Morobe Consolidated Goldfields Limited Morobe Gold and Silver Project Socio-Economic Impact Study Volume I Introduction, analysis of social and political risks, recommendations Volume II Area study and social mapping Volume III Working Papers March 2001 proof corrections 9 May 2001 document format remediated in Word 2007, 22 August 2010 Author With the assistance of John Burton Peter Bennett, MCG In 2001: Morobe Consolidated Goldfields Ngawae Mitio, MCG In 2010: Australian National University Lengeto Giam, MCG Wayang Kawa, MCG Susy Bonnell, Subada Consulting Jennifer Krimbu, MCG Boina Yaya, MCG EXECUTIVE SUMMARY · This study characterises the stakeholder environment in the hinterland of the Morobe Gold and Silver Project. Its key objectives are to identify areas of risk in the inter- stakeholder relationships and to provide the means of ensuring equity in the distribution of mine-related benefits. · On present design, the project will be a small to medium sized operation, compared with the larger contemporary mining and petroleum operations in Papua New Guinea. Partly as a consideration of the project’s size, this report deals only in passing with the project’s macroeconomic contributions to Papua New Guinea, useful though they may be, instead looking much more closely at its effects within the District it is situated in, one of 89 in the country. · This emphasis is also helpful in focussing on the key social and political risks of the project at a time in the development of Papua New Guinea when contemporary political process has seen renewed efforts to de-centralise many of the planning and implementation functions of government to District level. · The primary project impact area comprises the parts of the Bulolo District where the project’s principal Biangai (50%) and Watut (50%) landowners live and which contains the historical mining towns of Wau and Bulolo, established in the 1920s when the area was opened up to Australia prospectors after the First World War. · This is the first SML (Special Mining Lease) based project in the country to be proposed for an area that is not ‘remote’; that is, with little existing infrastructure, distant from towns and with a limited pool of potential employees with any formal work experience. · The project will complement existing mining, timber and pastoral operations in the area which have provided employment to a diverse mix of people, drawn from both the customary owners and many other parts of mainland Papua New Guinea, for the last 75 years. · The project will be able to make use of a highway already sealed from the ocean port of Lae as far as Bulolo, draw on the graduates of the twenty-four primary, three secondary and vocational, and one university level educational institutions in the District for employment, use its two airfields, and accommodate its workforce in and adjacent to existing urban land. The project’s key social and political risks are related (a) to the special history of Wau and Bulolo and (b) cultural and social organisational factors that have acted to constrain development among the Biangai and Watut people in the past. · In relation to their history, both the Biangai and Watut peoples feel dispossessed by colonial era land acquisitions that made mining and the establishment of their two - i - towns possible, and which created wealth that helped build the rest of New Guinea up to the end of the 1960s, but which gave due recognition to them only belatedly. · This is accompanied by a feeling of neglect by post-Independence governments as the focus of development and urbanisation has shifted into the highland interior of Papua New Guinea and out to the coastal towns of Moresby, Madang and Lae—the latter once merely a service centre for Wau. · In relation to their culture and social organisation, both groups—in common with everywhere else in Papua New Guinea—have special characteristics that allow the rapid uptake of certain aspects of development but act to inhibit others. An important issue is how ‘safe’ decision-making can be made in the context of societies where leaders are not given a customary mandate to speak for their communities on matters which are essentially handled at family level. · The short mine life of ten years is identified as a critical negative impact of the project; the main reason is that many landowner ventures (like small businesses everywhere) will inevitably fail at the first attempt, and a short mine life will allow few second chances. Similarly, a short mine life means that local area employees will have ‘jobs’, but not ‘careers’ at the project. · When project design details are more advanced in relation to procurement and the demand for locally-sourced services, a Business Development Plan will be prepared as a separate document. · A Mining Development Forum will be the venue at which stakeholders will meet to negotiate and finalise those parts of the mining agreements that relate to stakeholder benefits and obligations to one another during the project life. (This follows from government requirements for the issuing of a Special Mining Lease in Papua New Guinea.) · Balance among the benefit streams that accrue at an SML mining project—lease payments and compensation, royalty, employment, small business opportunities, provincial funding arrangements, equity provisions—is identified as being more important than their absolute scale, though this should be in line with contemporary industry practice. This study recommends that the participants at the Mining Development Forum adopt the primary goal of achieving overall balance, taking into account their different methods of quantification and delivery, in the overall package of benefits. · One-off compensation for clearance of the high bush during construction will deliver large amounts of cash for a short time; in view of difficulties experienced elsewhere this study recommends a financial model be prepared in order to negotiate a village development package at the Development Forum using this money as a common property benefit. A village housing scheme is indentified as the most appropriate objective. · Mortality rates in the rural hinterland of the project are among the highest in the country. The company has been involved in health assistance to villages for ten years; it may wish undertake to extend its involvement at the Development Forum. - ii - However, if doing so, undertakings should be sought detailing the responsibilities of government, including for the facilitation and endorsement of donor assistance in the area of health. · Social and political risks are identified in several areas. These are divided into three parts: in the local political process, relating to the project design, and relating to the environment. · The local political process: Wau and Bulolo are not noted for competive, resource- consuming politics—indeed have suffered in the past because of the invisibility of local political issues on the stage of national politics. However, the whole area is vulnerable instead to intrigues and dealings over alienated land, whose history dates back to acquisitions by the Administration in the 1932-41 period, and litigation over the ownerhip of leases on non-alienated land, including mining tenements. · The part of EL677 designated in 1987 in the Provincial Land Court as being an ‘Area of Common Interest’ between Kwembu, Winima and Nauti villages, and where the Hidden Valley ore body is situated, is considered to be under secure ownership. The likelihood of legal challenge is considered to be low. · Other parts of EL677 where exploration activity has taken place have not been the subject of specific legal cases. Compensation sharing arrangements have been subject to understandings only among Kwembu and Winima families. These understandings are not secure but concern only the members of the two villages, who are close relatives. The likelihood of legal challenge from other places is considered to be very low. · The part of EL497 where the Hamata prospect is situated, and subject to a determination of ownership in the Local Land Court in 1992, is not considered to be under secure ownership: (a) several parties, whose witness statements in earlier cases show at least that their cases need to be heard, were excluded from the court for procedural reasons which do not now exist, and (b) evidence presented in the court contains flaws overlooked by the magistrate but which are now apparent. The likelihood of a legal challenge being successful is considered to be high, but concerns land more than 5km from the proposed SML. · The remaining parts of EL497, including areas that may be needed for waste dumps adjacent to the Hidden Valley SML, is considered to be under contestable ownership. The Local Land Court case over Hamata, which was taken by the two previous tenement holders to also cover land between it and Hidden Valley, actually refers to the land immediately around Hamata. The likelihood of litigation everywhere else is considered to be high. · Relating to the project design (on current plans): the acquisition of land for the project will not cause land shortage near to human settlement; the relocation of communities is not required; the mill and main industrial facilities will not cause a nuisance near to human settlements. The construction of the mine will consume some natural resources (mid-montane forest with Nothofagus and conifers) that villagers could otherwise make economic use of, but the remote location of the facilities in relation to existing means of access is a mitigating factor. - iii - · On the other hand, the planned access route through Edie Creek, and any camp accommodation in the Edie Creek-Bulldog Track area, will involve far more contact with the settler communities of alluvial miners there than has been the case during exploration. There is potential for conflict and the Liaison Department will need adequate resources to ensure that this does not happen.