Rio Tinto Group has given away its stake in the company that owns an abandoned mine in Papua New Guinea with potential copper and gold reserves worth $51 billion.
The London-based miner has transferred its 54 percent holding in Bougainville Copper Ltd., owner of the Panguna project, to an independent trustee “for no consideration,” Rio said in astatementThursday. The trustee will manage the distribution of shares to national and local governments.
The divestment comes as the world’s second-biggest miner prepares for a change in leadership, with Jean-Sebastien Jacques to replace Sam Walsh as chief executive officer from July 2.
Panguna, Bougainville Copper’s asset on Bougainville Island, was shut due to local unrest in 1989. The company estimated in its 2014 annual report that reserves stood at 5.3 million metric tons of copper and 19.3 million ounces of gold. That would be worth about $51 billion at today’s prices.
“The dollar-value sum is not significant, not to Rio Tinto, but it’s quite a symbolic gesture to the people of Bougainville,” Peter O’Connor, a Sydney-based analyst with Shaw and Partners Ltd., said by phone. “It’s been a 30-year long saga. To draw to a close at some point is inevitable.”
Rio had said it was reviewing its stake in 2014 after the provincial government passed laws that might adversely affect Bougainville Copper’s mining rights. Reopening the mine could cost more than $4 billion, PNG’s then-Prime Minister said in 2010.
Rio’s decision will provide “a platform for the ABG and PNG Government to work together on future options for the resource,” Rio’s copper & coal chief executive Chris Salisbury said in the statement, referring to the Autonomous Bougainville Government.
Rio will no longer hold any interest in Bougainville Copper. The PNG government currently owns 19 percent of the company and public shareholders the rest. Bougainville’s Sydney-listed shares surged 55 percent to 31 Australian cents at the close. Rio’s shares were 1.5 percent higher.
Bougainville Copper said its board of directors is considering the implications of Rio’s action, according to a separate statement. The company’s Chairman and Managing Director Peter Taylor will resign, and Robert Burns has been appointed acting chairman.
“They now have a situation where they can sit back and review, and decide on their journey from here, maybe include another owner,” Shaw and Partners’ O’Connor said. The chances of the mine restarting are “probably closer to zero, but it’s still a globally significant ore body, which may one day be mined.”
Source: The Australian
Rio Tinto 'gives up' Bougainville Copper stake
Rio Tinto has exited its 53.8 per cent stake in the ASX-listed Bougainville Copper after a near two-year review of its position.
The mining giant will transfer the holding to an independent trustee who will distribute the shares to both the Autonomous Bougainville Government (ABG) and the Papua New Guinea government.
It will receive no compensation in return despite the stake being worth over $40 million as of the close of trade yesterday.
The decision by Rio will see the ABG receive a greater proportion of its stock, although both ABG and the PNG government will hold an equal share of 36.4 per cent once the stake is transferred.
Bougainville Copper’s prospects rest on the future of the controversial Panguna copper/gold mine in Papua New Guinea, which has been out of operation since it was central to the start of a 10-year civil war that broke out in 1989.
The Panguna mine was a major producer in its heyday and is believed to still house a very significant 5.3 million tonnes of copper and 19.3 million ounces of gold. However, it could cost up to $10 billion to restart production, while the hurdle of public support will be a challenge to clear.
Bougainville Copper’s rights to the mine were stripped in 2014, which led to the Rio review and while it still hopes to reclaim the licence to develop the mine, there has been no significant change to the state of play.
It does, however, retain an exploration licence.
Rio’s stake was worth $92.5m when it first hinted at an exit, with market interest steadily fading since.
“Our review looked at a broad range of options and by distributing our shares in this way we aim to provide landowners, those closest to the mine, and all the people of Bougainville a greater say in the future of Panguna,” Rio Tinto Copper & Coal chief executive Chris Salisbury said.
“The ultimate distribution of our shares also provides a platform for the ABG and PNG government to work together on future options for the resource.”
The deal will see Rio give six months’ notice for termination of its management agreement with the ASX-listed group, while Bougainville Copper chairman Peter Taylor will step aside, with immediate effect.
Should either the PNG government or ABG not accept the stake offered by Rio within two months, it will be offered up for the other party to take control.
The departure of Rio from the project echoes a similar decision to walk away from the Northern Dynasty Minerals project in Alaska in April 2014, as it gifted its stake in that controversial project to charitable enterprises.
Bougainville President, John Momis, today expressed anger at Rio Tinto’s decision to transfer its 53.8 per cent share in Bougainville Copper Ltd (BCL). International mining giant, Rio earlier announced transfer if its BCL shares to an independent trustee, for distribution to the ABG (36.4 per cent), and the PNG Government (17.4 per cent).
PNG is already 2ndlargest BCL shareholder. So the share distribution would see the governments equal BCL shareholders – 36.4 per cent each. The remaining 27 per cent of shares are held by small shareholders.
Rio Tinto has been reviewing its BCL shareholding for almost two years. The review resulted in Rio deciding to end its investment in BCL, which ran the giant copper and gold mine at Panguna from 1972 to 1989, under the 1967 Bougainville Copper Agreement (BCA).
“Rio Tinto has made a unilateral decision,” President Momis said, “it failed to consult the Bougainville Government about distributing its shares.”
“At meetings with senior Rio officials, in July 2015 and February 2016, I warned strongly against transfer of Rio’s shares to PNG. It Bougainvilleans cannot accept National Government control over the future of Panguna through either majority or equal shareholding in BCL.
“We are open to PNG remaining a BCL shareholder. That may assist us find responsible partners and financiers for possible future operations at Panguna. But we cannot accept Rio Tinto’s interference in seeking to give PNG equal control over Panguna. There is no possibility of progress on resolving the future of Panguna on that basis.”
“Rio Tinto has shown arrogance and ignorance in ignoring my warning. Sitting in their comfortable London offices, they have interfered in Bougainville’s affairs by deciding PNG should have equal control of BCL.
“Bougainvilleans are united in rejecting what Rio Tinto seeks to thrust upon us.”
Source: PNG Attitude
Rio gives up – on its way out of Bougainville & leaving a mess
AFTER two years of deliberation, Rio Tinto has today transferred its 53.8% shareholding in Bougainville Copper Limited (BCL) to an independent trustee, which, in six months, will provide both the PNG and Bougainville governments each with 36.4% of the company.
The remaining 27.2% of shares is held by independent shareholders, who now become important players in the future of BCL.
In a media statement, Rio said Equity Trustees Limited will manage the distribution of shares between the ABG "for the benefit of Panguna landowners, the people of Bougainville and PNG".
According to Rio, this “ensures both parties are equally involved in any consideration and decision-making around the future of the Panguna mine.
“The ultimate distribution of our shares provides a platform for the ABG and PNG government to work together on future options for the resource,” said Rio copper & coal chief executive Chris Salisbury.
“Our review looked at a broad range of options and by distributing our shares in this way we aim to provide landowners, those closest to the mine, and all the people of Bougainville a greater say in the future of Panguna.”
Although Rio will no longer hold any interest in BCL, the statement said it will continue to meet its obligations under the agreement during that period to ensure an orderly transition in the shareholding.
BCL chairman Peter Taylor resigned with immediate effect but will continue to provide services to the board during the transition period.
The statement was silent on whether Rio will take any responsibility for the environmental clean-up of the site, so it must be assumed that this huge task will be left to BCL to address.
The negotiations about who will eventually take control of BCL will be particularly messy, and Rio must know this.
The governments of PNG and Bougainville have been at loggerheads for some time over financial obligations the PNG government has not met in relation to the Bougainville Peace Agreement.
In light of this, Mr Salisbury’s comment that Rio’s decision “provides a platform for the ABG and PNG government to work together on future options” seems especially cynical.
With Bougainville’s referendum on independence due in the next couple of years, Rio’s stepping aside could turn out to be an abdication that spells even bigger trouble for Bougainville-PNG relations.
Rio Tinto has today transferred its 53.8 per cent shareholding in Bougainville Copper Limited (BCL) to an independent trustee.
Equity Trustees Limited will manage the distribution of these shares between the Autonomous Bougainville Government (ABG) for the benefit of all the Panguna landowners and the people of Bougainville, and the Independent State of Papua New Guinea (PNG).
Under the trust deed, the ABG has the opportunity to receive 68 per cent of Rio Tinto’s shareholding (which equates to 36.4 per cent of BCL’s shares) from the independent trustee for no consideration and PNG is entitled to the remaining 32 per cent (which equates to 17.4 per cent of BCL’s shares).
The ABG and PNG will both hold an equal share in BCL of 36.4 per cent if the transfers are completed. This ensures both parties are equally involved in any consideration and decision-making around the future of the Panguna mine.
The Trust Deed determines that should either beneficiary of the trust not apply for the transfer of the BCL shares attributable to them from the trustee within two months, then those shares will be made available to the other party.
Rio Tinto Copper & Coal chief executive Chris Salisbury said “Our review looked at a broad range of options and by distributing our shares in this way we aim to provide landowners, those closest to the mine, and all the people of Bougainville a greater say in the future of Panguna. The ultimate distribution of our shares also provides a platform for the ABG and PNG Government to work together on future options for the resource.”
In accordance with the existing management agreement with BCL, Rio Tinto will today give the required six months’ notice to terminate the arrangement. Although Rio Tinto will no longer hold any interest in BCL, Rio Tinto will continue to meet its obligations under the agreement during that period to ensure an orderly transition in the shareholdings of the company. BCL chairman Peter Taylor will resign with immediate effect but he will continue to be available to provide services to the board during this transition period.
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