Porgera Restart: Benefits to be Shared Fairly, Transparently

PRESS RELEASE

New Porgera Limited (NPL) would like to clarify certain matters related to the reopening of the Porgera gold mine that have been the subject of speculation and considerable misinformation both in the national media and on social media platforms over the past week.

The benefit sharing terms agreed between the State, Barrick Niugini Limited (BNL), Kumul Mineral Holdings Limited (KMHL) and Mineral Resources Enga (MRE) to restart the mine ensure a transparent and fair distribution of the overall economic benefits that will be generated by Porgera over its 20-year mine life.

Over the life of mine, PNG shareholders, comprising Porgera landowners, Enga province and the State (including KMHL which will hold the equity in new Porgera on behalf of the State), will receive 53% of Porgera’s overall economic benefits. BNL will receive the remaining 47%.

At a gold price of US$1,800 per ounce, PNG shareholders would expect to receive nearly US$7.3 billion (Kina ~25.2 billion) over a potential 20 year life and US$2.8 billion (Kina ~9.7 billion) in the first ten years. The current gold price is significantly higher at approximately US$2,170 per ounce.

Importantly, BNL, the operator of New Porgera Limited, has committed to financing the capital required to restart the mine. Furthermore, once the mine has restarted, any additional loans made by BNL or its affiliates to New Porgera Limited will be on an interest-free basis.

This means the State of Papua New Guinea will never face a situation where it would be necessary to take out interest-bearing commercial loans to fund its portion of the capital needed for investment in the mine.

During the period between when the mine ceased operations in April 2020 until the reopening on 22 December 2023, BNL has alone funded 100% of the care and maintenance and preparatory restart costs totaling approximately US$677.6 million (Kina ~2.58 billion).

The State, KMHL and BNL agreed that initially KHML’s dividends from New Porgera Limited (as well as the dividends paid to the entity jointly owned by Barrick and Zijin that holds shares in NPL) will be used to reimburse BNL for the care and maintenance and restart costs (other than some agreed nonrecoverable costs).

However, the other PNG shareholders are not affected by this arrangement and will receive their dividends as they are declared following the start of operations.

In addition, New Porgera Limited will be a significant taxpayer, being subject to a 32% corporate tax rate, in return for fiscal stability under the Resource Contracts Fiscal Stabilization Act, and an increase in the royalty from 2% to 3%.

The proportion of equity and economic benefits that belong to the landowners is also a first in PNG’s agreements with international investors.

Separately there have been reports in the media that New Porgera Limited has selectively engaged individual clan members in discussions on compensation agreements and bypassed the Porgera Landowners Association.

This is not true. NPL has not selected the landholder representatives with whom it is dealing. Rather, NPL is following the Government’s agency system that has been used for compensation payments since 1989, which has long been accepted by landholders.

NPL is committed to progressing negotiation of the long-term compensation agreements with tenement landholder agents as soon as possible, and an NPL team is currently in Porgera and Tari on a second visit in as many months for this purpose.

NPL agreed to doing so under the interim Consent Compensation Agreements arrangements that were endorsed last year by the overwhelming majority of landholder agents and approved and registered by the Mineral Resources Authority to allow the mine to reopen.

The members of the Porgera Landowners Association (PLOA) have been invited to participate in the discussions concerning the compensation agreement for SML13 and we look forward to their involvement in those discussions, as well as their participation in the State-led process to agree the Community Development Agreements (CDA).

NPL would like to see the benefits being distributed directly to the household level, and not through middlemen, to ensure the benefits actually reach the people for whom they are intended.

These facts have been shared to clarify some of the confusion created by inaccurate accounts of the terms of Porgera’s reopening and demonstrate beyond doubt that the benefits derived from this world-class mine will be shared fairly between PNG and its partner, BNL, and that NPL is engaging with landowners in a completely transparent and appropriate manner in accordance with PNG law.

Finally, the law and order situation in the Porgera Valley continues to be a major concern.

It is critically important that a safe and stable security environment is quickly restored and maintained for the benefit of the Porgera community and to support the continuation of the restart operations.