Australian resources companies have been asked to lift their investment in Papua New Guinea’s mining sector as the country slashes its red tape to accelerate major new exploration and mine development projects. One of the biggest changes expected to increase the Australian impetus in its nearest neighbour is PNG’s review of its mining act – which the country’s Minister for Mines, Sam Akoitai, says is nearing completion.
“This will increase the exploration tenure in PNG from two years to five years and we expect that will have significant appeal to foreign mining investors, particularly as we estimate only one third of our mineral resource has been exploited,” Akoitai said. In an address delivered on his behalf to the Paydirt Asia Pacific Downunder Conference in Perth, Mr Akoitai said that while a common description of PNG was an unknown frontier described as “the mountain of gold floating on a sea of oil”, it remained one of the least explored countries in the Asia Pacific.
“The mineral resources of PNG still include vast areas of greenfields with known or inferred but unexploited resources,” he said. “While mining has played a very significant role in PNG’s early development, we are seeking to implement a raft of legislative and regulatory initiatives to ensure that the industry remains vibrant and internationally competitive. This includes the establishment of the Mineral Resources Authority (MRA). While not yet fully functional even though the bill was passed early this year,due to some constitutional issues, the establishment of the Authority is to ensure that the current responsibility of PNG’s Department of Mining is carried out effectively. Currently, the Department is not adequately funded and is ill equipped to carry out its statutory functions. The MRA will have sufficient funding (mainly from production levies) and adequate staffing levels to facilitate the administrative functions ensuring that all stakeholder interests are adequately dealt with.”
On the question of tenure, Mr Akoitai said security of tenure was an important issue for PNG’s future mineral development and the current two year tenure had been said to be too short. “This has been one of the industry’s major concerns, and the extension in tenure to five years is geared at remedying that,” Akoitai said.
Other fiscal changes introduced to attract more mining investment included a 30% income tax rate, 10% dividend withholding tax, an accelerated depreciation allowance, a 2% royalty rate, a 200% deduction of exploration expenditure and the abolishment of additional profit tax.
“We have successfully restructured the fiscal regime to make PNG one of the world’s best places to invest in, in terms of return on investment. This is evident in the exploration pickup rate, with 25 new licence applications in the first six months of this year, compared to just 26 for the whole of the previous 12 months. We anticipate that by end of 2006, this figure is likely to double. In addition, total exploration expenditure in PNG in 2005 was pgk90 million yet the total expenditure to June this year for 2006 is pgk170 million.
“Significantly, PNG is now attracting new players from across the world and we have explorers from Canada, the UK, South Africa and Asia and the Chinese state company, MCC, has taken up 85% of the Ramu nickel project. We say to Australia though – there are some Australian companies which have been around for a long time in PNG and we encourage more Australian based explorers to come – we are just next door.”
