1,500 metres (about 1 mile). The future exploration, development and mining of these deposits, or others in similar conditions, will require considerable innovation, technological development and investment at each stage before a commercial mining venture can take place. If compared to an on land situation, the present occurrences would be considered as interesting exploration targets requiring considerable additional exploration before an economic decision for further investment could be made. Indeed, one of the greatest uncertainties with respect to the future development of PMS deposits is the time frame within which such an activity might have to take place.

Many of the problems associated with the future exploration, development and possible mining of the Manus Basin PMS deposits, and their impact on the existing on land mining law and fiscal regime of the Government of Papua New Guinea have been outlined in the Government's "A Green Paper on Offshore Mining Policy" (Department of Mineral Resources, 1998) and are abstracted in the following:

1. (Page 1) ".. .As to the offshore, the legislation seems to extend only to the outer edge of PNG's territorial sea. In this sense there is a policy and regulatory vacuum so far as exploration and exploitation of mineral resources in the offshore is concerned " ;

2. (Page 2) "... The type of technology available, the cost of acquiring them and mining methods employed may be similar or different from those employed onshore. Relevant licencing regime, fiscal terms, environmental regulations and so forth would be devised to take account of the similarities or differences as the case may be.. .."; 3. (Page 4) "...It is proposed that in the offshore at least three types of licences be issued. These licences include exploration licence, production licence and lease for mining purposes. The objective is to ensure security of tenure in light of many factors including long lead time and high cost of technology involved to mine offshore mineral resources "; 4. (Page 6) "...A basket of fiscal measures will comprise (the) offshore fiscal regime. Some measures will have limited application whilst others may be generic. In the final analysis the appropriate mix will be dependent on inter alia cost of exploration and mining in the offshore. And this cost will in turn be functions of available mining technology and method of mining employed in the offshore "; 5. (Page 6) "...Mineral royalty in respect of the offshore it is dependent on the extent to which the Mining Act of 1992 applies particularly in terms of compliance with the relevant articles of the UNCLOS " (Page7) "...The current rate of 2% of the f.o.b. value of mine products may apply. However, this regime will be amended to take account of the complexities involved in offshore mining "; 6. (Page 7) "...Production bonus of 2% of the f.O.b. value will apply to offshore mining projects. Like royalties where appropriate a sliding scale may be devised to take account of the depth involved and the ease with which mineral resources may be exploited "; 7. (Page 7) "...In principle the current rate of income tax may apply. However, the key consideration here is the use of fiscal tool(s) to encourage mineral exploration and exploitation in the offshore. As to the effective rate of tax this may be dependent on the cost of mining which again entails consideration of available technology, acquisition costs, and mining methods employed. Amortization and depreciation provisions of the Income Tax Act of 1959 as amended may be reviewed on needs basis to accommodate any potential or actual difficulties encountered by the taxpayer... ."; 8. (Page 7) ".. .Currently, dividend withholding tax is payable by foreign shareholders in mining companies operating in PNG. However, in order to encourage foreign investment, dividends withholding tax if applicable may be removed "; 9. (Page 8) "...Generally, no duty exemption is available to mining companies "; 10. (Page 8) "...Additional Profits Tax is applicable only to major mining projects...in principle the current tax base and rate will apply ";

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11. (Page 8) " The current State equity participation policy is that the State has an option to take up 30% at cost in a major mining project. The state may continue to retain this option for mineral resource project development in the offshore irrespective of the size of the deposit.. ."; 12. (Page 8) "...Mineral exploration and mining companies will be required to make their activities consistent with the requirements of the environment related laws and regulations operating in PNG "; 13. (Page 9) ".Benefit distribution is important in light of PNG enacting the new provincial and local governments reform law the State is not only required to consult with affected provinces and local communities but also is required to share some of the benefits derived from mineral projects; 14. (Page 9) "... Where mining takes place within the territorial sea *** appropriate benefit packages will be designed to assist relevant provinces and local coastal or island communities. In general, the packages will reflect impact of mining activities. In the case of local coastal or island communities, benefits to be derived by them will be dependent on mining being undertaken on seabed underlying traditional fishing grounds or other recognized activities within those areas "; 15. (Page 9) "... The State will encourage mineral companies, which demonstrate the best available technology with a willingness to transfer it to PNG. Such technology must be tested and proven...and environmentally friendly "; 16. (Page 10) "...the State will encourage developments that demonstrate the willingness to source materials and other necessities from a PNG port "; 17. (Page 11) ".. .Offshore mining may also affect other stakeholders in the offshore. These stakeholders include fishermen, navigators, divers Any exploration or mining activity that is proposed or undertaken ought to take account of these stakeholder interests. Where necessary appropriate compensation may be paid to these stakeholders who may not be able to have access to the previously accessible offshore areas "; and, 18. (Page 11) ".. .Offshore mineral exploration and mining are frontier and pioneering activities. These activities will be encouraged consistent with this policy. Where appropriate legislative amendments or new legislation will be enacted to give effect to the relevant aspects of the policy".

A comparison of the issues addressed in the "Green Paper" by the Government of Papua New Guinea, above, with the basic components of a fiscal regime presented previously, clearly shows (a) the intention of the Government of Papua New Guinea to be flexible with respect to several key issues related to direct taxation (income tax, dividends withholding tax, royalty), however, less flexible with respect to others (production bonus, duties, and the additional profits tax). However, when one views the "Green Paper" in the context of indirect tax issues, the Government's position appears to be (a) quite flexible with respect to several key areas (technology transfer, onshore sourcing), (b) less flexible on others (benefits, stakeholder interests, scientific research, research data) and (c) for a wide range of others (local component, foreign exchange regulations) there is no comment.

Equally important, the "Green Paper" is silent on many of the key economic issues affecting exploration, development and mining. In particular, the core issues of depreciation, amortization, depletion, tax holidays, loss carry forward and interest deduction are not discussed. This, however, is largely because the Papua New Guinea Government has already developed a very mature system of dealing with such issues based on its experience with other mineral developments within the country (OK Tedi, Porgera, Misima, Lihir) and to a large extent the existing rules and regulations would be expected to apply.

Additional Considerations in Establishing a Fiscal Regime

In addition to the above issues which have been discussed in the "Green Paper" and elsewhere in this overview, there are a number of other issues which will directly impact the fiscal regime to be developed by Papua New Guinea for offshore mining and they are briefly discussed in the following:

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Net Present Value. It is to be anticipated, and indeed is accommodated in the licencing procedures proposed by Papua New Guinea, that the exploration and development of PMS deposits will be a long process. According to DMR (1998) " Exploration licences will be granted by the Minister responsible for mineral resources (and) will be for five years initially. The term can be extended in additional tranches of five years thus according the licencee a good number of years to undertake mineral exploration " It should be noted that to date over 30 years has passed since the first pilot mining activities on manganese nodules were conducted and to date there is still no commercial development of this rich resource.

As a result of the long time-frame involved in exploration and development there arises a fundamental problem of constructing, in the early phases of the program, an accurate financial analysis of the project. Indeed, any estimation of an Internal Rate of Return (IRR) based on present economics would be of little value either to the Government or to industry. Obviously, such an analysis can be done, and probably would be done and updated periodically, but should be viewed primarily as an indicator of future profitability. More detailed factors required for an accurate financial analysis, such as markets, price, demand and uses, would be largely unavailable.

Ring Fencing. In many countries, expenses incurred in the exploration of one area, which exceed the expenses called for in a work program can be credited as expenses on an adjacent property, owned by the same company, in order to fulfill the work program on the second area. In essence, a company can expend all of its effort on one property while holding a second property without doing any work on that property.

Alternatively, a company may be able to mine on one property at a profit yet transfer expenditures on other properties in order to reduce their taxable income on the profitable property. In the case of PMS exploration, where one company holds two licences, the problems associated with ring fencing could become acute.

Resource Conservation. A major problem associated with most deep-ocean mineral resources is that of resource conservation. Because of the inherent difficulties with location, when mining remotely, it is to be expected that (a) it will be very difficult to accurately mine a given deposit and (b) that dilution of the ore will be a problem in marginal areas of any deposit.

Another major problem that may occur in the mining of PMS deposits, is that of necessary high- grading of the deposit. This will be particularly true if the operational costs of mining are very high and thus necessitates mining only the highest grade portions of the deposit. Economically, this can be viewed simply as mining a deposit with a high cut-off grade, however, because of the particular circumstances which surround the mining of deep ocean resources it may not be feasible, as it often is on land, to assume that you can go back later and remine the area.

Environmental Costs. A great uncertainty with respect to the development of PMS deposits lies in the associated environmental costs and liabilities that a company may have to assume in order to mine a deposit. Although this is a distinct possibility, studies associated with the proposed development of manganese nodules and crusts indicate that environmental costs are not prohibitively high nor is the amount of disruption caused by mining overly significant.

Polymetallic massive sulfide areas, in particular those associated with active "smokers" tend to have a high concentration of unique biota (clams, worms, micro-organisms) which contribute to a unique biodiversity of such areas. The definition of this unique biodiversity, and the implementation of appropriate procedures to protect it, may well become one of the major costs to a proposed PMS development.

Summary and Conclusions

As with many nations worldwide, Papua New Guinea has a well developed mining industry which functions within the confines of established mineral policy and legislation and within a known fiscal regime. Additionally, as with many other nations, Papua New Guinea also has significant potential for mineral development in the offshore areas of its territorial seas and beyond; in particular, with respect to manganese nodules, gas hydrates and polymetallic massive sulfides. Unlike many other nations, however, Papua New Guinea is the first nation in the world to issue exploration licences in the deep ocean for polymetallic massive sulfide deposit exploration. In taking this action the Government of

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Papua New Guinea has recognized that although certain aspects of it's mineral legislation and fiscal policy for onshore mineral exploration and development is applicable to the deep ocean resources there are certain unique aspects of deep ocean resources, and in particular polymetallic sulfide deposits, that require modification of the legislation and fiscal regime presently utilized onshore.

In particular, the anticipated long period of time required for exploration and technology development, the unique environment under which mining must take place, high risks associated with a pioneering endeavor and the uncertainty which surrounds the economic viability of the deposits all must be factored into the fiscal regime under which PMS deposits would be developed.

The majority of these issues have to a large degree been considered in the recently released publication entitled "Green Paper on Offshore Mining Policy" (DGM, 1998) which clearly shows the intention of the Government of Papua New Guinea to be flexible with respect to several key issues related to direct taxation (income tax, dividends withholding tax, royalty), however, less flexible with respect to others (production bonus, duties, and the additional profits tax). In the context of indirect tax issues, the Government's position appears to be quite flexible with respect to several key areas (technology transfer, onshore sourcing) and yet less flexible on others (benefits, stakeholder interests, scientific research, research data) and for a wide range of others (local component, foreign exchange regulations) there is no comment.

Future discussions concerning an appropriate fiscal regime for PNG in the exploration and development of PMS deposits in its offshore areas should further address issues such as (a) the validity of net present value determinations as applied to such long exploration and development periods as proposed for PMS deposits; (b) ring fencing of industry activities; (c) environmental costs, in particular, those associated with the unique biodiversity of active PMS areas; and (d) resource conservation.

Papua New Guinea stands on the frontier of deep ocean mining, particularly with respect to PMS deposits, and the fiscal regime that it develops to govern exploration, development and mining will be the "first of its kind" and undoubtedly a model for all other nations.

References

Clark, A.L. and Clark, J.C. 1986. Marine Metallic Mineral Resources of the Pacific Basin. Marine Resource Economics 3(1): 45-62. Clark, A.L. 1991a. Worldwide Trends, Needs and Prospects for Deep-Sea Mining. In Marine Policies Toward the 21st Century: World Trends and Korean Perspectives. Korea Ocean Research and Development Institute (KORDI), Ocean Industry and Policy Division, Occasional PaperNo. 1/1991. pp 58-81. Clark, A.L. 1991b. Economic and Technological Variables in Deep-Sea Mining. In Marine Minerals and the Environment. Technical University of Clausthal, Germany. pp 104-126. Clark, A.L. 1973. Some probable impacts of deep ocean mineral resource development. In Proceedings Marine Technology Society, 9th Annual Conference. pp 253-258. Department of Mineral Resources 1998. A Green Paper on Offshore Mining Policy. Unpublished report of the Government of Papua New Guinea, Port Moresby, Papua New Guinea. Fortin, P. 1992. Recent Trends in Mineral Development Law. In Mineral Industry Taxation Policies for Asia and the Pacific. Economic and Social Commission of Asia and the Pacific (ESCAP), Bangkok, Thailand. pp 22- 31.

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CHAPTER THREE: MARINE MINERAL DEVELOPMENT AND GOVERNANCE

Industry, Research & Government

Based on a paper presented by Julian Malnic Chief Executive Nautilus Corporation Ltd, New South Wales, Australia

A World First for Nautilus Corporation

The Nautilus Corporation ("Nautilus") achieved a world first in offshore mineral exploration in November of 1997 when it was announced (Nautilus 1998):

".. .Nautilus Minerals Corporation became the first in the world to be granted exploration titles over the newly-discovered, high-grade seafloor massive sulphide (SMS) type deposits "

Our announcement attracted widespread media attention including a large article on the front page of the New York Times, reports on the BBC World Service and various international news programs. We also think it changed the "rules of the waves" as shall be discussed in this paper.

Nautilus' two exploration licences are in PNG's Bismarck Sea and cover more than 5000 square kilometres of the Manus Basin, a tectonically active and well-mineralised geological province. Over the last decade, this province became a Mecca for researchers who found it a "living laboratory" of analogies to the volcanogenic massive sulphide deposits which onland have supplied much of the metal consumed by man over the last millennia.

Many nations are expected to follow PNG's lead in developing a seafloor resources policy. Our message to any nation considering the development of a seafloor resources policy is "Please understand the explorer's position". As we build our first "terrestrial mines in the sea" many of our familiar terrestrial principles will apply although, as we have noted, there is a tendency for people to regard the sea as an alien environment and, therefore, to imagine that the normal development principles of mining on land will not apply.

Mention "mining in the ocean" and people are immediately at sea. Most seem to lose their bearings regarding the normal resource development sequence of exploration, resource identification, to reserve proving and finally to a feasibility study. The first question inevitably asked is "How is it to be mined?" I should say that while we are very impressed with the wide range of technologies and their evident ability to do our mining task, we do not have a mythical "Titan CX2000 Deep Sea Miner" ready to go. Regardless, we believe that the first question that ought to ask is "How big is the resource?" and once this is established the how-to-mine question can be addressed during the course of mining and economic feasibility studies.

As our experience grows, we see more and more that the development methods and principles used on land will transplant directly to help create the world's first profitable 'deep water' marine mine.

Emerging Issues and New Policy

In the currently unfolding scenario, the overlap in the interests of marine mineral explorers and international marine researchers has potentially set these two groups on a collision course. As a result of Nautilus' plans for commercial mining, PNG's Department of Mineral Resources ("DMR") has begun the first serious attempt to codify its seafloor resources policy. While this policy is being drafted in PNG it is timely for Nautilus Corporation to present its views on how government, the explorer and the researchers can and should work together.

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Mineral resources, whether on land or in the territorial waters, belong to the nation and to the people. Therefore, as governments frame laws that encourage companies to explore and develop mineral deposits in both places our basic message is "do what you would do on land". Indeed, Nautilus' exploration licences are in PNG territorial waters and are instruments of the PNG Mining Act 1992.

However, Philemon Embil, PNG's Minister for Mineral Resources, announced in July 1998 that a special policy regarding seafloor resources is being developed by DMR and it is reported that that the draft seafloor resources policy may well be implemented as an entirely new "Seafloor Resources Act" perhaps as early as next year. As a result, Nautilus' consultation in this policy forming process has required us to carefully think through our position, particularly as a new wave of international "research" cruises prepares to enter PNG waters. In light of this, I would like to outline the fundamentals that Nautilus, or any exploration company, would like to see satisfied if we are to fulfill our vital role as a primary force in seafloor exploration and mining.

The Roles of the Explorer, the Researcher and the Government

For successful minerals exploration and development, we see the most critical relationship as the one between the explorer and the host nation's government. In the brand-new business of marine mineral exploration and development, this partnership must be an especially workable one for the company and the nation to ensure that both get the profits they seek, particularly when it comes to jointly harvesting the benefits of marine research. In about three years I think you'll see industry expenditures exceeding those of the research community, however, for the time being research is where the big spending is and where most of the useful exploration data is generated.

But first let me say something about ships: unique logistical constraints apply at sea. In the terrestrial environment many parties can access an exploration area on foot, in vehicles or with aircraft. In relative terms these are low cost. As a result, access is relatively free and does not carry massive cost penalties. But at sea, a suitable exploration or research ship can cost at least US$20,OOO a day and if you add in mobilisation costs and assume a couple of weeks work you require a half million dollar budget.

For the scientist onboard, ships do two things: they transport them to the site and then act as the highly specialised work platform that is needed to do even very basic tasks, e.g., sampling. However, great value, great economic value, can come from the research cruise simply by having representatives of the explorer and the government on board scientifically participating in the research activities.

Having these guests onboard and participating requires relatively little incremental cost and discomfort to the researcher. Also, research is meant to benefit the broader community and by having multiple specialists onboard it can achieve this objective. One of the primary justifications for the large quantities of money governments put into research, and the access that researchers seek in foreign waters, is the expected economic benefit of the research to industry and ultimately to the broader community. In the case of research within the waters of PNG, the participation of Nautilus and the DMR representatives onboard would assure that the economic value of the research efforts in Nautilus' licence area will be captured along with the benefits of scientific research.

The Importance of Research

All discoveries of potentially economic "deep sea" marine mineral deposits so far have been the result of research. We are, therefore, in debt to the important business of the scientists who research the oceans and their floors.

Before the arrival of marine mineral explorers, researchers cooperated according to a rather complex and, to the industry observer, obscure set of protocols. These protocols were driven by political factors, such as international acts of friendship and the host nations need to enhance its international profile through scientific research. Equally important was the need to share resources, such as ships and cameras, and a shared academic interests in common research topics.

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As an example, and in chronological order, the Manus Basin has been visited by geophysical and geological parties from Australia, USA, Japan, Canada, USSR, Germany and France. I think that on all but one cruise an observer from PNG participated onboard the research vessel. Explorers will see the observers' main job as the capture of scientific data in the national interest. It also tends to allay any general security concerns that go along with having a foreign ship working in the nations' territorial waters.

PNG ratified the 1982 United Nations Convention of the Law of the Sea (UNCLOS) on January 14, 1997. Therefore, PNG's territorial waters now include the 200 nautical mile "Exclusive Economic Zone" (EEZ), which is protected under international law. However, under UNCLOS, PNG has certain responsibilities with respect to governing and maintaining their claim. With PNG having a strong national dependence on mineral production, it is likely that mineral exploration and development will be major activities within the EEZ of the nation. From the very beginning, the DMR must keep the key records for future explorers and to help assess mining proposals in the offshore.

Nautilus is learning very quickly in this virgin field, as we are sure the DMR is as well. For example, even the basic principles of exploration present an ever-changing field of learning to us. In particular, we are conscious that we must share what we learn with the DMR and other relevant agencies. As a result of this increasing data bank, in the future it is hoped that the DMR will be better able to help us and, we hope, to better fulfill its national commitments.

The Data Chase

Although the UNCLOS guidelines stipulate that the originals of all data be deposited with the host nation, a major issue immediately arises, i.e., even if the host nation can afford to store it all, what use will it be? The same question applies to Nautilus who soon noticed that the data, information and knowledge that research generates is voluminous, and not all of it relevant to exploration. Physical samples alone vary from tonnes of sulphides, buckets of mud, water samples, crates of deep sea clams, and hydrothermal fluid samples. Although the samples are highly diverse, it must be remembered that even biological samples can be of direct value to the mineral developer seeking baseline data for environmental studies. There are clearly some complex matters to be resolved regarding data. Learning who needs what and where the data copies should most efficiently go will take time and collaboration.

Open or Closed File?

For the mineral explorer, the system of publicly accessible 'Open File' and confidential 'Closed File' material, used by many nations' respective departments of mineral resources, will need to be refined to cope with the status of research materials gathered within licence areas. Currently, research material goes straight to Open File in the DMR. The scientific conclusions from the research may be published a year or two later. Nautilus believes this practice should be altered so that research information, of potential commercial importance from within a licence area, is released only when the licence is relinquished or when the title holder agrees to its release.

Nautilus is keen to see the term of marine exploration licences extended beyond the current two years, at least during the "pioneering years" of exploration because of the need to develop and apply new exploration techniques, equipment and methodologies. It will initially take longer to explore offshore than it does on land, due to the unique logistical constraints, although in the long run marine exploration may become faster.

Nautilus' technical relationship with the DMR will largely revolve around the access and release of geological data, information, reports and samples--choosing it, storing it and working with it. As a result, the only conclusion can be that the relationship between the government and the explorer is of critical concern, and the work of researchers should be transparent to each of them.

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Guaranteed Berths

Representatives of exploration licence holders and the DMR should continue to receive the offer berths on every research cruise that comes to our licence areas. Nautilus is pleased that the 1998 SOPAC protocol for collaboration between licence holders and researchers is now in place. Previously, the cruise plans of researchers wanting to work in PNG waters have been approved, sometimes through diplomatic channels, by the DMR. In the relatively low tempo environment of the past, this has worked well. However, assuming a more intense future for mineral exploration, Nautilus believes that the conditions regarding collaboration applicable to researchers and industry should ideally be stated in regulations and law and in a way that does not discourage researchers or bury them in paperwork.

The Rights of the Explorer

I think any future marine mineral explorer would agree with Nautilus' sentiment that 'We must continue to have access to data, information or conclusions generated from research work on deposits in our licence areas and access to all research cruises". Like commercial organisations, researchers covet their discoveries, and so they should. But should a researcher have priority for conducting subsequent research on his discovery?

Recently, Nautilus was asked to comment on a situation where an independent research consortium wished to exploit another researcher's discovery without consultation. Whatever the researchers' conventions might be in such matters, our response was basically technical and commercial. In particular, we could foresee problems if there was no continuity in a researchers' activity. As examples, experience would go unused and/or new data might not mesh with what we, or another leaseholder, might have. To resolve this issue, perhaps the development of a protocol or guideline, that bestows some privilege or priority to the researcher of discovery, might help to maintain an orderly flow of information.

Win-Win-Win

At Nautilus, we have tried to befriend and collaborate with researchers because we support what they do and have already benefited from them considerably. Additionally, we want to collaborate with researchers so that we can give them as much freedom to release information as possible as we recognise that scientific publications are the lifeblood of their businesses and that these mean the release of data.

However, we are also mindful that as explorers we must comply with our statutory obligations to "report to and to ensure a well informed stock exchange". Here, the implication is plain: where the researcher and explorer collaborate in a licence area, commercially sensitive information should only be released to the public domain within a framework and timing determined primarily by the explorer.

The mutual rewards of an industry/research collaboration are sure to grow. As funding flows in from industry, more research will be affordable and paid for by industry. Industry will benefit, as we have, from the keen minds in research and we in turn will provide to the researchers our studies and information on our discoveries to advance their efforts. In our experience, it takes very little more than a face-to-face meeting and genuine exchange of ideas to ignite a collaborative effort. The expected wave of exploration funding over the coming years that I have mentioned earlier will accelerate collaboration of this sort.

At sea, on a shared vessel, it will be more important to cooperate with others than it has been in conventional terrestrial exploration and mining and there will be a growing need for negotiated approaches and pooled results. Access to data and results can be a continuous process in a well- founded and well-intentioned collaborative effort between industry and research.

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Researchers with 'Other' Commercial Connections

Inevitably researchers and explorers together will have to find ways to work through commercial matters such as protecting intellectual property and preventing conflicts of interest. Declaring interests, and possible conflicts of interest, will be most important to the building of good relations and will clear the way for more sophisticated arrangements.

Perhaps a good illustration of such collaboration is our own case. After consolidating our lease position, Nautilus approached the CSIRO with the offer of a 'research partnership' to support future exploration and mining. But the CSIRO already had a prior commitment to a consortium of companies to research in Nautilus' Manus Basin areas. Negotiations between all parties resolved the issues and allowed us to work side-by-side with different purposes. The caution exercised by the CSIRO, first in declaring its position and then in arranging with Nautilus and the other consortium to maintain confidentiality of information, has made this double arrangement conflict-free.

The difference between a researcher "consulting to" and researcher "working for" a company comes down to the details of the arrangement, and to whether that researcher has beneficial ownership in the commercial project. However, researchers cannot expect to work in this new environment of competing interests by simply announcing which hat they are wearing today.

Trespass

In industry circles, trespass is not usually tolerated. Any situation where a competitor company tried to work on another company's exploration tenements, without a formal agreement or joint venture, would never be tolerated in a terrestrial environment. On land, no explorer allows another company to drop in on a drill rig and take away some of its core for assay--an issue of straight trespass.

Intellectual Property

In exploring its licence areas, Nautilus will be learning lessons about their geology as well as more general lessons regarding seafloor exploration and mining that will benefit its future activities. One of the main purposes of the exploration licence is to keep the exploration lessons the explorer learns for its own benefit. Such knowledge is "intellectual property" which has real commercial value. Nautilus will energetically defend this belief if it is put at risk by parties who imagine that the same rules that apply on land do not apply at sea.

Even before the introduction of new policy or legislation, we believe sufficient precedent exists in the law to uphold our stance on this matter. It is useful here to consider precedents such as the 1993 case involving Western Mining Corporation (WMC) and Savage Resources in the Supreme Court of New South Wales. WMC's alleged failure to observe the rights to data and information of the title holder, Savage Resources, led to WMC's forfeit of its stake in the Ernest Henry copper-gold deposit, now a major mine, and facing adverse public opinion.

So when does 'research' become 'commercial'? It is a question that bears close scrutiny, particularly when the individual or institutional researcher or its employees also has other commercial interests.

Nautilus believes that researchers should have conditional access to carry on their important work in its licence areas and we believe each research cruise plan filed should carry with it full disclosure of such commercial interests. The disclosure should state explicitly that representatives of competing companies are not on board and that information will not be given to competing interests without the licence holder's approval. Where the research organisation also has commercial aspirations, it should declare these and state its full intentions for its proposed work. The explorer needs to know it is not competing against researchers. As such, the cruise plan should be filed with the licence holder for comment at the same time as with the government.

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Releasing Research Information

Researchers need to be aware of the commercially sensitive nature of their results in a granted exploration licence area. We believe the licence holder should have the final say concerning the publication of certain data and information about its tenements. For example, the CSIRO plans a shallow drilling expedition within our EL 1196 for the purpose of testing deep-seated alteration patterns and mineralising fluid pathways, its aim being to better understand mineralising processes and to further test the new PROD drill rig. There is also a proposal under consideration for deeper drilling under the Ocean Drilling Program.

Clearly the release of drill core assays, which can be extremely commercially sensitive, will need our approval. On land, companies often need to exercise discretion in announcing drilling results in order to generate additional supporting results that better qualify or quantify the initial results. But I am sure we will be keen to give it.

Why this must be so is more understandable if we consider the case of the public company (Nautilus is still a privately owned company but is expected to list in the medium term). Stock exchanges have very clear expectations regarding the timely release of information, and are one of several regulatory bodies that are interested in directors seeing that information does not leak onto the market from other sources, thereby disadvantaging shareholders who are not 'in the know'. Ultimately, this ensures confidence and credibility in the financing of high risk exploration, which would be put at risk to everyone's disadvantage if the system is compromised.

We hope that future seafloor resources policy creates both the onus and the opportunity for the resolution of release of information issues between researchers and licence holders. But, in any conflict, we believe those policies, laws and regulations should give the explorer priority in the economic and national interests. With the rapid advance of marine and mining technologies we think marine mines will have many more parallels with the terrestrial environment than people currently imagine. The matters of access and information will be no exception.

Environmental Issues

Understanding environmental issues in the marine mining medium is of paramount importance to both the PNG Government and to Nautilus. Already, cruises specifically dedicated to studying the marine life around the Vienna Woods, PACMANUS and DESMOS deposits have been conducted. The 1995 ManusFlux Cruise has already collected biological data that will be valuable for mining feasibility studies. This and other biological information also has commercial value to mineral developers and should fall under the same access arrangements as mineral-related data.

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CHAPTER THREE: MARINE MINERAL DEVELOPMENT AND GOVERNANCE

Licencing Regime in Papua New Guinea

Based on a presentation by Nellie James Registrar, Mining Tenements Department of Mineral Resources, Papua New Guinea

The law and regulations governing licencing for mining in Papua New Guinea (PNG) are found in one piece of legislation, the Mining Act of 1992 (hereinafter referred to as the Mining Act 1992). The Mining Act 1992, designed to suit land-based mining activities, simplified many processes and the types of licences and leases governing mining activities. Outlined below are the types of leases and licences that are available under the Mining Act 1992 to carry out mining activities.

Types Of Tenements

ACTIVITY LEASE! LICENCE MAXIMUM TERM

Exploration Exploration Licence 2 year term (can be extended/renewed for further terms) Production '. Special Mining Lease 30 year term (can be extended for further terms) Mining Lease 20 year term (can be extended for further terms) Alluvial Mining Lease 5 year term (can be extended) Ancillary Special Mining Easement Term identical to term of principal tenement Lease for Mining Purposes Term identical to term of principal tenement

Requirements

The legislation in the Mining Act 1992 sets out the requirements for applying for leases and licences. The requirements are clearly set out in the body of the legislation. As an example, anyone wishing to undertake a particular form of mining activity has to fill out a prescribed application form which is the same for all types of tenements. As the form is the same for all tenements, the applicant needs to indicate in the application form the type of tenement required. In filling out the prescribed application form, the applicant must provide the following information.

Onshore

New application

.Application form correctly filled out .Proposed w9rk program is adequate .Proposed expenditure meets the minimum requirement .Demonstrate adequate technical resources for the proposed work program .Demonstrate adequate financial resources to fund the proposed work program .Proper survey of the area of the licence application

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Application for extension of term

.Application form for extension of term of licence correctly filled out .Application lodged ninety (90) days or more before the expiry date .Proposed work program for next term is adequate .Proposed expenditure meets the minimum requirement .Area of land reduced by 50% from the area of land held in the last term

Onshore, an exploration licence grants an exclusive right to search for minerals within the boundaries of the licence. The licence is granted for an initial term of two years and can be renewed further. The provisions for an extension of term for an exploration licence are in favor of the licencee such that the licencee can be sure that he will get an extension of the term of the licence if he has complied with his work program and expenditure commitment in the last term. The maximum area for a new exploration licence application is 750 sub-blocks. Upon extension of the term of a licence, the licencee is required to relinquish 50% of the area of the licence in the last term. This relinquishment requirement upon extension of the term of the licence remains until the area is reduced to 30 sub- blocks. The licencee may, however, ask for a waiver from reducing the area further, when it has reduced down to 75 sub-blocks but more than 30 sub-blocks.

For the offshore regime, the sea is divided into various segments and it appears that the Government can issue licences giving the licencees the exclusive right to search for minerals, within specified areas, in PNG's archipelagic waters, the Exclusive Economic Zone and the continental shelf.

Offshore

In the case of the Regulations on Prospecting and Exploration in The Area, now before the Council of the International Seabed Authority for its deliberation, they provide for a prospecting licence that gives the prospector general rights to prospect and for an exploration licence that gives the licencee the exclusive rights to explore.

For PNG it has been proposed that the offshore mineral regime have only one licence which would give exclusive rights to the licencee to explore for minerals in a given area, subject to the operation of UNCLOS provisions, especially as they apply to marine scientific research. The proposed size of the area for an exploration licence is 1000 sub-blocks for a term of 5 years and can be renewed for further 5 year terms. It is also proposed that the exploration licence area mayor may not be reduced depending on the work program.

Discussions around the types of licences for the offshore regime originally included consideration of a retention licence, however, idea of a separate retention licence was dropped to reduce the monitoring and administrative costs involved in having an additional licence. Instead of having a separate licence, in the form of a retention licence, it was proposed that relinquishment requirements be made flexible to accommodate the concerns that necessitate a retention licence.

Another type of activity proposed in the "Green Paper", which is related to exploration, is that of the Pilot Mining Test. The Pilot Mine Test, as proposed, does not require a separate licence as it is viewed as an activity that would be undertaken as an extension of exploration activity. Therefore, the exploration licencee can undertake pilot mine tests by way of a variation to the work program of the exploration licence. Again, this activity will require clearly definition and monitoring.

Production Lease

Onshore

Special Mining Lease

.Application form correctly filled out .Applicant holds the exploration licence on which production is proposed .The area is clearly demarcated and has been properly surveyed .Applicant must provide a proposal for development

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Mining Lease

Special Mining Lease versus Mining Lease. The distinction between a special mining lease and a mining lease is that a special mining lease is granted after a Mining Development Contract has been signed between the developers and the Government. The Minister makes the decision that a special mining lease is granted after he considers, on reasonable grounds, and concludes that the size or distribution of a mineral deposit, the method of mining and treatment, the infrastructure requirements, the financial and economic considerations make a mining development contract necessary.

Alluvial Mining Lease

.Application form correctly filled out .The area of land is clearly demarcated and properly surveyed .Applicants proposal .Statutory declaration that applicant owns the land the subject of the application

The alluvial class of lease is available to a landowner that wishes to undertake mining on their own land using very simple alluvial mining methods to mine.

Offshore

The production tenements available for mining activities on land will not be the same as those for the offshore regime. It has been proposed in the PNG "Green Paper" that only one production tenement is issued for production, that is the Offshore Mining Lease. The Proposal for Development will identify the mineral resources to be mined, the technology to be used and other considerations that are relevant to the development of a mine.

In the approval process for granting offshore mineral production rights, issues such as environmental concerns, fisheries concerns and concerns for other uses of the sea will have to be considered.

The different stakeholders will have to be identified and their concerns addressed before any type of offshore production rights can be issued.

Ancillary Lease Requirements

The Special Mining Easement and Special Mining Leases are tenements issued on land for the construction of facilities to support mining activities. The application requirements include:

.Application form .Survey of the land .Development Proposal

One type of ancillary tenement, a Lease for Mining Purposes, has been proposed for the offshore regime to provide for the construction and installation of facilities relevant to the mining.

Application Fees

Onshore

There are application fees that have to be paid at the time of lodgment of an application for the various tenements. There is a schedule of fees that also contains the other fees charged under the legislation which are rental charges for all tenements, fees for the registration of documents and

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security deposits, which is a type of bond paid to ensure the compliance of the conditions imposed on the licencee or lessee.

Offshore

There are no fees presently proposed for the offshore, however, it is assumed that the present onshore fee structure, with some modifications to account for the special circumstances that exist, will form the basis of the offshore fee structure.

Procedure to Grant a Tenement

Onshore

.Application to be lodged at the Registrar's Office .Registration of the application .Setting a date for the Warden's Hearing .Advertisement .30 day objection period .Conduct of Warden hearing .Warden presents report to the Mining Advisory Board (MAB) .MAB considers application and makes a recommendation to the Minister .Minister makes a decision based on the recommendation of the MAB .The grant or refusal is noted in the Register .Annual rental payment and security document must be paid before the Lease or Licence is given to the holder.

Offshore

There are no administrative procedures proposed at this point in time for the offshore regime but again it is to be expected that the procedure for the granting of offshore licences will follow those for onshore tenements. It would be in the interest of the regulators, the industry and the various stakeholders that procedures be as transparent for the offshore as they are for the onshore regime. For the onshore regime, the relevant procedures are contained in the body of existing legislation that provides the advantage that the procedures cannot be abused by anyone including the administrators of the licencing system.

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CHAPTER THREE: MARINE MINERAL DEVELOPMENT AND GOVERNANCE

Stakeholder Issues in Papua New Guinea

Based on a presentation by Francis M. Lola Legal Advisor to the Department of Petroleum and Energy Papua New Guinea

Introduction

This paper will provide a brief overview of the different stakeholders that one would encounter when dealing with any resource development in the offshore area and the various issues that such stakeholders may raise when they stake their claims in relation to such development. In Papua New Guinea (PNG or State), as would be the case in many other places, these stakeholders and the issues that such stakeholders would raise, may basically be the same as those relating to onshore mining development. However, considering the fact that the offshore area is a "new" development environment, there may be new stakeholders and new stakeholder interests. It is, therefore, of great importance that the stakeholders and their interests, more particularly, the "new" stakeholders and the issues that are associated with them, are identified and addressed, at the outset in any regulatory regime. The responsibility of government agencies and their employees, as those entrusted with the onerous task of formulating an offshore mining policy for PNG, is therefore to ensure that all stakeholders involved in the offshore are identified and that their interests are properly catered for in the policies that are developed.

The following is a brief discussion of the forums and the mechanisms that PNG currently uses to address stakeholder issues that relate to onshore mining, which may be considered for use in relation to developments in the offshore area.

The Stakeholders

Who are the stakeholders? The two obvious stakeholders that quickly come to mind, when considering offshore mining development, would be the State and the developer. Their shared interests are to develop the resources and make money for their country and citizens or shareholders, respectively, from such development. Although both of these two particular stakeholders may have a shared interest, they may use completely different, and at times conflicting, methods to realise their basic objectives. In PNG, the following individuals or entities can be identified as possible stakeholders in any mining development or any other resource development in the offshore area:

.Mineral Resources Development Company Limited (MRDC) .Orogen Minerals Limited .Provincial Governments .Local level governments .Coastal communities .Marine scientific researchers and researchers undertaking other research activities .Commercial fishing industry participants, including traditional fishermen .Shipping operators, including other marine navigators and users .Interest groups, including environmental groups, conservation groups .International Seabed Authority .Landowners

Basis for Staking Claims

In staking their varied claims, these stake holders will, of course, base such claims on ownership and user rights, perceived or otherwise, that they claim to exercise over the offshore area. The State's

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assertion of ownership rights over mineral resource in the offshore area, more particularly the archipelagic waters, the territorial seas and the exclusive economic zone, stems from the ownership rights vested in the State over such resources under both the Mining Act 1992 and the National Constitution and its inherent right of ownership over natural resources within its territories. Some activities relating to offshore mining operations may, however, take place onshore so customary landowners may assert their ownership rights over such customary land.

Other stakeholders may not assert ownership rights but they can still assert some form of user rights in the offshore areas and, therefore, their interests, or the issues that they represent, will have to be considered. For example, stakeholders, such as traditional fishermen and local coastal communities, may assert user rights over certain reefs or traditional fishing grounds.

Some stakeholders, such as commercial fishing industry participants, may assert rights that are inherently theirs by virtue of the terms of bilateral and multilateral agreements that are in place, that accord them the right to fish in the territorial waters and PNG's EEZ. In relation to the offshore, the commercial fishing industry participants are an important group of stakeholders primarily because of the fact that they are already operating in the offshore areas that are considered for mining activities. The fishing industry already plays a vital role in the PNG economy and the role that they will playas a stakeholder in the offshore will be quite important.

A researcher may assert certain rights, including the right to be in a particular place to conduct Marine Science Research (MSR) or other forms of research, on the basis of any agreement or other forms of approval that they may have received from the State or its relevant agencies. A stakeholder, such a petroleum company may assert a right, to be in the offshore, pursuant to the terms of a petroleum agreement that it has with the State, which permits it to carry on petroleum activities in the offshore area.

A mining company may assert that it has the right to be present offshore because it has been given a statutory right, through the exploration licence that it has been granted under the Mining Act 1992, to be there. Likewise, a shipping operator may also assert a right because it has been licenced under the relevant shipping laws to operate a particular route.

Provincial governments and local level governments may assert rights in relation to the sharing of benefits emanating from the development of a natural resource. In fact, the State is obligated under the Organic Law on Provincial and Local level Governments 1995 (Organic Law) to share such benefits with these second and third tier governments.

The Mineral Resource Development Corporation (MRDC) may assert that, pursuant to its enabling legislation which accorded it the right to be an entity, that as the State nominee, it has a right to participate as the State nominee in any mining project. Likewise, Orogen Minerals can assert that pursuant to the Option Agreement that it has with the State, it has the right to take up the State's 30 per cent interest in a mining project.

Stakeholder Issues

Issues of interest to these various stakeholders are varied and would very much depend on the rights that they are asserting in relation to the offshore areas. The common issue of interest to most stakeholders would be for some form of compensation for the loss of certain rights due to mining development activities. Some stakeholders, like commercial fishing industry participants, may find that mining activities may curtail their fishing activities and, hence, they ought to be properly compensated for any loss that arises as a result of their forced curtailment of fishing activities.

Customary landowners whose land may be taken over under lease for mining purposes may seek compensation and annual rental payments for the use of their land. Coastal communities and traditional fishermen may also seek compensation for the loss of their traditional fishing ground and reefs, which may be restricted as a result of mining activities.

The issues of interest to the State would primarily relate to its right to participate in the development of a mining project. This interest is, of course, shared by both MRDC and Orogen Minerals, as a result of the current arrangements under which MRDC acts as the State nominee and Orogen is given the first right to the 30% that the State is entitled to take up in a mining project.

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Other important issues of interest to the State relate to the various taxes and other imposts that the State adopts as part of its fiscal regime for offshore mining projects. The State may also be interested in seeing infrastructure being developed by developers in areas they operate in, and nationals being trained for more skilled jobs within the operations of a mining company. The State is also interested in seeing that the development of a mining project is carried out in a manner that has minimal environmental impact.

The developers on the other hand will be interested in getting a good return for their investment. They, therefore, would very much want to see a fiscal regime that is not so rigid and onerous on them. Because, as much as they do not want to publicly admit it, they invest, not only to spread their risk, but also to make a profit and keep their shareholders happy by declaring dividends more often. Making money places them in good stead against any possible competitors. The will also want security of tenure and would want to see a more flexible and transparent regulatory regime.

Non-government organisations (NGOs) have, in recent years in PNG, become the self-proclaimed voice of the so-called voiceless majority, on issues relating to development of natural resources and the distribution of benefits arising from such developments. They may also be interested in the protection of the environment and the conservation of the pristine environment that one finds offshore.

Provincial governments and local level governments would want to see the provisions of the Organic Law followed to the letter so that they can also receive benefits, including royalties, that arise from development of mining project in their areas. Most provincial governments are now keen to have direct participation in the development of projects. For example, the Madang Provincial Government has been reported in the press to be considering direct equity participation in the Ramu nickel/cobalt project. Provincial governments and local level government will also want infrastructure to be developed by developers operating in their areas.

Forum for Address of Stakeholder Issues

The stakeholder issues in relation to a new mining project that involve the State, the landowners, the provincial governments, and local level government will usually be considered at a meeting, or a series of meetings, specifically convened to deal with those issues. These meetings comprise the forum and consultation process that the Organic Law requires the State to initiate in relation to the development of a resource project. In fact, the provisions of the Organic Law, merely repeat what has been in the Mining Act since 1992. The process has been used on many of PNG's current mining projects.

Decisions and agreements reached at the forum on issues relating to royalty distributions, equity participation (basically the sharing of the portion of project equity available to the State), additional grants from the national government, and commitments from the national government on infrastructure development are recorded in specific memoranda of agreements that are executed between the State and the provincial governments and the landowners. The issue of landowners' involvement in the offshore is yet to be fully considered so at this stage their involvement is also not fully settled.

Stakeholder issues that involve the State and a developer are usually considered in meetings held between the parties, either in specific meetings to consider specific issues such as financing plans, or through a negotiation process. The State normally establishes an inter-department negotiation team with the Department of Mineral Resources (DMR) playing the lead role. This team is the government's representative body that can enter into negotiations with a developer on stakeholder issues mutual to both and other related issues, with a view to concluding a mining development contract (MDC) for the project being considered.

The concept of having a MDC for a project is not only advantageous to a developer for purposes of securing financing for a project but also to the State in that it may impose certain additional conditions that it can not impose as conditions of the production licence. The MDC is the document that stipulates the binding obligations and commitments of both parties in relation to the development of a project. The developer's approved proposals for the development of the project forms part of the MDC.

The State, through its instrumentalities, is also required to give separate approvals relating to the developers' proposals for development, its financing plan and the environmental plan, among others.

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A developer can have one-on-one meetings with the agencies responsible for these approvals, including DMR, for purposes of seeking clarifications on issues relating to these approvals.

Conclusion

The number of stakeholders and the issues that one associates with them in a mineral resource development project are numerous and diverse. These stakeholder issues, like the fisheries issues, are quite complex and, at times conflicting, and require some delicate consideration from the initial stages. Therefore, it is vitally important that all possible stakeholders who may have some involvement or dealings in the offshore area are identified and for all issues associated with such stakeholders are considered and dealt with at the outset.

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CHAPTER THREE: MARINE MINERAL DEVELOPMENT AND GOVERNANCE

Papua New Guinea Fisheries and Marine Mineral Development

Based upon a presentation by Ursula Kolkolo National Fisheries Administration Port Moresby, Papua New Guinea

Introduction

Papua New Guinea is comprised of the eastern half of the world's largest tropical island plus an archipelago consisting of an additional three large islands and a further 600-odd islands and atolls: lying between approximately 2°-12°S and 141 0-163°E in the western Pacific Ocean. The country PNG has a total land area of 462,243 sq. km and an Exclusive Economic Zone (EEZ) estimated to cover 2,437,480 sq. km making it one of the largest in the region. PNG shares it borders with Australia, the Federated States of Micronesia, Indonesia and the Solomon Islands.

The coastline and offshore archipelagos present a great diversity of coastal types and marine environments. The Gulf of Papua is characterized by large delta areas, mud flats and mangrove swamps, while the north coast and high island coasts are typified by fringing coral reefs and narrow lagoons. Some of the smaller island clusters lie adjacent to extensive submerged reef systems or broad shallows. Papua New Guinea's total coastline length of approximately 17,100 km includes about 4,250 km (25%) of deltaic flood plain/lagoon systems, while some 4,180 km (24%) of the coastline occurs around islands and atolls. PNG also has fast- and slow-flowing rivers, over 5,000 lakes, and an extensive system of marshes.

In addition to its National Government, PNG has a decentralized system of semi-autonomous Governments in each of its 19 Provinces. Five of the Provinces are landlocked, while the remainder are coastal or maritime in nature, although some of the coastal Provinces also have extensive fresh water systems. Provincial Governments have considerable autonomy in regard to fisheries development/management and share in the revenues generated from fishery activities within the extended jurisdictional boundary of the individual provinces seaward into the territorial sea.

The GDP of Papua New Guinea in 1998 was US$4.655 billion that results in a per capita income of US$1,034. The economy is largely resource based with the agriculture, minerals and energy sectors comprising approximately 30% each of the nations GDP, with minerals and energy providing approximately 75% of export earnings. The fisheries industries contribute approximately K90 million to the nations GDP «1%) and employ approximately 2,000 individuals in the formal fisheries sector. However, an additional 250-500,00 (out of a population of 4.5 million) individuals, or approximately 10% of the population, are estimated to be involved in subsistence fishing. Therefore, although the economic value of fisheries in the GDP is small, the importance of fisheries to the overall population, and in particular to those existing at a subsistence level, is significant.

The proposed development of offshore marine mineral resources in the Exclusive Economic Zone of Papua New Guinea and the potential impact of such developments on the nation's fisheries is a major new consideration for the fisheries industry as a whole and for government bodies, at a national, regional, provincial and local level specifically.

Because the scope, location and specific impacts of offshore mineral development activities are largely unknown at this time, there is little that can be said with respect to specific impacts and or policies vis a vis such developments and Papua New Guinea fisheries. However a number of concerns can be identified which will need to be addressed by government and industry should such developments take place. Among the most significant are the following:

1. Virtually any foreseeable mining venture will require extensive disruption of the seafloor with varying impacts on biota;

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2. Waste disposal: The mining operations will produce waste materials both at the mine site and, if different, at the site of processing. The former will normally be in the deep ocean and the latter near shore thereby impacting a number of habitats; 3. Restrictions on access: The mining activity will necessitate that the areas of primary operation be (a) declared off limits for other activities or (b) that other uses be restricted in scope and area of operations; 4. Fishery impacts: The mining operation will have multiple impacts (both good and bad and many of which cannot now be predicted) on fisheries in the areas of activities; and, 5. Economic, social, cultural and environmental impacts: The mining activity will, in most cases and to varying degrees, have national, provincial and local impacts on the economy, environment, social institutions and culture.

In the following, a brief overview of the fisheries industry of Papua New Guinea is presented and at the end of each section the specific concerns of the fisheries industries with respect to the above impacts are attempted to be defined. It is hoped that this analysis will provide some preliminary guidance, with respect to research and policy which may need to be developed by government and industry, to ensure that marine mineral resource development does not impact unduly on the responsible and sustainable development of Papua New Guinea's fisheries.

Marine Fisheries

The fisheries resources of Papua New Guinea are generally divided into four major geographical areas based on the types of fisheries which predominate: the inland fisheries (including aquaculture), sedentary resources (on the reefs), coastal fisheries (including reef fishes, coastal pelagics, such as trevally, mackerel and marine prawns) and offshore tuna fisheries. Similarly, the fisheries industry of Papua New Guinea can be divided into four general types: coastal subsistent, inland subsistent, artisanal fisheries (classified as small-scale) and the commercial/industrial fisheries (classified as large-scale).

Small scale fisheries

Papua New Guinea's small-scale fisheries reflect the diversity of the country's coastal environments. Along the mainland and high island coasts and in the smaller island communities, fishing activities include the harvesting of the reef flats, spear fishing, shallow-water hand-lining from dugout canoes, netting, and trapping in the freshwater reaches of the larger rivers. In the swampy lowland areas net fisheries for barramundi, catfish, and sharks occur, while in the Gulf of Papua there is also a village-based lobster fishery. Collection of invertebrates, both commercially (beche-de-mer as well as trochus and other shells) and for subsistence purposes is extensive, and may exceed finfish harvesting.

Overall, subsistence harvesting is the most important component of Papua New Guinea's domestic fishery in terms of both volume and value, but is poorly known. Some of the subsistence catch is sold, traded, bartered or forms the subject of customary exchange. An estimate of subsistence/artisanal production ranges from 40 to 75 mtlyr (Table 1).

Table 1. Annual Domestic Fisheries Production Fisheries E ..

Coastal Subsistent A Inland Subsistent A Artisanal Domestic Markets A

A large number of people, estimated at somewhere between 250,000 and 500,000 (FAa 1999) participate in coastal subsistence fishery, although the number is thought to have decreased at an annual rate of 1.5% between 1980 and 1990. It is estimated that 30% of the marine subsistence catch

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comprises coastal bay, lagoon and reef fish, 10% pelagic fish, and the rest invertebrates and seaweeds. Subsistence fishery production has been valued at about US$26 million based on a typical price to consumers of about US$1.00/kg. This is probably an underestimation of the fishery's true value.

Commercial/industrial fisheries

Papua New Guinea's commercial/industrial fisheries are primarily for export (Table 2) and consist primarily of rapidly developing seining and long-line fishery which focus primarily on harvesting tuna, in particular, sashimi-grade tuna.

Table 2. Total volume and value of fishery exports: 1995-1997

1995 1996 1997 Fishery Vol. mt Value (K'OOO) Vol. mt Value (K'OOO) Vol. mt Value (K'OOO) Canned Tuna 0 0 0 0 659 Tuna PIS 0 0 18,000 25,000 25,000 33,000 Tuna Sashimi 132 494 252 4,675 800 24,000 Prawn 695 9,568 658 7,107 573 5,675 Lobster 122 3,038 75 2,141 103 3,173 Sedentary 764 8,000 972 10,582 1,009 12,303 Finfish 155 580 292 549 3,733 5,693 Others 7 79 3 34 22 5,967 Total 1,875 21,760 20,252 49,788 31,899 92,292

In addition, sedentary fisheries and prawn-trawling operations take place in the Papuan Gulf and other parts of southern Papua New Guinea. A substantial fishery for barramundi, producing 200- 400 tlyr, operated for several years until it collapsed in the early 1990s. As can be seen from Table 2, the total value of Papua New Guinea's fisheries exports were over 92 million Kina in 1997.

There are two fish canneries in PNG. One cannery is based in Lae, and packs imported frozen mackerel, mainly for the domestic market although there is some export of this product. The major fish cannery for Papua New Guinea is in Madang, and primarily packs tuna for export. This cannery is supplied by its own fleet of catcher boats, as well as by purchasing fish from other tuna-fishing vessels.

Foreign commercial fishing

By far the largest fishing enterprises in Papua New Guinea are those conducted by foreign fishing fleets, primarily for tuna, in the EEZ (outside Papua New Guinea's archipelagic waters). Foreign fishing in the EEZ of Papua New Guinea is carried out under a number of bilateral and multi-lateral fisheries agreements. Under bilateral agreements with Taiwan and the Philippines, the countries operate four and six purse seining vessels, respectively, in the EEZ of Papua New Guinea. Support facilities consisting of carriers, mothers hips and lightboats also operate within the EEZ. Similarly, under multi-lateral agreements with the United States and the Federated States of Micronesia 35 and 6 purse seiners, respectively, operate in the EEZ of Papua New Guinea. In 1997, the value of the foreign catch within the EEZ of Papua New Guinea was approximately US$380 million.

Domestic commercial fishing

After many years of foreign commercial fishing, Papua New Guinea is attempting to promote more direct participation in the tuna fishery by local companies and individuals. In line with this policy, the Government ceased issuing foreign longlining licences in mid-1995 in an attempt to promote development of a domestic tuna long line industry. Subsequently, after a number of longliners began operating under local charter arrangements, this too was regulated against so that the fishery was closed to all but bona fide domestic entrants. At present, 27 domestic longline vessels are licenced to

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operate in the EEZ of Papua New Guinea. These operations are primarily for "yellowfin" and "big eye" tuna. The prime-quality part of the catch is exported in fresh chilled form to Japan by air while lower- quality fish may be canned, air freighted to Australia or sold on the domestic market.

A locally-based purse-seine fishery has also begun to develop and at present eleven vessels are licenced to operate within the EEZ of Papua New Guinea. A large amount of the domestic purse seining activity is conducted around "Fish Aggregation Devices" or FAD's which have been placed by the Government of Papua New Guinea. Despite its gradual start, the domestic tuna fishery appears to have the potential to grow substantially as can be seen from the growth in tuna exports from 1995- 1997 (Table 2).

Research and policy considerations

The above overview of Papua New Guineas Marine Fisheries demonstrates the fisheries are (a) biologically diverse, (b) wide-spread throughout many marine environments and (c) are comprised of a wide range of fishing operations from local subsistence fishing to large-scale purse seining. Given the potential impacts of offshore mineral resource development outlined previously, it is believed that the following research and policy issues will need to be addressed in the formulation of a comprehensive marine mineral resource development policy which is sensitive to fisheries development.

1. Diversity of fishery resources: The diversity of fisheries and their associated ecosystems within the EEZ of Papua New Guinea necessitates that a comprehensive program be initiated to protect biodiversity and to ensure the preservation of marine fishery habitats both near shore and in the deep ocean; 2. Zoning of the sea areas: Because of the above mentioned need to protect the biodiversity within the fisheries, the scope of fisheries-related activities throughout the EEZ and the requirements of individual treaties and agreements, it will be necessary to consider a zoning of sea areas for specific uses; and, 3. Impact assessment and compensation: Appropriate programs will need to be developed for the assessment of and compensation for impacts of marine mineral resource development activities on traditional and commercial fishery activities.

Maximum Sustainable Yield of Papua New Guinea's Commercial Fishing

The extent to which the domestic and foreign fishing activities can increase and/or be maintained within the EEZ of Papua New Guinea is dependent on being able to maintain a stable stock within the individual fisheries. Therefore, a major concern of the Government of Papua New Guinea, as it is for the majority of the island nations in the Pacific, is to prevent overfishing of the region's resources in order to have sustainable development of its fishery resources. As a result, the Government of Papua New Guinea has estimated the "Maximum Sustainable yields" for the most important of its domestic commercial fisheries (Table 4).

Table 4. Potentia! Yields for Domestic Commercial Fisheries

Species Est. Maximum Sustainable Yields % of Total Tuna 300,000 mVyr 49% Coastal PelaQic 130,000 mVyr 21% Finfish 151,000 mVyr 24 Prawns and Lobsters 2,000 mVyr <2% Estuarine Fishes 20,000 mVyr 3% Others <10,000 mVyr <1 %

Research and policy considerations

As it is anticipated that marine mineral resource development projects in the EEZ may be of long duration (a decade or longer), there is a legitimate concern as to the possible long term effects of such

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activities on the sustainability of various fisheries. As a result, there is a need for government and industry to address the following issues:

1. Value of renewable fisheries resources: The marine fisheries of Papua New Guinea have a high economic and social value to the people of Papua New Guinea as well as to the region as a whole. Therefore, it is imperative that the sustainable yield of Papua New Guinea's fisheries be preserved through a comprehensive program of monitoring fisheries stocks and 2. Environmental Impacts: A primary focus of government and industry should be the development of a continuing program of monitoring and study to ensure that there are no adverse environmental effects from offshore mineral development which would negatively impact on the various fisheries.

Administration of Papua New Guinea's Fishery Resources

Fisheries governance

The main fisheries law in Papua New Guinea is the Fisheries Act of 1994 ("Fisheries Act 1994'} which amalgamated and superseded the earlier Fisheries Act of 1974 and the Continental Shelf (Living Natural Resources) Act of 1984. The Act governs most fisheries in the country except those in the Torres Strait, an area jointly managed by Australia and PNG, which are administered separately under the Fisheries (Torres Strait Protected Zone) Act of 1983.

Apart from the Fisheries Act 1994 there are at least 28 other legislative instruments currently in force and relevant to the fisheries sector. Most important of these is the Organic Law on Provincial and Local-level Governments of July 1995 ("Organic Law'?, which gives provincial governments the responsibility for fisheries and other development activities and the provision of basic services. The Organic Law requires that national bodies devolve as many of their functions as possible to the Provincial authorities, or carry them out at Provincial level.

The Fisheries Act provides for the establishment of the National Fisheries Authority (NFA) to replace the former Department of Fisheries and Marine Resources (DFMR). The NFA, which has a more commercial orientation than its predecessor, began operating in 1995 as a non-commercial statutory authority, but is expected to undergo further transformation to a fully commercial statutory authority in the future. The primary goals of the National Fisheries Authority are:

1. To manage Papua New Guinea's fisheries resources in a manner that ensures their long- term sustainability; 2. To promote the growth and development of the fisheries sector; 3. To maximize the participation of Papua New Guineans in the fisheries sector; and, 4. To administer its resources in an efficient and responsive manner.

The NFA's activities are under the overall control of the nine-member National Fisheries Board, also established by the Fisheries Act 1994. The NFA acts as Secretariat for the Board, which meets quarterly in order to review NFA's proposed activities prior to their being implemented, as well as to consider other issues related to fisheries.

The other main body involved in PNG fisheries is the Fishing Industry Association (FIA), which was formed in January 1991 to provide a formal channel through which fishing-related businesses could voice their ideas, opinions and concerns relating to the development of the sector. The Association now groups together some 53 fishing companies. It has been quite outspoken since its formation and has become both respected and influential in the development of fisheries policy in PNG. The Association has successfully lobbied Government for the removal of a range of taxes and levies and the granting of other concessions to the industry. A representative of the FIA sits on the National Fisheries Board, as well as on the Governing Council of the National Fisheries College. It seems likely that now the FIA is well established, it will continue to provide a voice for the interests of the fishing industry.

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Research and policy considerations

As noted previously, the issues surrounding offshore mineral resource development and Papua New Guinea's fisheries are new and not well understood. This presents a special challenge to the Government of Papua New Guinea in that, although a new Fisheries Management law is being developed, it (as is the case of the existing law) does not address the various issues which will arise with respect to the impact of offshore mineral development on fisheries activities.

As a result, there is a need for a policy and legislative review of existing (and proposed) fisheries related legislation and agreements (bilateral, multi-lateral) to ascertain what existing issues may exist that require resolution/coordination with the mineral sector legislation and policy (freedom of access, jurisdiction, revenue sharing, compensation).

Future Development of Papua New Guinea Fisheries

There is scope for expansion of both offshore and coastal fisheries in PNG, as well as for the development of local markets through improved distribution, better use of by-catch (especially from tuna fishing) and value-added processing. It may also be possible to develop more 'exotic' resources, such as aquarium fish, specimen shells and game fishing. Overall, however, the Government of Papua New Guinea has placed a priority on the future development of the tuna fisheries of its EEl and specifically through domestication of the industry. To this end, the Government is presently considering the implementation of a new Fisheries Management Act (expected to be passed in late 1998). Central to the act would be the implementation of a Tuna Fisheries Plan (TFC) which, in general, would provide for the following:

1. Longline Tuna Fisheries -Under the TFC the PNG Government would provide (a) 80 licences for Papua New Guinea registered and flagged "fresh chill vessels, (b) 10 licences for locally based foreign vessels, (c) ten licences for freezer vessels in support of the above licences and (d) would limit the total annual catch to 10,000 mt for all longline vessels, and 2. Purse Seining Fisheries -Under the TFC, the PNG Government would provide (a) 30 licences for Papua New Guinea registered and flagged vessels and limit the total annual catch from these vessels to 132,000 mt., (2) 40 licences (in total) for the Federated States of Micronesia and the U.S. Treaty countries and limit the total annual catch to 40,000 mt. and (c) issue 30 licences to countries with bilateral treaties with Papua New Guinea and limit the total annual catch to 128,000 mt..

The above licences and total annual catches are in accordance with the estimated maximum sustainable yields for tuna that have been determined by the government (Table 4).

The constraints to coastal fishery development mainly relate to the absence of a fish handling, distribution and marketing infrastructure. Costly and protracted experience has shown that the value and volume of production from coastal fisheries is insufficient to cover the high cost of establishing and running such an infrastructure. Future commercialization of coastal fisheries will depend largely on the development of facilities such as longline bases or fish canneries to service the needs of the industrial tuna fishery, whose production levels can justify the high cost of such plants.

Research and policy considerations

The overall planning for the expansion of the domestic fishing industry, and limiting of foreign fishing, particularly for the tuna fishery, which is critical both to the Papua New Guinea and throughout the Pacific, necessitates that special consideration be given to ensuring the sustainability of these resources. Similarly, there is a growing concern over the development and sustainability of the above mentioned coastal and inland fisheries. To facilitate such developments it is important that government and industry consider joint development activities: The government and industry (fisheries and minerals) should consider the possibility of joint development of industrial support facilities that could service both industries and allow for additional development (mineral processing, fish canning).

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International issues

The National Fisheries Authority maintains direct contact on technical issues with regional and international organizations dealing in fisheries. Policy and other matters are managed in the first instance through designated contact points, most often the Department of Foreign Affairs. Papua New Guinea is a member of the South Pacific Commission (SPC), the South Pacific Forum Fisheries Agency (FFA) and the South Pacific Regional Environmental Programme (SPREP). Papua New Guinea is party to a number of treaties and agreements relating to the management of regional fisheries, including:

.Treaty on Fisheries Between the Governments of Certain Pacific Island States and the Government of the United States of America

.Convention for the Prohibition of Fishing with Long Driftnets in the South Pacific

.Niue Treaty on Cooperation in Fisheries Surveillance and Law Enforcement in the South Pacific Region .Nauru Agreement Concerning Cooperation in the Management of Fisheries of Common Concern .Palau Arrangement for the Management of the Western Pacific Purse Seine Fishery

.FSM Arrangement for Regional Fisheries Access

Papua New Guinea is also a signatory to the United Nations Convention on the Law of the Sea (UNCLOS) and the Agreement for the Implementation of the Provisions of the United Nations Convention of the Law of the Sea of 10 December 1982 Relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks. Papua New Guinea is also party to the Washington Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

Research and policy considerations

As a signatory to numerous regional and international agreements, many of which are specific to the fisheries and EEZ of Papua new Guinea, there is a need to ensure that national policy and legislation facilitates the joint development needs of offshore mineral resources and fisheries and are in compliance with regional and international agreements. Therefore, there is a need to address to conduct a policy and legislative review of existing (and proposed) fisheries and minerals related legislation, agreements (bilateral, multi-lateral) and relevant contracts to ascertain what issues exist that may require resolution/coordination with regional and international bodies.

Summary and Conclusions

The existing fisheries industries of Papua New Guinea and the proposed new development of offshore mineral resources have in common the goal of fostering sustainable development for the benefit of the peoples of Papua New Guinea. They also have in common the need to occupy and utilize the same area, the EEZ of Papua New Guinea, in order to carry out their activities. However, the fisheries industry of Papua New Guinea is well established, both at a subsistence and commercial level; whereas, the development of offshore mineral resources is only now beginning to be actively considered by the industry and the government of Papua New Guinea.

The possible development of marine mineral resources within the EEZ of Papua New Guinea raises a number of issues directly and/or indirectly related to present and future marine fisheries activities. These issues can be generally classified in terms of anticipated impacts and needed actions with respect to research and policy in order to mitigate the impacts on fisheries and ensure the responsible and sustainable development of both marine fisheries and offshore mineral resources.

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Potential impacts

As there are presently no specific marine mineral resource developments in the EEZ of Papua New Guinea, it is impossible to point to specific problems that need to be addressed. However, there are a number of issues associated with mining activities in general that will need to be considered because of their possible impact on the nation's fisheries. Among the most significant are the following:

1 .Sea floor disruption; 2. Waste disposal; 3. Restrictions on access; 4. Fishery impacts; and, 5. Economic, social, cultural and environmental impacts.

Policy considerations

Based on the above anticipated impacts from marine mineral resource development there are a number of issues which will need to be addressed, from the perspective of marine fisheries, in the formulation of a comprehensive marine mineral resource development policy. Among the most critical are the following:

1. Diversity of fishery resources; 2. Zoning of the sea areas; 3. Value of renewable fisheries resources; 4. Impact assessment and compensation; and, 5. Policy and legislative review.

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CHAPTER FOUR: MARINE ENVIRONMENTAL ISSUES

Environmental Impact Assessment for Deepsea Mining

Based upon a presentation by Charles L. Morgan Honolulu, Hawaii, USA

Introduction

Currently, a number of commercial interests are developing new programs of exploration in the Southwest Pacific region and other areas worldwide for seabed mineral deposits of copper, zinc, lead, gold, and other metals. These deposits are found at and near active sites of hydrothermal venting, where hot-water mineral springs flow from the earth and deposit their mineral contents to form seafloor metal accumulations with economic potential. Of primary concern for commercial development of these deposits are the assessment and minimization of the potential environmental impacts which may accompany such development. Presented here is a brief discussion of the key factors related to such impact assessment, a description of the unique hydrothermal vent ecosystems which are expected to be the objects of the most serious concerns, and a strategy for addressing these and other concerns in an effective and efficient manner.

Key Factors

Three key factors must be addressed in any environmental assessment program; in many ways these dictate the strategy for implementation of such a program. Each is discussed below.

Multiple jurisdictions, few rules

Many of the primary exploration targets for massive sulfide mining are located in the territorial waters or exclusive economic zones (EEl's) of small island nations with few or no established procedures for offshore mineral development. Others are located in areas subject only to international law. Even the prospects located in the jurisdictions of countries with well-developed regulatory frameworks present unique problems because of their offshore locations and because their development would not be covered by existing rules. Each site will present different problems and call for the interfacing with different authorities and individuals.

Undefined technologies & ecosystems

The history of environmental controversy is full of critical decisions based on inadequate information. Deep seabed mining will consist of unprecedented commercial-scale mineral recovery operations in seabed areas populated by biological communities which were completely unknown to science before 1979 and which remain only very poorly characterized to date.

Since before 1969, when the U.S. enacted the National Environmental Policy Act (NEPA), the people and institutions of the United States have been profoundly affected in many ways by the recognition of natural environments as resources worth defending. Through taxes, restrictive laws and regulations, and individual sacrifices, much progress has been made in the attempt to preserve and enhance the air, water, land and living resources that are essential to our survival. In addition to the bureaucratic chaos and quasi-religious rhetoric that unfortunately abound in the general field of environmental protection, some genuinely useful ideas have also evolved. Some of these ideas were assembled in 1979 by the Council on Environmental Quality (CEQ) into a set of Guidelines, codified in Title 40 of the U.S. Code of Federal Regulations, which provide basic guidance for environmental impact assessment. These are particularly relevant to the regulation of new industries in poorly defined environments.

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As we contemplate the development of deep seabed mining operations, it is appropriate to review this good advice by the CEO and thereby hopefully avoid some portion of the long and tortuous path we have already traveled toward adequate environmental protection. The original purpose of these Guidelines was to implement the NEPA by telling "...federal agencies what they must do to comply with the procedures and achieve the goals of the Act". The ultimate objectives are to produce NEPA documents that "...concentrate on the issues that are truly significant to the action in questions, rather than amassing needless detail" and generally "...not to generate paperwork-even excellent paperwork-but to foster excellent action". After declaring these laudable goals, the Guidelines proceed to describe when the NEPA process should be structured and how the CEO, federal agencies, and the public are to interact in the process.

Drafters of proposed regulations and legislation for deep seabed mining activities would be wise to review in detail these Guidelines before attempting to impose new and arbitrary procedures for environmental compliance. Two concepts from the Guidelines are particularly relevant: "scoping" and "tiering". These are central to the objectives and many of the procedures described in the Guidelines, and particularly relevant to environmental analysis of new activities in frontier areas.

Scoping is defined in the Guidelines as follows: "[t]here shall be an early and open process for determining the scope of issues to be addressed and for identifying the significant issues related to a proposed action. This process shall be termed scoping". Scoping begins when the subject of an environmental analysis, the proposed action, is sufficiently defined to permit its reasoned evaluation by all interested parties. It consists of public hearings, private interviews, and literature surveys. It culminates in a scoping report that describes the concerns raised in the process and the means chosen to address these concerns. It continues throughout the duration of the environmental analysis. It serves as the principal device for establishing the relative priorities of analysis tasks in the environmental assessment. Scoping compels the environmental assessment to include the following rules:

1. A definition of the proposed action which is detailed enough to permit meaningful environmental impact analysis and 2. An iterative and open project review procedure that can identify and set priorities for the issues considered in the analysis.

Tiering is defined as "...the coverage of general matters in broader environmental impact statements with subsequent richer statements or environmental analyses...incorporating by reference the general discussion and concentrating solely on the issues specific to the statement subsequently prepared". Tiering allows preparers of EIS's to "...focus on the issues which are ripe for decision and exclude from consideration issues already decided or not yet ripe". Tiering involves the application of jurisdictional and time-phasing considerations in the selection of issues to be analyzed. It implies the following additional rules for efficient and timely impact analysis:

3. Phasing of the resolution of environmental issues to be compatible with the schedule of activities contemplated in the proposed action. 4. Whenever possible, separate environmental issues from governance issues and general issues from specific issues and deal with each as appropriate.

One may not agree that these four rules of environmental impact assessment are direct corollaries of the CEO definitions of scoping and tiering. However, they are certainly consistent with the definitions and with the overall content of the Guidelines. Moreover, their responsible implementation can do much to serve both the objectives of industrial development and environmental protection. In practical environmental analysis the author has found three mechanisms to be very useful in the application of these rules, and they are recommended as basic precepts for a deep seabed mining environmental program. They are summarized as follows:

Bootstrapping. When activities cannot be adequately defined, phase their regulation to cover the front-end, well-defined portion of the activity. Through monitoring and disclosure requirements, structure each phase of regulation to include definition of the next phase.

Consolidated Procedures. When the activities are well-defined, organize the permitting procedures as much as possible into a single process with specified time limits for each step. However, do not attempt to over-structure activities which are not well-defined.

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Representative Committees. Whenever possible, channel the identification and resolution of environmental issues through an independent group composed of representatives of all interested parties rather than through hired staff. This permits identification of the key issues in time for their resolution and also provides an objective guidance of the assessment process.

Strong public concern, difficult stereotypes

In 1969, oil from Union Oil's offshore wells fouled beaches in Southern California and aroused public anger against pollution. This, termed the "Santa Barbara Oil Spill" was one of the key events that precipitated the passage of NEPA and has been a rallying cry for environmental lobbies ever since. The sentiment is well expressed by the introduction provided by the Oceanic Resource Foundation in their web site (URL: http://www.orf.orq):

'Without question, the survival of the oceans and the biodiversity that sustains the marine ecosystems are at risk. We are the cause; there are too many people who consume too much, who have limited knowledge of the fragile marine biosphere and we do not recognize the value of the earth's natural resources. We are the solution; we must reduce our consumption, we must increase our knowledge of the complex marine ecosystems, and we must re-evaluate the earth's biological resources."

Deep seabed mining will undoubtedly flame the fires of opposition from this and other environmental groups a priori. To many, the oceans are characterized by their fragility, as epitomized by coral reefs and other coastal ecosystems that have clearly suffered from human settlement and developments on the shoreline. In fact, of course, the oceans represent the Earth's ultimate dump site, which consume volcanic exhalations, mountains, and other natural inputs with very little effect, along with the relatively pitiful amounts of toxic wastes and surface run-off caused by human activities.

This existing perception of the "fragile marine biosphere" must be very carefully handled by deep seabed miners to avoid unnecessary opposition and political headaches. The hydrothermal vent communities which form around active vents have been a particular focus for popular sentiment, thanks in part to the high visibility of Robert Ballard's JASON program, but certainly also for the relatively recent discovery of these communities and their radical differences from other ecologies known to man (discussed in the next section). Deep seabed miners must take a strong, pro-active stand with regard to environmental issues; they must be prepared to document carefully the existing environmental conditions at potential mine sites and to monitor exhaustively the mining activities that take place. Only through an open process of monitoring, research, and public education will it be possible to avoid strong negative lobbying from environmental groups.

General Implications

In summary, deep seabed miners are faced with a variety of potential environmental regimes in their development efforts, many of which are not yet in place. Miners face particular challenges related to environmental impact issues because of: (1) the relatively undefined nature of the deposits to be mined and the systems to mine them; (2) the popular mystique of anything related to the oceans and the political forces which thrive on them; and (3) the genuine issues associated with hydrothermal vent communities. The next section outlines the important aspects of the hydrothermal vent communities of concern.

Hydrothermal Vent Communities

Discovered in 1979 by Robert Ballard on the East Pacific Rise, deep seabed hydrothermal vent communities have been a very active topic for research ever since. These ecologies apparently derive their sustenance primarily from the oxidation of the reduced sulfur species that are produced during the venting along with the sulfide minerals of interest for commercial recovery. They are populated by high densities of organisms that are found nowhere else. These hydrothermal ecosystems are of great interest to scientists, but they are also of great interest to the modern biotechnology industry because of the economic potential of enzymes and biochemical processes that occur in these extreme

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environments. The following passages outline the key factors of these ecologies which will be important to environmental impact assessment.

The base of the food web for hydrothermal vent communities is populated by a group of bacteria, named A rchaea , which are genetically quite distinct from any other life on Earth. Scientists now believe that Archaea may have preceded all other life forms on the planet. Hydrothermal vents are found at certain locations between the tectonic plates that make up the earth surface. Lava is known to erupt at these places, and seawater enters the newly formed channels, becomes heated and is chemically changed. The heated seawater is ejected through hydrothermal vents, and contains hydrogen sulfide. This hydrogen sulfide is the basis of the hydrothermal vent community, providing essential nutrients for chemosynthetic bacteria that use the hydrogen sulfide as a source of energy. These bacteria do not need sunlight to produce energy, which is how they are able to live and grow in the ocean depths. The bacteria themselves are a food source for a variety of creatures, mainly giant clams, mussels, polychaete worms and other invertebrates. These creatures are often quite abundant. They don't exist right next to the vent due to the high temperature there, instead existing on the fringes where the water is cooler. Other creatures living near these vents include crabs, octopuses, limpets and sponges.

Environmental issues related to the uniqueness of these communities, their robustness and stability will undoubtedly have to be addressed at some level by deep seabed miners in efforts to assess environmental impacts. To date, the most in depth research into these questions has been done on the Juan de Fuca Ridge off Oregon, Washington, and Canada. One of the research programs active in this area is the VENTS program, which is managed by the U.S. National Oceanic and Atmospheric Administration from its facilities in Newport, Oregon and which includes many researchers from around the world.

The VENTS Program, established in 1984, conducts research on the oceanic impacts and consequences of submarine volcanoes and hydrothermal venting. The program focuses on understanding the chemical and thermal effects of venting along the northeast Pacific Ocean seafloor spreading centers, which provides the foundation for predicting the global-scale impact of seafloor hydrothermal systems on the ocean. VENTS research in recent years has concentrated on the following objectives (abstracted from their web site, URL: http://www.pmel.noaa.qov/):

1. determining patterns and pathways for the regional transport of hydrothermal emissions, as well as source strengths of the emissions, and their relationships to the geology and tectonics of spreading centres and 2. further developing capabilities for monitoring hydrothermal activity at a wide range of temporal and spatial scales.

To date the program has shown clearly that ridge-axis volcanic eruptions are common and that their effects can be studied in a systematic way. At least on the Juan de Fuca Ridge, it is clear that volcanic eruptions are accompanied by singular or multiple releases of event plumes that vary in size by over an order of magnitude. The chronic venting following an eruption may last for years or for months. The connections between eruption size, event plume size, and chronic plume intensity and duration are uncertain and a continuing focus of VENTS research.

Another major research program in this area is the RIDGE (Ridge Inter-Disciplinary Global Experiment) Program (URL: http://ridge.unh.edu/). It is a major National Science Foundation (NSF) initiative that was established "to understand the geophysical, geochemical, and geo-biological causes and consequences of the energy transfer within the global rift system through time". This program has been working on seabed geological spreading centres worldwide for almost a decade. It has been collaborating closely with the VENTS program to look at the hydrothermal systems on the Juan de Fuca Ridge.

Another component of the RIDGE program is particularly relevant here. This is the Larvae At Ridge Vents (LARVAE) Project (URL: http://ridge.unh.edu/larve/larve.html). It is an interdisciplinary program aimed at understanding the geology, physics, chemistry and biology of processes occurring along the global mid-ocean ridge system. The goal of the LARVAE Project is to investigate larval dispersal and gene flow in vent environments and to evaluate the potential role of these processes in generating and maintaining biogeographic patterns along mid-ocean ridges and across ocean basins. These experiments are coordinated within RIDGE to foster interdisciplinary studies of reproduction, larval

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ecology and physiology, physical transport processes, recruitment and population genetics in deep-sea hydrothermal vent habitats. The LARVAE project is focused at the East Pacific Rise 100 N site that has received intensive attention by researchers for many years. Active studies addressing these topics are currently underway at Rutgers University, the University of Southern California, Woods Hole Oceanographic Institution, Harbor Branch Oceanographic Institute, the University of Delaware, the University of North Carolina, and Pennsylvania State University. Particular organisms that are being examined in detail include those listed in the following:

Riftia pachyptila (vestimentiferan tube worm)

eogastropod)

producing turri

These biological communities respond apparently quite rapidly to changes in the venting rates and are effectively destroyed when venting ceases for some period of time. The model for these communities, emerging from the VENTS, RIDGE, LARVAE, and other programs, is based on populations of these chemosynthetic bacteria that permeate the seabed to significant depths near the active spreading centers. Spores and vegetative bacteria are entrained in the venting fluids and distributed to some distance away from the active vent sites. It is likely that these bacterial colonies are widely dispersed from active vent sites and are then available to provide the basis for future colonies at new vent sites. Because of these active programs in place, we can expect in the next few years to learn a great deal about the dispersal mechanisms, life spans, sensitivity to changing conditions, ranges and other parameters crucial for the survival of these organisms.

Outline for Impact Assessment Efforts

Based on the considerations provided in the preceding sections, the following approach may be " appropriate. All steps would be included for each jurisdiction, but the levels of effort would vary I significantly in response to the specific needs and priorities of the host nation. Overall, schedules would be driven completely by the exploration and development schedules. The effort should be initiated concurrently with the permit acquisition process. Discussion of environmental issues should be included during the initial contacts between commercial interests and host countries to demonstrate the unanimous commitment to environmental protection.

Scoping and tiering

As discussed above, this is probably the most important part of an assessment program. The key items that must be accomplished in this component are:

1. Identify and analyze the legal and regulatory regimes which will control the exploration, mining, and other activities, including the lines of authority, participating organizations, and pertinent rules (if any); 2. Identify and examine the chains of authority to elucidate, if possible, any potential conflicts of interest among agencies with regulatory responsibilities; 3. Complete a development scenario which describes, in as much detail as practical at the time, the planned activities of exploration, mining, transportation, processing, and waste management; 4. Establish an advisory board for each assessment program, to include representatives of industry and the organizations with authority, technical experts (e.g., scientists from the VENTS, LARVAE or RIDGE programs, local fisheries biologists), and representatives of potentially interested parties (e.g., from tourist bureaus, fisheries organizations, environmental groups);

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5. Hold public hearings and information exchange meetings within the appropriate jurisdictions to present the development scenario and to provide an open forum for the expression and documentation of environmental issues; and, 6. Complete a scoping report which: (a) identifies the primary issues that will require assessment and those that do not; and (b) provides a specific plan for the assessment effort.

Environmental programs include tasks in the following categories.

Compliance tasks

These are the assessment tasks that are specifically required by the appropriate regulatory regime. They include such things as the acquisition of permits for land-based activities, vessel inspection certificates, and completion of environmental assessment reports, if required. In a jurisdiction with well- developed environmental regulations, these tasks form the bulk and heart of the assessment effort. In jurisdictions with few and unstable regulatory regimes, they will constitute a variable part of the job. It is important to distinguish such tasks from the primarily technical task of environmental assessment and from the primarily public relations task of public education, described below.

Assessment tasks

These tasks include the formal assessment work that must be done to address the environmental issues raised by advisory committees and at public hearings. The result is an environmental assessment report or statement that covers the following topics:

.A description of the laws, regulations. or formal agreements under which mining activities will be carried out

.A detailed summary or complete presentation of the development scenario .A description of the potentially affected environment, focusing particularly on those resources which have been raised as issues of concern in the scoping process

.An analysis of environmental effects and necessary plans for mitigation, if necessary .Documentation of the process by which issues were identified for analysis

Research and data gathering activities

It may be advisable to sponsor limited research and/or data gathering activities in the exploration areas to address critical issues of concern. However, such work should be undertaken only after it is deemed necessary during the scoping process and after its objectives and methods are clearly defined. When possible, research and data gathering activities should be carried out in conjunction with exploration field activities. Collection of baseline data and execution of field experiments can often be tied very efficiently to exploration activities with minimal interference and relatively little expense.

Public education tasks

It may also be advisable to sponsor efforts to distribute research or assessment results in public forums and using attractive presentation methods. Such tasks should also be identified specifically in the scoping analysis as particularly controversial or subject to widespread misunderstanding. In such work it is very important not to replace substance with format; presentations should be clear, well documented and supported by independent experts. Public workshops can provide visibility and credibility to the program efforts and can enlist the help of acknowledged world experts to assist in the design of the program plan.

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CHAPTER FOUR: MARINE ENVIRONMENTAL ISSUES

Review of Japanese Activities on Manganese Nodule Development and Marine Environmental Preservation

Based upon a presentation by Yuji Kajitani Director, Metal Mining Agency of Japan (MMAJ)

Introduction

With the demand for mineral resources growing worldwide, manganese nodules, cobalt-rich crusts, seafloor hydrothermal deposits and other deep-sea mineral resources are becoming increasingly important as one of humankind's last untouched resources. In particular, manganese nodules are important because they contain nickel, copper, cobalt and other important non-ferrous metals, and because they have been the subject of particularly active exploration and technological development relating to mining and processing techniques.

At the same time, increased global interest in environmental preservation has led to calls for active efforts to prevent the environmental destruction associated with deep-sea mineral resource development. In fact, the Legal and Technical Commission of the International Seabed Authority, established under the United Nations Convention on the Law of the Sea (UNCLOS), has decided to draft its own environmental guidelines. In response, pioneer investor nations having manganese nodule mining claims are rushing to carry out marine environmental impact studies.

In Japan, the Metal Mining Agency of Japan (MMAJ) has been entrusted by the Ministry of International Trade and Industry to undertake investigations on the effect of manganese nodule mining in the marine environment. The project, titled "Environmental Impact Research for Manganese Nodule Mining", is an eight-year study that began in 1989.

This paper will discuss Japan's past and current activities of manganese nodule development and marine environmental preservation.

Exploration

Manganese nodules are spherical or egg-shaped globules of metallic oxides measuring from 2 to 15 centimetres (cm) in diameter, and are spread on flat seabed surfaces at depths of 4,000 to 6,000 metres (m). They contain mainly iron and manganese oxides, but also contain nickel, copper and cobalt, amongst others. The more promising reserves exist in the Clarion-Clipperton fracture zone (known as the C-C zone), a section of deep seabed located in the equatorial part of the northeast Pacific Ocean between the Hawaiian Islands and the North American Continent, and in the Indian Ocean. Manganese nodules were first discovered in the nineteenth century by the English marine research vessel H.M.S. Challenger, but it was not until the early 1950s that interest in the nodules' economic value began to heighten.

Cobalt and nickel, the rare metals found in manganese nodules, are essential for the production of many high-tech materials on which Japanese industry depends. Although the demand for these rare metals is expected to grow, Japan currently depends on imports for almost its entire supply. This, along with the fact that cobalt and nickel production is limited to a small number of countries, places Japan in an extremely weak position with respect to its supply structure.

From the viewpoint of ensuring a stable supply of these mineral resources, it is a national task to promote the exploration and exploitation of manganese nodules. In 1975, MMAJ, entrusted by the Ministry of International Trade and Industry, began manganese nodule exploration in international waters south-east of Hawaii in the Pacific Ocean and also started construction of the Hakurei-Maru No.2, a research vessel designed to explore for deep seabed mineral resources. Full-scale exploration began in 1980.

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"The Tentative Measures Act for Deep Seabed Mining" aimed at laying the domestic foundations for deep seabed mining, was enacted in July 1982. Two months later, in September, the Deep Ocean Resources Development Co., Ltd. (DORD) was founded to take a leadership position in Japan's exploration and development of manganese nodules.

As a result of the joint prospecting efforts of the government and the private sector, Japan registered 75,000 km2 of mining claims for manganese nodules off the south-east of Hawaii (Figure 1) in December 1987 under the United Nations Convention on the Law of the Sea. Japan thereby acquired exclusive rights to explore those areas for manganese nodules.

Meanwhile, as part of several cooperative mineral resources development projects, basic research has been underway supported as ODA projects in developing countries. In addition, the Metal Mining Agency of Japan has been carrying out basic exploration activities for deep-sea seafloor mineral resources at the request of the South Pacific Applied Geoscience Committee (SO PAC) in the exclusive economic zones of its member countries. These research operations, which began in 1985, have yielded a host of results and large amounts of useful data about deep-see mineral resources such as hydrothermal deposits. These operations are still in progress and the third, five-year research program began in 1995.

Research and Development of Mining Technology

Research and development of manganese nodule mining technology was begun first by an U.S.- led consortia with experimental mining being undertaken in the 1970s. In Japan, the research and development of manganese nodule mining technology has been carried out since 1981, with over US$100 million being expended over the 17 years to 1997. The technology for manganese nodule mining systems has almost been established. However, there are still a number of obstacles, such as additional scale-up research and development, before mining of nodules can be deemed economically feasible.

The manganese nodule mining system that Japan has established using original technology is a fluid dredging process in which deep seabed manganese nodules are mined by towing a collector and then raised to the towing vessel using either a pump lift or an air lift. This technology ranks alongside America's as the world's most advanced.

Research and Development of Processing Technology

Efforts by the MMAJ to research and develop the technology for processing manganese nodules began in 1989 and culminated seven years later in 1995, with a processing method considered ideal: a smelting and chlorine leaching process. Although this processing is technically possible, there are still a number of obstacles to overcome before the smelting of mined nodules is economically feasible. In particular, we need to reduce energy costs and develop a lower-cost processing technology.

Marine Environmental Preservation

Environmental impacts associated with manganese nodules mining

A number of environmental impacts may result from mining manganese nodules. When the manganese nodule collector is dragged or travels across the seabed, it consolidates the seabed surface, creating grooves and ridges. When this occurs, it is possible that benthos and their habitat may be crushed or buried.

To avoid collecting sediment with the manganese nodules, the collector separates fine particles and discharges them in a plume together with seawater from the rear of the collector. These plumes may also have an effect on both bottom and surface waters.

As the plumes of sediment are carried by bottom currents at very slow speeds, the particles blanket the seabed as resedimentation occurs. This blanketing effect may impact on the benthos.

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Manganese nodules, mixed with a large quantity of seawater in a slurry, are brought up from the seabed at a depth of approximately 5,000 m via lifting pipes (fluid dredging system) to the mining vessel. The slurry is then subjected to sorting and separation onboard. During this process, sediment other than manganese nodules are mixed with seawater (bottom water) and then discharged back into the sea at surface level.

Bottom water has a lower temperature than surface waters and is rich in nutrient salts. As such, it is considered capable of bringing about a variety of different environmental impacts together with discharged sludge particles. One possible negative impact is the reduction of primary production by reducing phytoplankton biomass from increasing turbidity that decreases sunlight penetration. On the other hand, the addition of nutrients to surface waters may increase plankton biomass.

Initiatives for Manganese Nodule Mining Environmental Impact Studies Across the World

Since the early 1960s, the economic value of manganese nodules started attracting attention, particularly in the United States. In the following years, attempts at exploration and development were undertaken for seafloor hydrothermal deposits and cobalt-rich crust deposits. At the time, however, much importance was placed on resource development, while almost no consideration was given to protecting the deep-sea environment.

The United States government, responding to the National Science Academy, was the first to tackle environmental impact problems associated with exploitation of deep-sea mineral resources. Around 1970. the National Oceanic and Atmospheric Administration (NOAA) started the Deep Ocean Environmental Study (DOMES) that has involved many universities and research institutes within the United States, including research institutes under the direct control of NOAA. With the support of an international consortium, NOAA selected three representative locations (sites A, B and C) in the west, centre and east of the area of the Equatorial North Pacific Ocean rich in manganese nodules (CCFZ). It then subjected these sites to research (Fig. 1). These areas were explored by the consortium itself, and although the seabed conditions were undisclosed as trade secrets, NOAA obtained the right to use this data for research under a confidentiality agreement. The DOMES program through its first and second phases extended over almost 10 years, during which time it researched the possible environmental impacts from the fluid dredge mining system. Speculated impacts included turbulence caused by the collector on the seabed and the impact caused by discharge of mined bottom water on the surface (increase or decrease of biological productivity caused by diffusion of sediment particles and nutrient rich low-temperature water). Naturally this was not the ultimate objective, which instead was to obtain data to formulate a mining code for commercial mining, and to forecast the impact on ecosystems which may occur.

NOAA promoted research in research laboratories, and when the U.S.-led consortium undertook test mining in the late 1970s, it dispatched a research vessel to the area, and its research staff on board monitored environmental impacts. The result of this research has been disclosed as a huge quantity of data, and although the impacts near the surface have been almost completely clarified, analysis of the impacts near the seabed cannot be described as adequate.

In order to resolve these remaining issues, the Benthic Impact Experiment (BIE) was planned in the early 1990s in the United States. This experiment used a disturber that was dragged along the sea bed to throw up sediment, thereby excavating while the soil particle groups were pumped upwards. The state of diffusion by bottom currents was measured and the amount of subsequent long-term resedimentation and the behavior of benthos were observed. This method, using a disturber, was also adopted by Japan, an East-European international group (10M: Interoceanmetal), and India in their environmental impact studies (Table 1).

Japan's Environmental Impact Research for Manganese Nodule Mining project commenced in 1989 as a joint project with NOAA of the USA. Japan undertook a series of research projects comprising a baseline survey within Japan's manganese nodule mining area, measuring such parameters as bottom material disturbance, diffusion, and resedimentation using a disturber (Benthic Impact Experiments), and observation and analysis of meiobenthos.

Meanwhile, Germany developed a type of disturber called a plough-harrow, and started research offshore from Peru in the South Pacific Ocean in 1989 that intensively dragged this plough-harrow over a fixed area of seabed and analyzed the results. Since then Germany has continued to monitor,

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over the long-term, the changes in the state of benthos, the state of turbidity and diffusion, resedimentation of particles, and the seafloor state after dragging the plough-harrow, and is currently evaluating the impact on the environment.

Japanese Environmental Impact Research for Manganese Nodule Mining

As noted above, Japan, in conjunction with NOAA, started the Environmental Impact Research for Manganese Nodule Mining project in 1989. Part of this project was the Japan Deep-sea Impact Experiment (JET) carried out again using the Deepsea Sediment Resuspension System (DSSRS) in 1994 in the area of Japan's mining claim. So far, follow-up monitoring has been performed both one and two years after the initial disturbance experiment.

The MMAJ's Manganese Nodule Mining Environmental Impact Study was comprised of three parts: 1) the baseline survey, 2) the mining impact experiment, and 3) the development of an environmental impact estimation model. The survey research was performed at both the surface and bottom layers.

The baseline survey was conducted to clarify the characteristics of the Japanese mining area in the equatorial part of the northeast Pacific Ocean. From the results, most of the area can be regarded as a low latitude sea area. However, to evaluate the potential mining impacts in detail, individual data should be examined carefully due to the complicated water mass structure.

As there were very few comparable data available for meiobenthos, characterization of distribution in the survey area was left to future studies.

The mining impact experiment was undertaken to estimate and evaluate the affect of manganese nodule mining on the environment. At the surface layer, enrichment experiments were conducted to assess the impact of high nutrient salt concentrations from deep water on phytoplankton. Benthic impact experiments were carried out with an artificial sediment disturber to emulate the impact of a mining collector.

The results of the enrichment experiments made it clear that phytoplankton rapidly increased due to the upsurge of deep water. However, the experiments were not sufficiently detailed to demonstrate the influence on other biotic communities from variations in surface water temperature, light and other environmental factors. Thus these effects should be examined in future studies.

The results of the benthic impact experiments (JET) showed that the disturbance of the seabed caused a decrease in the abundance of meiobenthos and that it takes one-to-two years to recover (Fig. 2). However, as this study focused roughly on animal communities, it has not yet clarified whether or not the meiobenthos that now exists is in the same balance as before the disturbance. The image analysis technique of FOG photographs was developed to study the range and thickness of resedimentation. However, this method may not be applicable in heavily resedimented areas.

The simulation models to estimate the environmental impacts were completed for both surface and bottom layers. For the bottom layer model, good results were obtained in the simulation of the BIE site of the USA. For the surface layer, however, since there were few quantitative data which showed changes in the ecosystem when deep sea water was discharged, further experiments on mining impacts are needed to complete the final model.

Conclusions

After having firmly established its position in both name and deed over the past eight years as one of the world's leading nations in marine environmental impact studies, Japan now faces the important issue of how it will contribute to international society in the field of marine environmental preservation. Nations that will be engaging in survey research in this field must be provided with advanced environmental technology and related information along with suitable advice. In addition, Japan's active contribution to the drafting of the International Seabed Authority's environmental guidelines is also extremely important.

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Internationally, the promotion of sustainable, environmentally safe mine development is expected to become a dominant theme in the field of resource exploitation. This also includes exploitation of manganese nodules and other deepsea mineral resources. A key issue will be what types of marine environmental measures must be implemented in order to realize sustainable resource development.

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CHAPTER FOUR: MARINE ENVIRONMENTAL ISSUES

Summary of the Japanese Environmental Study for Manganese Nodules Development

Based upon a presentation given by Hirohiko Tesishima Metal Mining Agency of Japan (MMAJ)

Introduction

In Japan, the Metal Mining Agency of Japan (MMAJ) has been entrusted by the Ministry of International Trade and Industry (MITI) to undertake investigations on the effect of manganese nodule mining in the marine environment. The Project entitled "Environmental Impact Research for Manganese Nodule Mining" is an eight-year study that began in 1989. It has been undertaken in close collaboration with the U.S. National Atmospheric and Oceanic Administration (NOAA) since 1990.

The survey area covered a Japanese mining claim in the equatorial part of the northeast Pacific Ocean (Fig. 1). The project surveys were focused on the surface and bottom water layers. The research included baseline surveys, a mining impact experiment, data analyses, and development of simulation models to estimate environmental impacts. In order to evaluate the impacts of the mining operations, an artificial benthic disturbance was carried out in the survey area in 1994, known as JET: Japan Deep-Sea Impact Experiment. Subsequent monitoring surveys were conducted in 1994, 1995 and 1996 after the disturbance.

The purpose of the research was to establish methods to assess the environmental impacts expected from real mining. Since the research was almost completed by March 1997, this paper reports the results of the "Environmental Impact Research for Manganese Nodule Mining" project and suggests further research areas for the future. Details of the each survey and experiment are described in previous papers.

Methods and Results

Surface survey

For the surface survey, environmental research was undertaken in Japan's future mining area in the equatorial part of the northeast Pacific Ocean. The research was undertaken after equipment for the baseline survey had been developed and basic tests, needed to develop the simulation models that estimate environmental impacts, had been conducted in seas around Japan.

The baseline survey

For the baseline survey of the surface layer, eleven sampling stations were set in the survey area to monitor the distribution of temperature, salinity, plankton and nutrients.

Water temperature and salinity. The vertical distributions of water temperature and salinity were observed in the depth range from 0 to 200 m (Figure 2) using a CTD meter. Thermoclines were recognized in most stations at depths between 50 to 100 m except for measurements taken between latitudes of 130 to 150 North. Thermoclines were particularly obvious at the lower latitude stations. The vertical distribution of salinity differed greatly at every sampling station and no trends of definite change in a latitudinal direction or a vertical direction were recognized. Thermoclines detected in this area are typical of those in low latitude areas.

Plankton. Phytoplankton samples were collected between 0-200 m and zooplankton were collected between 0 to 2300 m to study each constituent community. PROCHLOROPHYTA, CYANOBACTERIA and nanoflagellates dominated the phytoplankton and SARCOMASTIGOPHORA dominated the

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zooplankton. These dominant genera were classified by size down to pico or nano plankton. In general, the abundance of small plankton tends to be greater offshore and at low latitudes rather than along the coast and at high latitudes. It was therefore judged that the plankton results of this survey are characteristic of low latitude sea areas.

Nutrients. The water at depths of between 0 and 200 m was sampled to study the vertical distribution of NO2-N NO3-N, PO4-P, and SiO2-Si (Fig.3). At all sampling stations the nutrients showed a tendency to increase with depth from the thermocline zone around 50 to 150 m to the bottom. This tendency coincides with the general tendency that can be observed mid-ocean at middle and low latitudes. The depth distribution of clines of nutrients was almost the same for each nutrient.

The significant annual changes on the high and low latitude borders of the ocean current indicated the movement of water masses, again typical of a low latitude sea area. The physical parameters also show tendencies peculiar to the type of area as evidenced in the development of thermoclines and the distribution of nutrients. However, at the sampling stations to the north of latitude 11 oN, a complicated region of converging currents was detected. For example, where no thermocline development was observed, this was characteristic of the Temperate Zone and showed accompanying annual deviations in nutrient concentrations.

It is possible to regard the greater part of the survey area as characteristic of a low latitude sea area, but in order to assess mining impacts in the area, it is necessary to focus on more specific data.

Mining impact experiment (Nutrients Enrichment Experiment)

In mining operations, it is to be expected that deep water will be discharged at or near the surface. Unlike the surface water, deep-sea water contains a great amount of nutrients and it is anticipated that the deep water would greatly influence breeding and growth of microorganisms including phytoplankton in the surface layer. Of particular concern are phytoplankton which are the primary producers: if their community loses balance, other biotic communities will be affected. However, as it was impossible to discharge a great amount of deep water to the surface layer, insufficient data were available to assess and evaluate the impacts of a proposed mining operation on the surface layer. Consequently, we decided to focus on a survey of phytoplankton, which, as noted above, are considered to be the organisms most likely affected, and in particular on the effects of deep water on the growth and reproduction response of phytoplankton in a nutrients enrichment experiment. Specifically, phytoplankton were cultured using different amounts of the deep water under the conditions shown in Table 1 to assess the changes in nutrients concentrations, community composition and changes in abundance.

The results of the enrichment experiment showed that the reproduction response of phytoplankton differed depending on how much deep water was added. When a small amount of deep water was added, the number of cells reached a small peak quickly. As the amount added increased, it took more time to reach the peak and the amount of chlorophyll was larger (Fig.4-1, -2). In addition to the change of chlorophyll, changes in nutrients concentrations were also observed, Judging from these results, it is possible to say that if deep-sea water was discharged into the surface area during mining operations, the concentration of nutrients would become high and phytoplankton could multiply rapidly. However, the enrichment experiment was run under artificial conditions and, therefore, did not exactly reflect the conditions of the survey area and as a result it was not possible to determine how other biotic communities would be affected by an unbalanced community of phytoplankton arising from this type of impact. During real mining, there would be added affects from low temperature water and bottom mud that would be drawn up with the deep water. Future studies should consider more realistic methods which will approximate the actual situation and to investigate more specific environmental influences.

Development of a model to estimate environmental impacts

Outline of the model

It is assumed that most biological production activity occurs in the surface layer of the ocean. Therefore, at the time of manganese nodule mining, the ecosystem will be affected by the surface

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discharge of deep water of low temperature, high nutrients content, and high turbidity. To address this issue a model was developed to estimate environmental impacts in the surface layer and, in addition, a numerical model was developed to estimate diffusion behaviour of cold water masses. However, when the model was developed there was insufficient knowledge about the survey area and, therefore, the model was validated using simulation data from a cold water discharge test in the Toyama Bay of the Japan Sea. At the same time, application of a simple carbon circulation model to the surface layer was studied and this circulation model was incorporated in the estimation model.

Outline of the simulation

It was very difficult to accurately reproduce the environment of the survey area by simulation because of the complicated flow structure of the survey area. Accordingly, the physical mechanisms could not be reproduced in detail, however, the flow field, to qualitatively reproduce the distribution of existing amounts of ecological elements in the survey area, was set. The boundary conditions of the area were determined using the simulation results of the general marine circulation of the North Pacific, the flow of the survey area and the initial existing amount of ecological elements. The simulation, with a subdivided mesh system, was then run again to reproduce the ecological system.

Although this study is now completed, for proper estimation of the ecological impacts from mining operations, quantitative data of ecological changes when deep water is discharged into surface water must be obtained. In other words, to prepare a complete model, new experiments of mining impacts must be conducted.

Bottom Survey

Baseline survey

Fundamentally, like the baseline survey for the surface layer, the goal was to investigate the natural conditions of the bottom layer. In fact, the aim of the survey was to collect basic data for the deep-sea impact experiment described below. Consequently, the surface zone of seabed (mainly 0 to 5 cm), where a mining collector will operate was sampled and the chemical properties of the sediments and the status of benthos living there were studied.

Chemical properties of sediments

To understand the chemical properties of sediments, the major components, such as organic carbon, total nitrogen, calcium carbonate and opal, were studied. The results showed that amounts of these components decreased gradually with depth (Fig.5) and they did not differ significantly with location in the survey area.

Benthos

The abundance of bacteria and benthos in sediments were also studied. The benthos were classified by size (e.g. macrobenthos and meiobenthos). Mainly their abundance and community composition were studied. It was found that the number of bacteria in the sediments was within the range of 2.3 x 107 and 6.4 x 1OB cells/g (dry weight) in the whole survey area. In general, it has been reported that the number of bacteria in sediments in the depth range of 2000 to 5000 m was 107 to 1010 cells/g (dry weight), thus, the results of the survey were within the same range. The abundance of macrobenthos was 235 individuals/m2 while that of meiobenthos was 105 individuals/10cm2, In total, 18 animal divisions and 27 animal groups were confirmed (Fig. 6). In all cases, about 80% of the total individuals existed in the top 3 cm of the sediment layer. Reports of other sea areas surveyed showed also that benthos existed mainly in the surface layer of the sediments.

The community composition of the sea area of this survey was typical of the deep-sea area of the central part of the Pacific. The abundance of macrobenthos was the same as that reported by DOMES of the United States. On the other hand, characterization of meiobenthos was not possible, due to the lack of comparable data available at present, and will be left as a subject of future study.

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Mining Impact Experiment (JET: Japan Deep Sea Impact Experiment)

The Japan Deep-Sea Impact Experiment (JET) was fundamentally the same as the BIE conducted by the United States. It was an experiment to estimate the mining impacts on the environment by actual discharge and resedimentation of the deep-sea sediments.

The purpose of JET was to evaluate influences of the deep-sea impacts from mining in terms of three items, i.e., "items of impacts", "range of impacts" and "recovery process". Monitoring research surveys were carried out one and two years after the deep-sea impacts.

To select an appropriate site, a submarine topographic survey was conducted by acoustic methods and photographic observation of the seabed. On the basis of these results, a flat valley topography with simple direction bottom currents and a low nodule density was selected (Figure 1) as it provided for ease of model simulation and for working efficiency. The purpose of the experiment was to create impacts on the selected site by discharging sediments and allowing them to redeposit. In this experiment, a benthic disturber that creates impacts, similar to those expected in a mining operation, was used. The benthic disturber was designed to loosen and recover sediments on the seabed by a jet pump and to discharge them from a chimney which was 4 m high using a lift pump. To estimate the amount of sediments actually discharged, a slurry sampler was installed on the top of the chimney.

In addition, around the towing zone of the benthic disturber, mooring systems equipped with current meters and sediment traps were installed so that the sediment diffusion range could be estimated. To obtain comparable data, these surveys were conducted both before (JET 1) and just after (JET 2) the disturbance. The monitoring survey after one year was named JET3 and that after two years was JET4.

In the monitoring surveys, sampling of sediments, monitoring of currents and sedimentation by mooring systems and seabed observation by FDC (Finder TV Camera Mounted Deep-sea Camera System) were conducted.

Survey of benthos

Among the benthos which are expected to be directly influenced, the number of those which belong to meiobenthos is comparatively large according to the their size classification. Comparing the abundance of meiobenthos of JET1 with that of JET2, it was apparent that the abundance just after the experiment was less. In other words, the number of meiobenthos decreased due to the resedimentation. JET3 showed that the abundance of meiobenthos was recovering. JET4 further substantiated that the abundance of meiobenthos had returned to the situation before the experiment (Fig.7). However, these analyses of benthos were conducted roughly by animal community, so it has not been clarified by genera or species, whether the same balance of meiobenthos community has been attained or not.

In regards to species composition, at present it is impossible to judge whether the status has recovered to that before the experiment. Therefore, as a future study through detailed analysis of the samples, a reevaluation should be performed after clarifying "a recovery process" in species level.

Range of Resedimentation

As a method to clarify the "extent of influence", image analysis (or color intensity analysis) of the pictures taken by FDC (Finder TV Camera Mounted Deep-sea Camera System) was used. This method estimates the thickness and extent of resedimentaion by measuring the color intensity of manganese nodules covered by resedimentation with reference to the color of sediments. For the estimation of the thickness of resedimentation, manganese nodules and sediments were taken back to an on-land laboratory and resedimentation experiments were repeatedly conducted in a tank to study the quantitative relation between color intensity and the thickness of resedimentation. From the color intensity distribution, it was estimated that the range of resedimentation impacts reached 300 m southeast and 1000 m northwest in the direction perpendicular to the benthic disturber towing lines and 2.5 km in the towing direction. This result reflects the northwest current direction when the deep- sea impact experiment took place (Fig.8). The tank test results showed that manganese nodules were

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completely covered with bottom sediment when the thickness of resedimentation reached 0.26 mm so that the color intensity ratio became 1.0 (Fig.9) (Yamazaki et al. 1997).

As resedimentation increases above 0.26mm no further change in the color intensity ratio can be observed. Within and near the towing zone of the benthic disturber, the color intensity became 1.0, indicating resedimentation in excess of 0.26 mm.

In this experiment, the extent and thickness of resedimentation were estimated by image analysis of photographs of the seabed and the amount of discharged slurry. However, the method is only accurate for resedimentation of less than 0.26 mm, and could not be applied over large areas of the site where resedimentation exceeded this limit. Therefore, in the future, it is necessary to develop a simpler methodology that can be applied to areas of heavy resedimentation.

Development of an environmental impact estimation model

An environmental impact estimation model in the deep-sea area was developed with the aim to estimate the diffusion process of the sediments that are raised by a mining collector during mining operations. In order to calibrate the model to be consistent with the sediment trap data, simulation experiments were carried out several times with adjustments to components such as topographic features of the seabed, flow directions and velocities of bottom currents and size compositions of sediments. Finally, a reasonably consistent model was completed. The model was further verified by simulation of the BIE test results obtained by the NOAA. In the future, it will be necessary to verify whether this method can be applied to a large-scale seabed disturbance caused by real mining.

Conclusions and future subjects

The mining impact experiment was undertaken to estimate and evaluate the influence of manganese nodule mining on the environment. At the surface layer, nutrients enrichment experiments were conducted to assess the influence of high nutrient concentrations from deep water on phytoplankton.

Benthic impact experiments were carried out with an artificial sediment disturber to simulate the impact of a mining collector. The results of the nutrient enrichment experiments made it clear that phytoplankton rapidly increase due to the upsurge of deep water. However the experiments were not sufficiently detailed to demonstrate the influence on other biotic communities, surface water temperatures, light and other environmental factors. Thus these effects should be examined in future studies. The results of the benthic impact experiments showed that the disturbance of the seabed caused a decrease of the abundance of meiobenthos and that it takes one-to-two years to recover. However, as this study focused roughly on animal communities, it is yet to clarify whether or not the meiobenthos now exist in the same balance as that before the disturbance. The image analysis technique of FOG photographs was developed to study the range and thickness of resedimentation. But this method may not be applicable in heavily resedimented areas.

The simulation models to estimate the environmental impacts were completed for both surface and bottom layers. For the bottom layer model, good results were obtained by the verification simulation of the BIE site of the NOAA. For the surface layer, however, since there were few quantitative data which showed changes in the ecosystem when deep-sea water was discharged, further experiments on mining impacts are needed to complete the final model.

The project surveys were almost completed in March 1997, but there are many subjects that should be dealt with in detail for further discussion. In the future, how Japan contributes to the international society from the viewpoint of marine environmental conservation, based on the results of the survey, will be one of the primary concerns. In addition, Japan is obliged to supply future accurate data and

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appropriate advice to countries which will carry out environmental research; therefore, as an advanced country Japan must be responsible and conduct environmental research.

This project was supported by the MITI and conducted under a cooperative relationship with the U.S. NOAA. A lot of cooperative efforts were supplied from the staff of the NOAA. Valuable suggestions were given by the members of the project advisory committee and working group. I would like to express my appreciation to everybody concerned with this work.

References

Fukushima, T. 1995. Overview: Japan Deep-Sea Impact Experiment = JET. In Proceedings of the First (1995) ISOPE Ocean Mining Symposium, International Society of Offshore and Polar Engineers, Tsukuba City, Japan. pp 47-53.

Harada, K., Shibamoto, Y., and Kokubun, H. 1995. Chemical and Radio-chemical Studies of Sediment Samples From JET Site. In Proceedings of the First (1995) ISOPE Ocean Mining Symposium, International Society of Offshore and Polar Engineers, Tsukuba City, Japan. pp 187- 192. Kaneko, T., Ogawa, K., and Fukushima, T. 1995. Preliminary Results of Meiofauna and Bacteria Abundance in an Environmental Impact Experiment. In Proceedings of the First (1995) ISOPE Ocean Mining Symposium, International Society of Offshore and Polar Engineers, Tsukuba City, Japan. pp 181-186.

Barnett, B., and Yamauchi, H. 1995. Deep Sea sediment Resuspension System Used for the Japan Deep Sea Impact Experiment. In Proceedings of the First (1995) ISOPE Ocean Mining Symposium, International Society of Offshore and Polar Engineers, Tsukuba City, Japan. pp 175-179.

Taguchi, K., Nakata, K., Aoki, S., and Kubota, M. 1995. Environmental Study on the Deep-Sea Mining of Manganese Nodules in the Northeastern Tropical. In Proceedings of the First (1995) ISOPE Ocean Mining Symposium, International Society of Offshore and Polar Engineers, Tsukuba City, Japan. pp167-174.

Horibe, S., ed. 1972. Material Cycling. Marine Chemistry. Tokai University Publishing, Toyko. pp141-175 (in Japanese). Taniguchi, A. 1975. In Motoda, S. (ed) Marine Plankton. Tokai University Publishing, Toyko. p. 223 (in Japanese).

Nakata, K., Aoki, S., Ishida, A., Taguchi, K. 1995. Development of Ocean Carbon Cycle Model: Application to the North Pacific Ocean. Environmental Resources 4-1: 63-86 (in Japanese).

Deming, J.W., and Yager, P.L. 1992. Natural Bacterial Assemblages in Deep-Sea Sediment. In Row, G.T., and Pariente, V. (eds) Deep-Sea Food Chains and the Global Carboncycle, Kluwer Academic Publishers, Dordrect, Netherlands. pp 11-27.

Hecker, B., and Paul, A.Z. 1979. Abyssal Community Structure of the Benthic Infauna of the Eastern Equatorial Pacific; DOMES Site A, Band C. In Bischoff, J.L., and Piper, D.Z. (eds) Marine Geology and Oceanography of the Pacific Manganese Nodule Province, Plenum Press, New York. pp 83-112.

National Oceanic and Atmospheric Administration 1993. US Cruise Report for BIE CRUISE 1 July 3D-September 9, 1993, RN YUZHMORGEOLOGIY A, NOAA Technical Memorandum NOS OCRM 4.

Yamazaki, T., Kajitani, Y., Barnett, B., and Suzuki, T. (In press). Development of Image Analytical Technique for Resedimentation Induced by Nodule Mining. In Proceedings of ISOPE-Ocean Mining Symposium, Seoul.

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CHAPTER FOUR: MARINE ENVIRONMENTAL ISSUES

Environment Regime: Papua New Guinea Case Study

Based upon a presentation by Katrina Solien Senior Environmental Protection Officer Department of Environment and Conservation, Papua New Guinea

Introduction

Papua New Guinea is blessed with many natural resources, both renewable and nonrenewable, and there are already a number of licenced development projects for the exploitation of many of these resources, e.g., agriculture, forestry, mining and the petroleum sectors.

The PNG Department of Mineral Resources (DMR) has recently granted an Exploration Licence for the exploration of the seabed in the PACMANUS Basin close to the province of New Ireland. This area of proposed offshore mining is a new frontier of resource development and will need special consideration, in particular, because existing legislation developed so far in the country is for land- based developments.

There are two possible environmental regimes that may apply to this proposed new industry. First, the environmental aspects of offshore mining may be accommodated within the framework of current legislation that consists of three Acts. Alternatively, Papua New Guinea's environmental regime was reviewed in 1995 and this review resulted in the development of a new proposed Environment Bill. This new proposed Environment Bill is now pending parliamentary debate and pending approval, hopefully, in the July 1999 session. If passed, offshore mining activities may be controlled or regulated under this legislation.

This paper outlines Papua New Guinea's existing and proposed environmental regime, and how it may relate to seabed/offshore activities. The discussion is with respect to terms of current legislation, the proposed environmental regulatory framework and a proposed regulation of an offshore mining scenario.

Background

The Department of Environment and Conservation (DEC) is the body mandated to administer the fourth Goal of the National Constitution which states:

"We the people of Papua New Guinea declare our fourth goal to be for Papua New Guinea's natural resources and environment to be conserved and used for the collective benefit of all, and be replenished for the future generations."

The DEC is comprised of two (2) major Divisions namely Environment and Conservation. The Environment Division is responsible for environmental approval, monitoring and management of project operations while the Conservation Division administers a number of Acts, such as the Flora and Fauna Protection Act and the Wetlands Act, as well as being responsible for export licences. The Conservation Division will also be responsible for implementing the Bio-diversity and Climate Change Conventions. Presently, the Conservation Division is in the process of setting up the PNG Biodiversity Institute which is intended to address all biodiversity issues and will coordinate all biodiversity related scientific research in the country.

During project planning and in the granting of environmental approvals and permits, socio- economic aspects (such as stakeholder interests and other uses of an area) and conservation issues are also considered and addressed together with biophysical aspects. Though the biophysical aspects were traditionally the main focus of the Environmental Impact Assessment (EIA) process, Social Impact Assessment (SIA) will now form an important component of the EIA overall process.

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.Operation Procedures .Industry Codes of Practice

Under this regime, clean technology and waste minimization initiatives are encouraged.

The Proposed Regulatory Process

The regulatory process under the proposed 3-tiered regime is determined by the nature of the project. Under this process an initial notification is submitted by the proponent giving a brief outline of the proposed operations. The project is then classified into the appropriate level.

Most small projects, which are not expected to cause any environmental harm, will be regulated under Level 1 activities. Under this level, Regulations, Policies, Codes of Practice and Standards will control activities. Projects with medium impact will fall under Level 2 and will undergo an environmental permitting process. The activities of projects under this level will be regulated by the permit conditions together with the above mentioned tools. Very few projects are expected to go through the very detailed Environment Impact Assessment (EIA) process required for a Level 3 project. The size of operation, sensitivity of the environment, potential for adverse environmental impacts and whether the project is of national significance, will be factors in determining whether a project warrants classification as a Level 3 project.

The decision making body here is the Environment Council chaired by the Director (Head of Department) and has multi-disciplinary representation. Note that under this regime, the Minister's approval of the Environment Impact Study is "in principle" where the Minister writes a letter of approval but indicates that environmental permits (with conditions) will follow after application for an environment permit and assessment. Most approvals will be done at the administrative level rather than at the political level (powers vested in the Director of Environment to approve environment permits).

Offshore Mining and the Environment Regime

The way in which offshore mining may be dealt with under the Environmental Regulatory Framework (ERF) is that, under current legislation, the project would undergo the existing environment plan approval process and the water use licencing processes. Alternatively, under the proposed legislation, assuming the Bill is passed through Parliament in its present form, offshore mining projects would be considered "prescribed activities". Such projects will fall either under Level 2 (environmental permitting), if environmental impacts from their activities do not significantly impact on the environment, or Level 3 (Environment Approval and environmental permitting) if the projects have the potential to significantly impact on the environment. The Level 3 classification will depend on the size of operations, environmental sensitivity of operation/discharge area, discharge type, and whether the projects are of national significance and different levels of classification may be applicable to differing phases of activity. The Level 3 classification may also be based on the fact there will be different stages of seabed mining proposals, including exploration, pilot testing and full-scale mining, each of which are expected to have some degree of environment impact. In addition, little is known about the environment of the proposed offshore mining areas, there is limited understanding of the ecological systems and processes in the areas and the resources in these areas may have potential for future contribution to science as well as future commercial uses. All of which may need to be defined.

The Bill provides for the adoption of any environmental protection policy (including those formulated by other government bodies).

Summary

In summary, the offshore mining projects may be dealt with under the existing environment regime through the submission and approval of environmental plans and controlled by licence conditions and regulations.

[SOPAC Miscellaneous Report 323 -Revised Edition] [118]

If the proposed Bill is passed in parliament, however, offshore mining activities may fall under Level 2 or Level 3 classification and will undergo environmental permitting or a full EIA process. The activities of projects under these levels will be controlled and regulated by licence conditions, and the various tools developed under the proposed new Environment Bill, with the aim of minimizing environmental pollution.

Finally, the proposed Bill is still undergoing parliamentary process. It is an enabling Bill and has provisions allowing DEC to adopt any environment protection requirements provided for in the offshore mining policy.

[SOPAC Miscellaneous Report 323 -Revised Edition] [119]

END SESSION:

Closing Address

Honourable Masket Langalio CBE MP Minister For Mining, Papua New Guinea

Mr Alf Simpson, the Director for SOPAC, our distinguished guests from the Metal Mining Agency Of Japan, Mr Yuji Kajitani, Mr Hirohoko Tesishima, Mr Tetsuro Yamazaki Of National Institute For Resources And Environment, Japan, distinguished members of the delegation from South Korea, Dr Allen Clark Of East-West Centre, Hawaii, Dr Ray Binns Of CSIRO, Mr Charles Morgan Of Marine Minerals Technology Center, University Of Hawaii, Mr Mike Lodge Of International Seabed Authority, Jamaica, Mr Kuma Aua Secretary of The Department Of Mineral Resources, ministerial colleagues, the Acting Governor For Madang, participants of the Workshop, particularly our visitors from island states, friends, ladies and gentlemen.

I am honoured to give the closing address to this distinguished audience in picturesque Madang Resort Hotel. You all have worked so hard in the last few days on what would be a Blueprint for our Offshore Minerals Policy. The mix of representation at this Workshop is very good and your contributions at the various levels of expertise is highly commended. The depths of the offshore is probably the last frontier awaiting economic exploitation by mining enthusiasts although our friends from the oil industry have been quite successful in areas such as the North Sea, Gulf Of Mexico, and many other places.

When the process for developing an offshore mining policy started we did not know what shape or form the proposed policy will take. It was like sailing into the unknown. Our only navigational aids were the United Nations Convention on the Law Of The Sea which itself was a nightmare to grasp, the Mining Act 1992 which was quite deficient for offshore purposes, and most importantly, the enthusiasm of interagency representatives to not only get in there and learn about the new challenge offered but also to contribute in a multi-disciplinary sense to develop a Green Paper or draft policy which you all have visited and revisited in the course of your Workshop. The outcome of this Workshop will no doubt assist PNG to finalise its policy and to realise the potentials presented to us by mineral occurances in our territorial sea in particular and possibly in the outer continental shelf. Our government is in the process of having its maritime boundaries clearly delimited so that appropriate policies and regulations can be developed reflecting differing legal rights and obligations attached to these maritime zones.

Papua New Guinea ratified the United Nations Convention on the Law of the Sea in 1997. I am advised this convention establishes the international legal basis and system for governing all ocean uses. As a result, it is incumbent on us to develop ocean use policies and regulations that are consistent with this Convention. Offshore mineral exploration and mining are no exceptions. The steps taken by my department is only one of the many steps other government agencies have and are taking to give practical effect to our commitments and to realise the benefits under the Convention.

The draft proposed policy has been widely circulated for views and comments. Valuable comments were received and this Workshop has brought all these views together in the form of a blueprint that will be finalised and presented to Cabinet and eventually to our national Parliament for its approval as a white paper. The next phase after that will be to develop an appropriate legal framework based on the policy. This will take some time to accomplish and I am sure those of you who are here with us today and are experts in the field will offer us your kind assistance when requested.

In the short to the medium term the benefits may not be clearly visible but as a principle of good governance it is vital to have a long-term view.

You would have realised in the course of your deliberations that current mineral policy and legislation is intended mainly for terrestrial exploration and mining. There is no comprehensive policy and legislation regulating exploration and mining in all the maritime zones where PNG has sovereignty, sovereign rights or jurisdiction as recognised under the United Nations Convention on the Law of The Sea. The work of the seabed mining policy committee chaired by my department was [120]

intended to fill this gap and this Workshop has taken that step further to realising a comprehensive offshore minerals policy for PNG.

Despite some of the deficiencies I mentioned and which you would have discussed, two exploration licences (EL-1196 and EL-1205) were granted in November 1997 to Nautilus Minerals Corporation, a PNG-registered Australian company, to explore for minerals in the Manus Basin, New Ireland Province. The licences, which are the first of their kind for seafloor massive sulfide deposits, have generated a tremendous amount of interest by the media, mining companies, foreign governments and international organisations.

The particular type of mineral deposit that is being explored for by the licencee is known as the seafloor massive sulphide (sms). These types of mineral deposits are formed in deep waters as a result of sub-marine volcanic activity under high pressure and at very high temperatures. The grades of minerals contained in the sms type deposits are relatively high compared to land based sources.

Currently offshore mining technology is still in its infant stages. We are optimistic that when seabed-mining technology is perfected offshore mining will be possible in the future. Hopefully that futu re is not too far off.

Man with the assistance of technology has managed to conquer the frontiers of land and space. Right now we are in session to plot our strategy to conquer the other frontier left -our ocean depths. Therein may also lie some of the answers to the numerous phenomena we face on the surface like droughts, flash flooding, tornadoes and the like. Offshore mineral exploration and mining will also assist us to learn more about our marine environment and its interface with the atmosphere and life in general.

I am advised there is life even in the depths of the ocean where no sunlight penetrates. Some of the biogenic species that occupy these habitats may hold clues to human needs in terms of medicines and drugs and industrial applications. In 1996 it was estimated that trade in these biogenic materials were worth US$800 million. This could outstrip returns from actual minerals being mined and sold.

This is an exciting time for PNG and the rest of the world. If we develop the right kind of policy and legal framework that encourages exploration and mining in the offshore areas while at the same time protecting our interests as well as those of our neighbours and the international community, particularly in terms of marine environmental protection and management, PNG's policy could become a mode! for other countries to emulate and follow.

Once again, thank you all for your tremendous efforts. With these remarks I now declare this Workshop closed.

[122]

A: INTRODUCTION

1. The present Mining Act 1992 is the principal policy and regulatory document governing the regulation and management of the mining industry in Papua New Guinea. However, this legislation is heavily biased towards onshore exploration and exploitation of mineral resources. As to the offshore, the legislation seems to extend only to the outer edge of PNG's territorial sea. In this sense there is a policy and regulatory vacuum so far as exploration and exploitation of mineral resources in the offshore is concerned.

2. It is the intention of government to develop a policy for the promotion of exploration and exploitation of offshore mineral resources.

3. Therefore, there is a need for the development of a comprehensive offshore mining policy. This policy is also intended to accommodate relevant interests of varying stakeholders in the offshore.

B: CONSULTATION

4. Offshore mineral exploration and mining are relatively new areas of interest. There are numerous stakeholders with varying interests that ought to be recognised and accommodated where feasible. As there are different government agencies responsible for managing such stakeholder interests and issues it was essential that a team approach be taken on the development of a comprehensive and workable offshore mining policy.

5. An inter-agency committee was initiated by the Department of Mineral Resources in March 1998 to recommend an offshore mining policy frame for consideration and approval by the government. Prior to this approval, it is anticipated that a green paper would be ready for circulation to relevant agencies and industry participants for their input before the policy is finalised and submitted for approval as a white paper.

6. Membership of the committee comprises representatives from relevant government agencies such as the Departments of, Prime Minister & National Executive Council, Attorney General, Foreign Affairs, Provincial Affairs, Treasury & Corporate Affairs, Petroleum & Energy, and Transport. Statutory bodies and others include National Fisheries Authority, PNG Harbours Board, Office of National Planning & Implementation, Office of Environment & Conservation, Internal Revenue Commission and University of Papua New Guinea Law Faculty.

7. Apart from the many meetings the committee had, it also convened an Internal Workshop on Seabed Mining from August 31- 02 September 1998 in Port Moresby. A few Provincial Administrations were invited to participate at this Workshop but none actually attended the Workshop. The intention of the Workshop was to develop this draft policy on offshore mining that would be circulated to both the government agencies and the mining industry for their inputs or comments. The "green paper" was also reviewed by independent experts.

8. Subsequently, during the period February 22-26, 1999 an international Workshop, sponsored by SOPAC, MMAJ, the Forum Secretariat and the Department of Mining of Papua New Guinea, was held in Madang, Papua New Guinea. This Workshop reviewed the draft "green paper" prepared by the government and, as a result of deliberations, prepared an expanded and revised "green paper".

C: ISSUES AND PERSPECTIVES

9. The mining sector is an important contributor to the national economy. At present all mining activities are undertaken onshore. There are a number of large mines and several medium and small-scale mines. At least three major prospects are in their advanced stages for development.

10. PNG has an even larger offshore area. The Offshore Seas Proclamation under the National Seas Act 1977 establishes an interim baseline for determining the outer limits of the territorial sea, exclusive economic zone, and the continental shelf. The final outer limits of its national jurisdiction is yet to be delimited in accordance with the relevant provisions of the United Nations Convention

[SOPAC Miscellaneous Report 323 -Revised Edition] [123]

on the Law of the Sea 1982. Nevertheless, PNG is an archipelagic State that has a very large ocean space including the seabed underlying such ocean space within its national jurisdiction. As a result, mineral occurrences in the seabed may even exceed those found onshore. These resources must be found and developed so that their economic potential can be unleashed for the collective benefit of all citizens and in a manner that safeguards the environment for the enjoyment by future generations.

D: OFFSHORE RESOURCES

11. The developed and potential mineral deposits of the offshore are:

1. diverse, including sand, gravel, diamonds, black sands, oil, gas, gas hydrates, manganese nodules, manganese crusts and polymetallic massive sulfides; 2. are poorly explored; and 3. have a wide range of associated issues which impact on their development including:

.inadequate governing policy and legislation

.a need for new and improved technology for exploitation

.a lack of assured economic potential .numerous environmental impacts .and other, as yet unquantified, stakeholder interests.

12. Within the broader subset of offshore mineral resources the deep ocean manganese nodules are by far the most studied by researchers and the private sector while the polymetallic massive sulfides, which occur within several nation's Exclusive Economic Zone (EEZ), are rapidly assuming equal importance in terms of research and private sector interest. Polymetallic massive sulfides are characterised by being:

1. Widely distributed 2. Highly variable in mode of occurrence and in mineralogy 3. Often high in copper, zinc, gold and silver content 4. Often high in deleterious metals such as cadmium, thalium, lead and arsenic.

13. Overall, it is the high gold content of the polymetallic massive sulfides which has made them the focus of recent research and to the private sector as possible economic mineral deposits.

14. Past and recent studies have shown that both the manganese nodules of the deep ocean and the polymetallic massive sulfides of intermediate depth have associated with them a relatively diverse biota which is of primary concern in terms of areas of environmental impact. The environmental impact of manganese nodule mining has been reasonably well evaluated, most recently in the work of the Japanese, whereas, that of possible exploitation of polymetallic sulfide deposits is largely unknown. As such assessing the environmental impact of possible mining on the associated biota of polymetallic massive sulfides remains an area requiring extensive research.

15. The present interest in PNG is in pollymetallic sulphides is exemplified by the two exploration licences that were issued by the government in November 1997. Literature review and recent studies reveal substantial hydrocarbon and mineral deposit in the offshore region all found within PNG territorial waters that may be commercially extracted.

16. Aggressive research within the Bismarck Sea lead to the discovery of PACMANUS Hydrothermal fields. Base and precious metal massive sulphide deposit in the Manus and New Ireland Basins are at relatively shallow depth. For instance manganese nodules occur in water depths of between 4 000 -6 000 metres. Current available information shows that the grades of minerals contained in the seafloor massive sulphide deposit are comparatively high. For instance, the samples analysed show an average of 26% zinc, 10% copper, 200g of silver per tonne, and 15g of gold.

[SOPAC Miscellaneous Report 323 -Revised Edition] [124]

17. Some of the offshore resources may be located on or under the seabed underlying shallow waters whilst others may be in deep waters. The type of technology available, the cost of acquiring them, and mining methods employed may be similar or different to those employed onshore. Certainly, different oceanographic and environmental conditions in the offshore provide challenges for the development and adaptation of technically feasible and environmentally acceptable exploration and mining technology and techniques. Relevant licencing regime, fiscal terms, environmental regulation and so forth would be devised to take account of the similarities or differences as the case may be.

18. It is recognised that the biodiversity and genetic resources associated with certain areas of marine minerals may have significant economic value. Therefore, means must be sought to ensure that the state receives adequate compensation from any utilisation of these resources.

19. Whilst the policy is aimed at encouraging exploration and exploitation of minerals in the offshore, the State will also ensure that it also benefits from the exploitation of these resources. And the State will also ensure that environmental damage to the marine ecosystems is minimised. Of course the risk taker (project developer) will be allowed appropriate return on investment commensurate with the risks taken.

E: OFFSHORE LEGAL REGIME

20. Under the 1982 Convention (UNCLOS), every coastal State is entitled to claim a 200 nautical mile continental shelf, regardless of its geographical configuration. The coastal State has sovereign rights over the continental shelf for the purpose of exploiting the non-living resources, including minerals. Coastal States may charge fees, royalties and taxes at their discretion and there is no obligation to allow any other State to make use of the non-living resources.

21. A coastal state may extend its continental shelf beyond 200 nautical miles in certain circumstances depending on the geomorphological configuration of the continental shelf. Claims for such extension must be submitted to the Commission for the Limits of the Continental Shelf within 10 years of the entry into force of the Convention for that state. In the case of the continental shelf beyond the 200 nautical mile limit, Article 82 of the Convention contains provisions for the sharing of revenues through the International Seabed Authority.

22. In Papua New Guinea the Mining Act of 1992 applies to internal waters, archipelagic waters and the territorial sea, however, within the Exclusive Economic lone (EEl) and continental shelf, additional legislation will be required to give effect to the sovereign rights provided for under the convention.

E.1 Constitutional Mandate

23. The Constitution of PNG is the source law or groundnorm. It not only provides for the system of government but also it sets out the development vision for the country. Whilst the constitution recognises the importance of developing its natural resources for the collective benefit of all citizens, it also obligates the State to ensure that its natural environment is protected for the benefit of future generations.

E.2 UNCLOS and its Implications

24. The UNCLOS is an important international law instrument governing all ocean uses and Papua New Guinea having ratified the Convention should ensure that it complies as required by way of domestic legislation.

E.3 Ownership of Mineral Resources

25. Under the Mining Act 1992 the State owns all mineral resources in, on or under any land in PNG. Under the Mining Act of 1992 the State's ownership rights to mineral resources in any land in PNG also extend to such minerals in or on the seabed under the archipelagic waters and territorial sea

[SOPAC Miscellaneous Report 323 -Revised Edition] [125]

(territorial sea in this context is used in the wider context but excludes the Exclusive Economic Zone and the Continental Shelf).

26. The application of the Mining Act 1992 may only extend to the edge of the territorial sea. However, the State of PNG has the right to regulate any mineral exploration and mining activities in the legal continental shelf pursuant to the United Nations Convention on the Law of Sea 1982.

F: LICENCES AND LICENCING

27. The current licences and licencing regime under the Mining Act 1992 comprise Exploration Licence, Special Mining Lease, Mining Lease, Alluvial Mining Lease, Mining Easement and Lease for Mining purposes. Requirements for application include boundary description, work proposal/ programme, evidence of technical expertise, evidence of financial resources, and fees. For the offshore, licencing regime will be modified to take account of different oceanographic and environmental conditions. 28. Based on the application of known terrestrial licencing procedures and their effectiveness, it is proposed that there be 5 different types of tentements to be issued for offshore mining. These are: Prospector Licence, Exploration Licence, Mining Lease, Lease for Mining Purpose (LMP) and Mining Easement. In addition, it is proposed that a prospectors right licence be granted under special circumstances of offshore mining.

F.1 Prospector's Right

29. In addition to the above, the state may issue a Prospector's Right, which allows a prospector to enter areas for prospecting purposes that are not covered by either an Exploration Licence, Mining Lease, Lease for Mining Purpose or Mining Easement, and to proceed in identifying such areas for the application of an Exploration Licence. A key justification of the use of Prospector's Rights is with regards to Marine Scientific Researchers working in prospective areas that have been identified by mineral exploration/development companies, or when such researchers form a strategic alliance with mineral exploration and/or development companies. The Prospector's right then allows the state to demarcate MSR activities from prospecting/exploration activities and who should perform them under licence. Marine scientific researchers who have a strategic alliance with private companies may be required to obtain a prospectors right to carry out their activities. Those under subcontract to companies will be covered under the contractors licence.

30. The duration of a prospectors licence shall be for a period of three years and shall be renewable for 3 years.

F.2 Exploration Licence

31. Exploration licence will be granted by the Minister responsible for mineral resources will be for five years initially. In the terrestrial environment, the area covered is not more than 750 sub-blocks and is subject to acreage reduction upon renewal or extension.

32. Exploration licences for the offshore will cover a maximum area of 1,000 sub-blocks, which equates to 3410 square kilometres, with a renewal period of 5 years. The term may be extended in additional tranches of five years each thus according the licencee a good number of years to undertake mineral exploration. The Minister may place additional conditions that relate to safeguarding national interest, the environment and other relevant issues under the UNCLOS.

33. Twenty percent (20%) of the area covered by the licence will be automatically relinquished on the anniversary of each renewal. The licencee may request a waiver to the reduction in size based on relevant information.

34. A key requirement of an Exploration Licencee is to ensure that it carries out its agreed or approved work programme. This entails a clear demonstration by the applicant of technical skills and financial resources available to effectively undertake exploration in accordance with the approved work programme. For offshore exploration licence, such information may include demonstration of

[SOPAC Miscellaneous Report 323 -Revised Edition] [126]

available vessel to carry out exploration or the financial ability available to hire such services and so forth.

35. At this juncture it is essential to note that some of the conventional exploration methods employed onshore may not be applicable in the offshore. As a result, it is necessary to define exploration in the offshore to include some aspects of the marine scientific research where applicable and only if related to the fulfillment of approved work obligations under the Exploration Licence. In particular seabed survey could be categorised as exploration if undertaken by the Exploration Licencee.

F.3 Pilot Mining Test

36. The licencing procedure recognises that Pilot or Trial mining is an important element in the development of offshore minerals: given the unknown factors involved and the impact of rapid technological changes. Thus, with special permitting requirements under the Exploration Licence, a company may apply to undertake Trial or Pilot Mining. Trial or Pilot Mining approvals may be granted, dependent on the type of mineral deposit to be mined, the technology to be used, and the sensitivity of the marine environment concerned, when deemed necessary to allow the company to firm up a viable and full scale mining project. In this regard, the state may grant several Trial or Pilot Mining approvals prior to the granting of a Mining Lease. The other added advantage is that regulators can regulate on pertinent issues that have been highlighted during the Pilot or Trial mining stage.

37. A Pilot Mining Test may be undertaken by an EL holder upon approval by the State prior to actual mining phase and will be effected through variation of approved work programme for the exploration phase.

F.4 Offshore Mining Lease

38. In the offshore there will be only one production licence for all mineral resources known as the Offshore Mining Lease.

39. Development contracts will be negotiated and will distinguish resources to be mined, mining technology and methods to be used, period such a licence is granted for, methods to be employed to decommission property and rehabilitate the sites and how costs for same will be met etc.

40. Further or alternatively regulations may be made for specific resources to be mined taking into account all relevant issues and stakeholder interests under the UNCLOS. Any variations to the approved proposals for development will be considered on a case by case basis.

F.5 Lease for Mining Purposes

At the mining phase the project proponent may require other areas to install facilities. These facilities may be onshore or offshore. In such situations the project proponent may apply for leases for mining purposes for such period as is required. In appropriate cases compensation will be payable to owners or occupiers of land that would be taken up for such purposes.

F.G Mining Easement

42. Since offshore mining may entail the use of structures above or below the water line such as pipes and other similar devices, or even special accessways, this provides justification for the use of easements in conjunction with the Mining Lease.

43. Activities undertaken under a mining easement will be coordinated with other responsible agencies and undertaken with regard to other government instruments such as notification of routes and issues related to marine safety.

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G: OFFSHORE FISCAL REGIME

44. A basket of fiscal measures will comprise the offshore fiscal regime. Some measures will have limited application whilst others may be generic. In the final analysis the appropriate mix will be dependent on inter alia cost of exploration and mining in the offshore. And this cost will in turn be functions of available mining technology and method of mining employed in the offshore.

45. As a general principle the fiscal package attempts to be flexible, simple, transparent and applicable to the issues involved in offshore mining. It is accepted that certain unique aspects of deep ocean resources warrant a deviation from the onshore fiscal package. These include the anticipated long period of time required for exploration and technology development, the unique environment under which mining takes place, high risks associated with a pioneering endeavour and the uncertainty surrounding the economic viability of deposits. With this in mind flexibility may mean that overall lower front end rates with respect to royalty and income tax may be balanced by an Additional Profits Tax that comes into place at a lower profit threshold rate than onshore.

G.1 Mineral Royalty

46. The state owns all minerals within its territorial waters and will charge a royalty as an economic rent for the exploitation of these resources. Due to the complexity and unknown costs and benefits to the exploiter of an offshore resource the state may consider a reduced royalty figure, less than the 2% Ad Valorem rate charged onshore.

G.2 Mining Income Tax

47. The current rate of income tax may apply although due to the high risks involved in offshore mining the government may grant concessions that would initially reduce the amount of income tax paid. A key consideration here is the use of the fiscal tool to encourage mineral exploration and exploitation in the offshore. Amortisation and depreciation provisions under the Income Tax Act 1959 as amended may be reviewed on needs basis to accommodate any potential or actual difficulties encountered by the taxpayer.

G.3 Dividends Withholding Tax

48. Currently, dividend withholding tax is payable by foreign shareholders in mining companies operating in PNG. However, in order to encourage foreign investment, dividends withholding tax if applicable may be removed. If there are double taxation treaties with relevant countries their provisions will be given effect with view to maximising the nation's tax position.

G.4 Duties

49. If it is found that import and export duties contradict the stipulations of the WTO for member countries, in terms of the liberalisation of trade and the removal of barriers, they may be removed where possible.

G.5 Additional Profits Tax

50. The fiscal package reduces the tax burden at the front end of a mining project as a response to the risks involved in offshore mining. However, an Additional Profits Tax will be introduced at a lower threshold rate than onshore to capture the windfall gains should the deposit mined result in bonanza profit.

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G.6 Equity Participation

51. The current State equity participation policy is that the State has an option to take up 30% at cost in a major mining project. This excludes mineral projects undertaken under Mining Leases and other tenements. As a result, the State has taken up interest in all projects that are developed pursuant to Special Mining Leases except Mt Kare. The State may continue to retain this option for mineral resource project development in the offshore irrespective of the size of the project.

52. It is recognised that the private sector regards such participation as a disincentive and an indirect tax on a venture. A particular concern with respect to offshore mining is that in this high risk environment the State does not bear a proportional share of the risk.

53. In the offshore areas beyond 3 nautical miles from the coastline, the current state equity policy with respect to landholder participation will not apply as the offshore waters are a national heritage and benefits should derive to the State.

G.7 Other Taxes

54. The mining levy and interest withholding tax provisions recently implemented should not apply to offshore mineral resource developments.

H: OFFSHORE ENVIRONMENTAL REGIME

55. Mining projects including offshore mineral resource developments will have environment impacts that are physically unavoidable. In addition, the offshore areas do contain living organisms unique to the marine environments that may be of industrial and medicinal significance. Consequently, proponents of such ventures will need to obtain and show evidence of necessary environmental approvals prior to granting of exploration or mining tenements. Furthermore, mineral exploration and mining companies will be required to undertake their activities consistent with the requirements of the environment related laws and regulations operating in PNG.

56. Environmental impacts will need to be assessed within the context of complete industrial systems and should consider the implication of the proposed activities as well as the activities themselves. In general, exploration licence holders (Iicencees) should be fully committed to environmental protection and clearly accountable for their activities related to the development of their licence and to any significant pollution caused by their activities.

57. Cost/benefit considerations should include environmental costs for every major development decision, including actions related to mine-site rehabilitation and facility decommissioning. Licencees should maintain adequate environmental and quality management systems to ensure compliance with environmental requirements. Because of the unprecedented nature of the deep seabed mining activities contemplated, the State will adopt a precautionary approach in all significant decision-making activities.

58. There should be an early and open process, including public hearings, information exchanges, and fact-finding efforts, to identify the environmental impact issues of concern. Priority ranking for impact assessment efforts should be related directly to the relative importance of the issues raised and to the time frame within which the issues must be addressed to accommodate the decision- making schedule.

59. Licencees should be prepared to collect relevant baseline data during their exploration activities. These data will be necessary to address identified and likely impact issues related to commercial mining. For any particular exploration area, the level of effort for such collection activities should be approximately proportional to the level of effort of the exploration activities in the area. At the conclusion of the exploration phase these collection activities should be sufficient to support the completion of an adequate environmental assessment for commercial mining.

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60. Testing of pilot mining systems will be allowed under the permitted activities of the exploration licence. Prior to such testing activities, the licencee will submit to the State an environmental assessment report for the planned activities and monitoring plan designed to obtain data to facilitate completion of an environmental assessment for commercial mining. Testing will be permitted only after the State has accepted as adequate the assessment report and monitoring plan.

61. The activities associated with the marine mineral resource exploration and exploitation should be undertaken within the context of broader Coastal Zone Management and Ocean Policy activities of the government; in particular, with respect to such issues as fisheries and coastal zone stakeholders.

I: BENEFITS DISTRIBUTION MECHANISMS

62. Benefits distribution is important in the light of PNG enacting the new provincial and local governments reform law and the ratification of the UNCLOS. Under the former the State is not only required to consult with affected provinces and local communities but also it is required to share some of the benefits derived from mineral projects. As to the latter, the International Seabed Authority established under the UNCLOS it will be entitled to share with a coastal state revenues derived from resource exploitation within the additional continental shelf area, i.e., additional 150 nautical miles from the usual 200 nautical miles limit.

63. This responsibility is specific to the 3 nautical mile zone from the coastline and responsive to the provisions of the organic act.

1.1 Provinces and local Communities

64. Where mining takes place within the territorial sea including the archipelagic waters, appropriate benefits packages will be designed to assist relevant provinces and local coastal or island communities. In general, the packages will reflect impact of mining activities. In the case of local coastal or island communities, benefits to be derived by them will be dependent on mining being undertaken on seabed underlying traditional fishing "grounds" or other recognised activity within those areas.

65. Benefits derived from exploitation of minerals on or under land underlying exclusive economic zone and the continental shelf should be reserved to the State for the collective benefit of all its citizens.

1.2 International Seabed Authority

66. As noted above International Seabed Authority has exclusive jurisdiction to regulate the exploration and mining of minerals in the area outside the national jurisdiction of a coastal state. However, the international community, through the ISA, also has the right to benefit from revenues derived from minerals exploited within the area beyond the exclusive economic zone but that is within the maximum legal continental shelf.

J: OTHER ISSUES (MISCEllANEOUS)

J.1 Technology! Technology Transfer

67. Offshore mineral exploration and mining is relatively new compared to fisheries and petroleum exploration and development. New technologies as well as innovations to existing technology would be required to explore and develop mineral resources on or under the seabed.

68. The State will encourage mineral companies, which demonstrate the best available technology with a willingness to transfer it to PNG. Such technology must have been tested and proven to withstand some of the unique oceanographic and marine environmental conditions. In other words such technology ought to be technically feasible and environmentally friendly.

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J.2 Onshore Sourcing

69. Offshore mineral activities would be undertaken away from the shores. Specialised equipment and infrastructure may enable companies to undertake these activities without the need to visit ports. However, in principle, the State will encourage developments that demonstrate the willingness to source materials and other necessities from a PNG port.

J.3 Decommissioning and Rehabilitation

70. Under the UNCLOS, offshore structures are to be removed completely though there is provision for partial removal in certain cases. The State will encourage companies to submit a decommissioning and rehabilitation plan at an early stage preferably together with the development proposals. As a general rule investors in mineral exploration and development projects will be responsible and liable for decommissioning and rehabilitation. A time frame for purposes of residual liability of companies may be agreed to with the State on a case by case basis. In addition, fiscal relief for decommissioning costs may be considered by the State as an incentive for companies that plan and implement a decommissioning and rehabilitation programme. Further or alternatively regulation may be drawn up to obligate proponents of the project to establish and maintain a mine decommissioning and rehabilitation fund.

J.4 Marine Scientific Research

71. Marine Scientific Research (MSR) is a key component of the development of offshore minerals, and this has also been recognised under the stipulations of UNCLOS (Articles 246-257). This is also based on the fact that terrestrial licencing procedures do not deal with this issue in a way that is cognisant of MSR's impact on offshore licencing procedures, and especially with regards to exclusive rights of access to these offshore mineral occurrences.

72. Marine Scientific Research (MSR) is an important component of maritime activities. Under Part XIII of the Convention coastal States are obliged to allow other States and international organisations to conduct marine scientific research (MSR) in the EEl and continental shelf under reasonable terms and conditions. The coastal state may withhold consent to MSR where the project is of direct significance to exploration for or exploitation of natural resources. Within its internal waters, archipelagic waters and territorial sea, the State has absolute discretion over the conduct of MSR. The State may impose such conditions on MSR as it sees fit, including provisions relating to the disclosure and publication of data.

73. The country should be mindful of the needs of a tenement holder under the Mining Act or such other legislation that may be developed to regulate offshore mineral exploration and development.

74. The State will require all information derived from MSR within its sovereignty and maritime jurisdiction be provided by the MSR group. This data or information received after the granting of exploration licence may be made available to the EL holder upon payment of appropriate fees to the State as owner of such data and information.

J.5 Other Stakeholder Interests

75. Offshore mining may also affect other stakeholders in the offshore. Major stakeholders in the offshore include the coastal subsistent, artisanal and commercial/industrial fisheries as well as navigators, the tourist industry and so on. Any exploration or mining activity that is proposed or undertaken in the offshore ought to take account of these stakeholder interests. Where necessary appropriate compensation may be paid to these stakeholders who may not be able to have access to the previously accessible offshore areas.

[SOPAC Miscellaneous Report 323 -Revised Edition] [131]

J.6 Dispute Settlement Mechanisms

76. Any dispute regarding offshore activity may be referred to arbitration. In respect of activity within PNG's territorial sea such dispute shall be dealt with under the Arbitration Act. However, the State and holder of a mineral exploration/exploitation licence or other relevant tenement may agree on a dispute settlement mechanism that is independent of the Arbitration Act.

77. Should the State or the International Seabed Authority dispute any aspect of the offshore activity where their respective interests are affected such dispute may be referred to the dispute settlement mechanism established under the UNCLOS.

I: CONCLUSION

78. The Government of Papua New Guinea recognises that there is a tremendous potential for the development of its offshore mineral resources. The development of these resources will require the reconciliation of key policy issues within a dynamic framework that requires the collaboration of all stakeholders. The policy being developed has attempted to be as flexible as possible, given the unique characteristics of offshore mineral exploration and development and the relative unknown factors involved. Given time, and with the collaboration of all stakeholders, it is envisaged that this document will develop into a succinct and pragmatic policy document for the optimal development of PNG's offshore mineral resources.

79. This Policy document recognises the conventions of UNCLOS with regards to the development of a legislative framework for the development of its offshore minerals, and also the key aspects of offshore mineral exploration and development. These include the impact of technological progress and technology transfer; the possible impact of offshore mining on the nation's fishing industry; the possible impacts of offshore mining to the community and the environment; the impact of Marine Scientific Research in offshore mining; and its impact on the biota that exist on the seafloor around mineralised areas.

It is the belief of the PNG Government that this document demonstrates the need for comprehensive and integrated legislation that is specific to the responsible management and development of offshore mineral resources. These objectives would appear to be best met by the development of an Offshore Mining Law under which these resources can be explored and exploited for the benefit of the peoples of Papua New Guinea.

[SOPAC Miscellaneous Report 323 -Revised Edition] [132]

APPENDIX 2

Workshop Participants

Julian Malnic Linda Slater Chief Executive Resource Policy Advisor Nautilus Minerals Corp lId UNDP 379 Liverpool Street Private Mail Bag Darlinghurst, NSW 2010 Suva Australia Fiji Islands Tel: [612J93602941 Tel: [679J313411 Fax:[612J 9380 5593 Fax: [679J 304809 Email: [email protected] Email: [email protected]

Ray Binns Michael W. Lodge Chief Research Scientist Chief, Office of Legal Affairs CSIRO Exploration and Mining International Seabed Authority POBox 136 14-20 Port Royal St North Ryde, NSW 1670 Kingston Australia Jamaica Tel: [612J 9490 8741 Tel: [1J 876 9672200 Fax: [612J 9490 8921 Fax: [1J 876 922 0195 Email: [email protected] Email: [email protected]

Benedict Southworth Yuji Kajitani Campaign Manager Director Greenpeace Metal Mining Agency of Japan (MMAJ) Sydney, NSW 2001 Tokiwa Building Australia 1-24-14, Toranomon Tel: [612J 92614666 Minato-ku, Tokyo Fax: [612J 92614588 Japan Email: [email protected] Tel: [81J 3 55121397 Fax: [81J 3 55121428 Ben Ponia Email: [email protected] Director of Research Ministry of Marine Resources Hirohiko Tesishima POBox 85 Metal Mining Agency of Japan (MMAJ) Avarua, Rarotonga Tokiwa Building Cook Islands 1-24-14, Toranomon Tel: [682J 28730 Minato-ku, Tokyo Fax: [682J 29721 Japan Email: [email protected] Tel: [81J 3 5512 1399 Fax: [81J 3 55121428 George Niumaitaiwalu Email: [email protected] Deputy Director Mineral Resources Department Toyo Miyauchi Private Mail Bag Director Suva Metal Mining Agency of Japan (MMAJ) Fiji Islands 1-25-5, Toranomon Tel: [679J 381611 Minato-ku, Tokyo Fax: [679J 370039 Japan Email: oeorae [email protected] Tel: [81J 3 5512 1420 Fax: [81J 3 35939410 Andie Fong Toy Email: [email protected] International Legal Adviser Forum Secretariat Tetsuo Yamazaki Private Mail Bag Senior Researcher Suva National Institute for Resources & Environment Fiji Islands Onogawa 16-3 Tel: [679J312600/220259 Tsukuba, Ibaraki Fax: [679J 305554 Japan Email: [email protected] Tel: [81J 298588521 Fax: [81J 298588509 Email: [email protected] [133]

Shunji Sukizaki Papua New Guinea Researcher Tel: [675] 3224224 Marine Biological Research Institute of Fax: [675] 3213701 Japan Co Ltd 1-7-7 Nishi-Shimagawai Patricia Pepena Shinagawa-ku, Tokyo Senior Resource Scientist Japan Department of Mineral Resources Tel: {81]33779 1630 Private Mail Bag Fax: {81]33779 1629 Port Moresby Email: [email protected] Papua New Guinea Tel: [675] 3227695 Dr Jai-Woon Moon Fax: [675] 3213701 Head of Deepsea Mineral Resources Ltd Korea Ocean Research & Development Nelly James Institute (KORDI) Registrar -Mining Tenements 1270 Sadong, Ansan Department of Mineral Resources Kyunggido Private Mail Bag Korea Port Moresby Tel: [82] 345 400 6360 Papua New Guinea Fax: [82} 345 4188772 Tel: [675] 3212891 Emai/: [email protected] Fax: [675] 3213701

Kyeong-Yong Lee Lasark Joseph Head of Deepsea Resources Environmental Lab Senior Geologist Korea Ocean Research & Development Department of Mineral Resources Institute (KORDI) Private Mail Bag 1270 Sadong, Ansan Port Moresby Kyunggido 425-170 Papua New Guinea Korea Tel: {675]3214011 Tel: [82} 345 400 6370 Fax: [675] 3213701 Fax: [82] 345 418 8772 Email: [email protected] Pomat G. Manuai Senior Mining Engineer Kuma Aua Department of Mineral Resources Secretary Private Mail Bag Department of Mineral Resources Port Moresby Private Mail Bag Papua New Guinea Port Moresby Tel: [675]3227654 Papua New Guinea Fax: [675] 321 4637 Tel: [675] 3211961 Email: [email protected] Fax: {675]3217958 Email: [email protected] Phillip Samar Mining Engineer Graeme Hancock Department of Mineral Resources Director-Mining Division Private Mail Bag Department of Mineral Resources Port Moresby Private Mail Bag Papua New Guinea Port Moresby Tel: [675] Papua New Guinea Fax: [675} 3213701 Tel: [675] 3227624 Email: DhiliD osamar@minera/.oov.DO Fax: [675] 3213701 Email: oraeme [email protected] Paul Kia Geologist James Wanjik Department of Mineral Resources Principal Policy & Legal Officer Private Mail Bag Department of Mineral Resources Port Moresby Private Mail Bag Papua New Guinea Port Moresby Tel: [675] 3224259 Papua New Guinea Fax: {675]3211360 Tel: [675] 3227603 Fax: [675] 3213701 Dennis Bebego Email: iames [email protected] Director -Multilaterial Economic Affairs Branch Department of Foreign Affairs & Trade Joe Buleka POBox 422 Assistant Director Waigani Geotechnical & Hydrogeological Survey Branch Port Moresby Department of Mineral Resources Papua New Guinea Private Mail Bag Tel: [675] 3014203 Port Moresby Fax: {675]3231011 [134]

William Powi Ambrose Kebai Principal Advisor (Policy) Advising Officer Department of the Prime Minister & NEC International Revenue Commission of PNG Box 639 POBox 777 Waigani, NCD Port Moresby Port Moresby Papua New Guinea Papua New Guinea Tel: [675J3216546 Tel: [675J 3276747 Fax: [675J 3214002 Fax: [675J 3276755 Juliana Kubak Masio Nidung Principal Advisor -Policy Development & A/Director International Law Branch Research Division Department of Attorney General Department of Treasury & Planning POBox 591 (Office of National Planning) Waigani, NCD POBox 631 Port Moresby Waigani, NCD Papua New Guinea Port Moresby Tel: [675J 3252067 Papua New Guinea Fax: [675J 3230241 Tel: [675J 3288320 Fax: [675J 3288375 Francis Lola Adviser-Legal Williiam Boas Department of Petroleum & Energy Assistant Secretary-General Investments Branch POBox 1993 Department of Treasury Planning Port Moresby, NCD POBox 710 Papua New Guinea Waigani, NCD Tel: [675J 3224232/3224200 Port Moresby Fax: [675J 3211872 Papua New Guinea Email: francis [email protected] Tel: [675J 3288405 Fax: [675J 3288425 David Tau-Loi Email: william [email protected]:ov.og Assistant Manager-Technical Mineral Resources Group of Companies Zebby Marare POBox 1076 Senior Policy Officer Port Moresby Department of Provincial & Local Papua New Guinea Government Affairs Tel: [6753217131 PO Box 1287 Fax: [675J 3217603 Boroko, NCD Email: [email protected] Papua New Guinea Tel: [675J3011082/3011015 Damien Ase Fax: [675J 3231438/3250553 Corporate Lawyer Mineral Resources Development Company Ltd Gabi Haoda POBox 1076 Senior Policy Officer Port Moresby Department of Transport Papua New Guinea POBox 1489 Tel: [675J 3217133 Port Moresby Fax: [675J 3217603 Papua New Guinea Email: [email protected] Tel: [675J3222595 Fax: [675J 3201205 Katrina Solien Senior Environment Protection Officer Ursula Kolkolo Department of Environment & Conservation Manager POBox 6601 Research & Management Branch Boroko, Port Moresl?Y National Fisheries Authority Papua New Guinea POBox 2016 Tel: [675J 3250194 Port Moresby, NCD Fax: [675J 3250182 Papua New Guinea Email: [email protected] Tel: [675J3212643 Fax: [675J 320 2074 Roddy Wada Email: [email protected] Investigations Officer Department of Treasury & Planning Donn Tolia Vulupindi Haus Director of Geology Box 710 Mines and Mineral Resources Division Waigani, Port Moresby Department of Energy, Mines & Water Resources Papua New Guinea Ministry of Natural Resources Tel: [675J 3288402/3288540 POBox G37 Fax: [675J 3288425 Honiara [135]

Solomon Islands Stanley Temakon Tel: [677J 21521 Director-General Fax: [677J 25811 Ministry of Lands, Energy, Mines and Water Resources David M. Natogga Private Mail Bag 001 Principal Economic Geologist Port Vila Department of Energy, Mines & Water Resources Vanuatu Ministry of Natural Resources Tel: [678J 22423 POBox G37 Fax: [678J 22213 Honiara Solomon Islands Tel: [677J 21521 SOPAC SECRETARIAT Fax: [677J 25811 Alfred Simpson Uilou Samani Director Government Geologist & Environment Scientist SOPAC Secretariat Ministry of Lands, Survey & Natural Resources Private Mail Bag, GPO POBox 5 Suva Nuku'alofa Fiji Islands Kingdom of Tonga Tel: [679J381377 Tel: [676J 23611 Fax: [679J 370040 Fax: [676J 23216 Email: alf@so{)ac.orQ.fi

Allen Clark Jackson Lum East-West Centre Marine Geologist 1777 East-West Road Email: iack@so{)ac.orQ.fi Honolulu Hawaii 96848 Helena McLeod USA Resource Economist Tel: [808J 9447509 Email: helena@so{)ac.orQ.fi Fax: [808J 944 7559 Email: [email protected] Kazuhiro Kojima Offshore Minerals Geologist Charles Morgan Email: kazuhiro@so{)ac.orQ.fi 94-452 Mulehu Street Mililani Laisa Baravilala-Baoa Hawaii 96789 Program Assistant USA Email: [email protected] Tel: [808J 956 6036 Fax: [808J 956 5308 Email: [email protected]

William H. Wilkinson Phelps Dodge Exploration Corporation 2600 N. Central Ave Phoenix, AZ 85004 USA Tel: [602J 2346080 Fax: [602J 234 4847 Email: wwilkinson@{)hel{)sdodQe.com