DEPARTMENT OF MINERAL POLICY & GEOHAZARDS MANAGEMENT

AND

MINERAL RESOURCES AUTHORITY

SPC-EU EDF10 DEEP SEA MINERALS (DSM) PROJECT INAUGURAL REGIONAL

WORKSHOP(6 – 8 June 2011 Tanoa Internaional Hotel, Nadi, Fiji)

THE INDEPENDENT STATE OF PAPUA NEW GUINEA

PRESENTATIONS

1. OVERVIEW OF THE REVIEW OF PNG MINERAL POLICY AND LEGISLATIONHarry Kore – Director (DMPGM - Mineral Policy & Legislation Division)

2. OVERVIEW OF THE DRAFT OFFSHORE MINING POLICYSteve Raaymakers – Consultant (DMPGM - Offshore Mineral Policy)

3. PNG’S CLAIM FOR EXTENDED CONTINENTAL SHELF AND ITS IMPLICATIONS ON THE POLICY DEVELOPMENT

Gregory Roaveneo – Assistant Director (DMPGM - Policy Advisory Branch)

4. THE EXPLORATION AND MINING PROCESSES AND POTENTIALSJerry Naime – Manager (MRA - Exploration Coordination Branch)

5. EQUITY PARTICIPATION ON SOLWARA 1Shadrach Himata – Deputy Secretary (DMPGM)

6. GEOHAZARDS MANAGEMENT INITIATIVES, CONTRIBUTIONS AND LIMKAGES TO OFFSHORE MINING

John Arumba – Director (DMPGM - Geohazards Management Division)

DMPGMDEPARTMENT OF MINERAL POLICY & GEOHAZARDS MANAGEMENT

SPC-EU EDF10 DEEP SEA MINERALS (DSM) PROJECT INAUGURAL REGIONAL

WORKSHOP(6 – 8 June 2011 Tanoa Internaional Hotel, Nadi, Fiji)

OVERVIEW OF THE PNG MINERALPOLICY AND LEGISLATION

REVIEWHarry Kore – Director (Mineral Policy & Legislation Division)

courtesy of Nautilus Minerals Niugini Limited

INSTITUTIONAL STRUCTURE

NEC Decision No. 164 of 17th Sept 2004 Approved restructure of former Dept of Mining Established MRA and DMPGM

MRA (2007) Regulator of the mining industry

Deal with geological survey, tenement administration, mine safety, project coordination

DMPGM (2009) Development of Mineral Policy and Legislation Management of Geological Hazards

OUR VISION 

By 2015 we will have a globally competitive mineral policy and legislative framework and a state of the art geohazards management system

OUR MISSION

We exist to improve the quality of life and safety of

our people in Papua New Guinea through

effective Mineral Policies and reduction of Geological Risks

REVIEW PROCESS 2009

Announcement by Deputy PM & Mining Minister (22/05/09)

Planning and sourcing of funds and assistanceWorkshop on Review

2010Invited Public Comments on draft Legislations and PolicyEstablished Commentary MatrixIdentification of Predominant IssuesOngoing consultations

2011Engagement of international ConsultantsPNG Regional Forum Consultations (x 4)Finalization of the draft legislations and policiesFinal Selective ScrutinyGovernment process for Enactment

POLICY & LEGISLATIVE REVIEW 2011

• Work currently in progress since 2009 (End July 2011)MINING ACT 1992 (per 2006 draft)MINING (SAFETY) ACT 1977 (per 2006 draft)MINERAL POLICY (per 2004 version)OFFSHORE MINERAL POLICY (per 1999 green paper)

MINERAL RESOURCES AUTHORITY ACT 2005

• Additions to the Mining Act (PARTS)PROSECUTION & PENALTIES PROVISIONMINE CLOSURE PROVISIONOFFSHORE MINING PROVISION

Work in Progress to 2015

• DOWNSTREAM PROCESSING DEVELOPMENT POLICY• MINE WASTE MANAGEMENT POLICY• INVOLUNTARY RELOCATION POLICY• MINE CLOSURE & SUSTAINABLE DEVELOPMENT POLICY• STUDY ON - COMPENSATION RATE

STUDY ON ROYALTY• SOCIAL IMPACT ASSESSMENT GUIDELINES• GEOHAZARDS MANAGEMENT POLICY• COAL SEAM METHANE POLICY• GEOTHERMAL POLICY• DATABASE FOR MINERAL POLICIES AND LEGISLATION

MINERAL POLICY & LEGISLATION …Cont.

Consultants Engaged 2011

Ms. Diana Dalton – Mineral Policy and Mining Act 1992

A skilled lawyer who was involved in the drafting of the current Mining Act 1992. She has done similar work for about 37 different countries and is currently the chair of the petroleum regulating body in Canada.

Mr. Geoff King – Mining (Safety) Act 1977

Has vast experiences in PNG serving the State. A very senior and experience lawyer involved in the drafting of a number of other legislations in PNG as well as the Oil & Gas Act 1998 as well as providing advice to the State on LNG matters. Well experienced in the Petroleum sector.

Mr. Steve Raaymakers – Offshore Mineral Policy

A well qualified individual who is the principal of Ecostrategic; a consulting firm engaged throughout the world in marine and environmental matters. Has vast experience in maritime issues and is currently drafting the ten (10) pieces of legislations for the National Maritime Safety Authority.

INSIGHTS INTO THE MINING ACT REVIEW

TENEMENT ADMINISTRATION• Merging of an SML with the ML• Mining Retention Licence• Online application and approval processing• Expeditious consideration of licence applications• State Equity Participation• Expeditious renewal of licence applications• Tenure of Licences• Limitation on the number of exploration licences

… MINING ACT REVIEW

COMPLIANCE REQUIREMENTS• Mining Advisory Council functions and independence• Social mapping and landowner identification• Mining Wardens additional powers • Royalty• Reporting, information and audit requirements• Improved compliance requirements• Prosecution for breaches of the Mining Act • Contracts and Agreements under the Mining regime• Mine Closure provisions• General Alignments – Petromin, MAC, royalties, etc

… MINING ACT REVIEW

POLICY REQUIREMENTS• Community awareness and consultations• Prov. Govt. and Landowner participation• Alternative dispute resolution process• Accountability for MOA obligations• Benefits distribution• Clarity on the various benefit streams

NATIONAL GOVERNMENT REVENUE STREAMS

1. FISCAL PROVISIONSCorporate Income Tax 30% resident companies 40% non-resident companies

Other Types of Taxes Interest Withholding Tax (15%) Dividend Withholding Tax (10%) Salaries & Wages Tax Production Levy (0.25% MRA)

2. STATE EQUITY PARTICIPATION

PROVINCIAL GOVERNMENT AND LANDOWNERS

1. Royalty 2. Compensation 3. Equity Participation 4. Business Opportunities 5. Employment Opportunities 6. Education and Training 7. Special Support Grants 8. Tax Credit Scheme 9. Infrastructure Development 10. Community Development and Assistance

General Comments on Offshore Mining Policy

CURRENT LAW:Section 6 LAND AVAILABLE FOR EXPLORATION AND MINING

Subject to this Act, all land in the State, including all water lying over

that land, is available for exploration and mining and the grant of tenements over it.

REVISED LAW:

General provisions that would provide for the conduct of offshore mineral exploration and mining.

Regulations to be developed to cater for specific areas that can be regulated upon.

NEW POLICY: Need to develop a Policy Guideline to set out the parameters within which a developer should conduct its business in PNG

PUBLIC DEMAND: Policy Guideline must be developed immediately to give some level of comfort to our people that offshore mining will be regulated

CONCLUSION

The process allowed a wider range of stakeholders to offer valuable commentary

Consultation forums process were organized to avoid confrontations and conflicts

Stakeholders were encouraged to take ownership by contributing directly to the Review Exercise

We are confident of achieving our goal!

Improving The Quality of Life

And

Safety of Our People

Hck10042011

Steve

Overview of PNG’s eCS Claims

Gregory RoaveneoDepartment of Mineral Policy and Geohazards Management

7 June 2011, Tanoa International Hotel, NadiFiji

Eauripik Rise Mussau Ridge

Ontong Java Platau

Technical Prerequisites and Considerations

1. Delimitation of Maritime Zones and Boundaries

2. Deadline of May 2009 Achieved

3. Maritime Zones Bill (Draft)

SPC – EU EDF10 DEEP SEA MINERALS (DSM) PROJECT 1st REGIONAL WORKSHOP - FIJI

A DEVELOPING COUNTRY’S CHALENGES INPERMITTING / REGULATION UNDERWATER

MINING – PNG EXPERIENCE

PRESENTATION BY MINERAL RESOURCES AUTHORITY

PAPUA NEW GUINEA

04/10/2023 25

BACKGROUND / AKNOWLEDGEMENT

Papua New Guinea has permitted its first underwater mine. Nautilus Minerals (PNG) Limited is the company permitted to operate the Solwara 1 project. The successful permitting of the activity was due to the existence of a broad legislative framework and the collaborative efforts of stakeholders.

Challenges faced included the lack of specific guidelines or policies for underwater mining; lack of existing technology and/or mining method; lack of benefit sharing mechanism for such a project and management of the perceptions of local communities that fear environmental degradation by the mining project.

This presentation shares the experience of Papua New Guinea’s first under water mine. A background of the country, the project and the legislative framework are presented. Followed by the challenges and approach taken to permit the project.Minerals for Life

Name of Mine Type of Mining License Law & Regulation Permitted under Year of first grant

Status of operation

Bougainville Copper (also called Panguna Mine)

Special Mining Lease Mining (Bougainville Copper Agreement) Act+Mining Safety Act

1969 Pre-maturely closed due to civil unrest

Ok Tedi Copper Mine

Special Mining Lease Mining (Ok Tedi Agreement) Act 1976+Mining Safety Act

1981 Planning for closure in 2013 but possible extension to 2020.

Misima Gold/Silver

Special Mining Lease with a Mining Development Agreement

Mining Act +Mining Safety Act+Environment Act 2000

1987 Operations ceased and under rehabilitation since May 2004.Yet to relinquish lease.

Porgera Gold Special Mining Lease with a Mining Development Contract (note the change from ‘Mining Development Agreement’)

Mining Act 1992+Mining Safety Act+Environment Act 2000

1989 In Operation

Lihir Gold Special Mining Lease with a Mining Development Contract

Mining Act 1992+Mining Safety Act+Environment Act 2000

1995 In Operation

Tolukuma Gold Mining LeaseWith a Memorandum of Agreement between company, government and landholders.

Mining Act 1992+Mining Safety Act+Environment Act 2000

1994 In Operation

Hidden Valley Gold

Solwara 1

Mining LeaseWith a Memorandum of Agreement between company, government and landholders.

Mining LeaseCurrently Negoting a Memorandum of Agreement with Developer and the Provincial Government

Mining Act 1992+Mining Safety Act+Environment Act 2000

Mining Act 1992Mining Safety ActEnvironment Act 2000

2005

2011

In Operation

Financial ArrangementConstruction of Equuipments / Tools

04/10/2023 28Minerals for Life

Facts and Figures

• Mineral dependant economy (60% total exportreceipts 2010).

• 61.5 tonnes Au, 57 tonnes Ag, 154.7,000 tonnes Cuproduced in 2010.

• Contribution from 3x large mines, 2x mediummines, 2x small mines and 70,000 artisanal miners.

• 4x large mines to commence production in thenext 5 years. By 2014, Gold output ~90 tonnesand ~174,000 tonnes Copper (Base case scenario).

• Diversification of mineral base (Co, Ni & Mo).

04/10/2023 30

Licences Key

142°140° 144° 146°

Current Exploration Licence

Exploration Licence Under Renewal

Ministerial Reserve

MOROBE

WESTERNHIGHLANDS

EASTERN HIGHLANDS

WESTERN

SOUTHERN HIGHLANDS

ENGA

I R I

A N

J A

Y A

(In

done

sia)

MADANG

CHIMBU

Exploration LicenceUnder Application

0 100 200 km

WEST SEPIKEAST SEPIK MANUS

P A P U A N E W G U I N E AE x p l o r a t i o n L i c e n c e s t o J u l y , 2 0 0 7

GULF

148°140° 142° 144° 146° 150° 152° 154° 156°

WEST NEW BRITAIN

ORO

EAST NEW BRITAIN

NORTH

SOLOMONS

148° 150° 152° 154° 156°

CENTRAL

2°

4°

6°

NEW IRELAND

MILNE BAY

12°

10°

8°

581

58

1312

1330

1337

1392

1438

1212

1329

1436

1441

1459

1574

1339

EL 1313

1344

1583

1413

1373

1391

1461

1559

1468

1350

10931024 1349

1437

1575

1235

1420

14441543

1320

1308

1397

1578 1584

1561

1398

1560 1573

13041416

1450

1453

1343

1562

1446

1931335

1460

1545

1570

1341

1334

1342

1400

1401

1504

1428

15051503

1473

1326

1472

1508 1419

1431

1510

1507

1506

1514

1511

1490

1483

1502

15001501

1482

1386

1345

1481

1509

15131512

1515

1485

1422

1480

14841486

1489

1487

454

858

1411

1427

1426 1115

1353

1384

1423

1456

14671546

1365

13631370

1434

1442

1553

1548

1103

440

1316

1435

1105

470

693

1049

1178

1369

1399

580894

1340

1371

1377

1409

12711264

1284

1292

1348

1352

1379

1440

1193677

1305

497

1028

1568

1580

15851403

1297

1366

1380

1577683

1327

1390

1547

1544 1579

1581

14661412

1367

14041550

1551

1582

13551372

1396

1424

1433

1454

11651415

14391455

1429

14321478

1479

1488

1491

1462 1043

1322

1077

1360

1445

1565

1361

1070

1025

1324

1394

1552

1576

1493

1418

1496

1495

1494

1492

1497

1498

1470

1477

154115421571

1588

1383

1347

1091

1323

1463

1499

13511395

1408

1430

1451

1586

1527

10691529

1528

14761381

1196

1452

1469

1474

1564

1563

1356

1388

15261572

1569

13076091449

1556

1557

1558

1587

1362

1140

1475

1170

485

1374

1425

14571458 1554

1172

12791465

15241525

1522

1523

1346

1421

1530 1389

1567

1021

1331

1555

15321531

1387

1540

1517

15161518

1537 1538

1539

1520

1521

1533

1414

1519

1535

15361534

34

7a 567b

2 1

Minerals for Life

04/10/2023 31Minerals for Life

04/10/2023 Minerals for Life 32

Mineral Project life cycle

Exploration Licence Development Licence(EL) (ML, SML) Relinquishment - Closure

Exploration Feasibility Approvals Construction Operation

Decom&Rehab.

PostMonitoring

Relinquishment

ExplorationJORCResource

ResourceStatement

Pre/FullFeasibility

Mining MethodProcessing MethodFEEDProject Financing

CashflowsCapexMine LifeRevenueOp.CostsNPVIRRPay Back

Statutory ApprovalsEnvironmentMine SafetyNEC (ML, SML)

Stakeholders ConsentDevelopment ForumSML – MDC

- MOA- Comp. Agmt

ML – MOA- Comp.Agmt

Construction Comm.

Operation&Production

Decom&Rehab

PostMonitoring Relinquishment

LICENCING PHASES

DEVELOPMENT PHASES

DEVELOPMENT DETAILS

04/10/2023 33

GOVERNMENT APPROVAL PROCESSMEMORANDUM OF AGREEMENT

Minerals for Life

PRE-FORUMMEETINGS

PROPOSAL FOR

DEVELOPMENT

DEVELOPMENTFORUM

MINING DEVELOPMENT

CONTRACT NEGO

MEMORANDUM OF

AGREEMENT

MINING DEVELOPMENT

CONTRACT

MINING MINISTERSUBMITS DEV. PROPOSAL,MOA, SML AND MDC TO NEC

NEC ADVICES HEAD OF STATE TO EXECUTE

CHALLENGES (Case Study on Sowara 1)

• EL granted in 1997

• Submittied ML application, Feasibility Study & Proposals for Development in 2008

• Due Diligence, Appraisals, Reviews & Visits took almost 2 years.

• Public and Wide Awareness and Consultation

• ML granted by Minister in 2011

• Development Forum commenced for Memorandum of Agreement

FUTURE CHALLENGES

• Need for Underwater Mining Policy and other associated guidelines

• Beneficiaries from the off shore mining project

• Benefit Distribution Mechanisms

• Management of Stakeholder Expectations

Concluding Remarks

• PNG took up the challenge after identifying, reviewing and analyzing the appropriate risks

• There needs to be proper definition of DSM for the purposes of distinguishing the levels of activity.

• Do not necessarily follow the PNG way however learn from it.

• Wide and Public Consultation is KEY!

04/10/2023 37

THANKYOU

_____________________Minerals for Life

STATE EQUITY PARTICIPATION IN THE SOLWARA 1 PROJECT

7th June 2011Tanoa International Hotel

Nadi, Fiji

SHADRACH HIMATADeputy Secretary

Department of Mineral Policy and Geohazards ManagementPapua New Guinea

Presentation Overview

•Government Policy on Equity Participation for Mining Projects

•Project Definition

•Extent of Equity Participation

• Timeframe for participation

• Value State is buying into

•State Participation in the Solwara 1 Project

Government Policy on Equity•Section 17 ( c ) of Mining Act 1992, provides for the acquisition by the State either directly or indirectly of a participating interest in a mining development.

• “PNG’s Mineral Policy” – The State may elect to acquire up to 30% participating interest in mining projects on a fully contributing baisi with no financial carry. To date this has only been exercised on SML projects. The decision on whether or not to participate is made at the grant of the Mining Lease (ML).

•Under the Option Agreement signed by Orogen Minerals Limited with the State, Orogen had the right, but not the obligation, to acquire from the State a 25% interest in all future mining development projects until the year 2021. (The State, through its wholly-owned subsidiary MRDC, holds 51% shareholding in Orogen).

• Landowners in SML projects areas are entitled to 5% equity in the project to come from the State’s share of equity. The cost of equity will be negotiated on a case by case basis.

•In the absence of Orogen today, the State has nominated another new entity of State, Petromin PNG Holdings Limited, to take up the State’s 30% equity option in the Solwara1 project.

•Petromin was established by State to manage State’s interest in mining, oil and gas projects.

•Under the Benefit Sharing Agreement (MOA) for the Solwara Equity distribution will be detailed.

Mining Project Definition

A project that is granted under a mining development licence, i.e; ML or SML

• The Project definition is fundamental to cost considerations and value for equity participation.

•For the Solwara1 project – it is the project granted under ML 154.

Extent of State Participation

•The State will exercise its 30% equity option in the “full value chain” of the project.

• In the Solwara1 case, the project refers to ML 154.

•That means the State will have an undivided beneficial interest (expressed as a percentage) as a tenant in common in all Project properties and assets.

Timeframe for Equity Participation

The decision on whether or not to participate is made at the grant of the development licence (ML or SML).

The Solwara1 was a special case where the State exercised its option after the ML was granted.

Prior to grant of ML there were still unknowns and undefined risks to the project. Hence, the State was not in a privilege position to make an immediate investment decision prior to grant of licence. However, the State has made a decision in principle to take up equity in the project soon whenever it is ready to do so.

State’s participation signals confidence in the future prospects of the projects and as a responsible government provide a sense of security for the offshore tenement and sharing the risks of a pioneering project in the hope of better returns.

The project was being financed purely by equity partners up to the point of grant and fund raising was required to raise capital to build and integrate the technology. The development licence and title to the tenement was necessary to secure debt financing.

Petromin and Nautilus have signed a State Equity Option Agreement on 29th March which detailed the timeframe of State’s participation.

Mineral Project cycleCovered under current legal framework.

Exploration Licence Development Licence (EL) (ML, SML) Relinquishment - Closure

Exploration Feasibility Approvals Construction Operation

Decom &Rehab.

PostMonitoring

JORCResource

ResourceStatement

Pre/FullFeasibility

Mining MethodProcessing MethodFEEDProject Financing

CashflowsCapexMine LifeRevenueOp.CostsNPVIRRPay Back

Statutory ApprovalsEnvironmentMine SafetyNEC (ML, SML)

Stakeholders ConsentDevelopment ForumSML – MDC - MOA - Comp. Agmt

ML – MOA - Comp.Agmt

Construction Comm.

Operation&Production

Decom&Rehab

PostMonitoring Relinquishment

Solwara 1 Project Approach

LICENCING PHASES

DEVELOPMENT PHASES

DEVELOPMENT DETAILS

Note: some aspects between exploration and construction are yet to be addressed.

Value State Is Buying Into

The State is really buying into the Sunk Cost of the Project to date.

The Sunk Cost refers to all Allowable Capital Expenditures (ACE) and Allowable Exploration Expenditures (AEE) spent on a Specific Tenement. Such expenditures are normally ring-fenced to the specific tenement.

For the Solwara1 project, the sunk cost refers to ACE and AEE before the grant of ML and ACE only after the grant.

Grant ofMLACE, AEE

ACE

Full Value Chain Participation in the Solwara1 Project

The mining arrangement for the Solwara1 project consist of two Joint Venture (JV) Arrangements. The Mining JV and the Marine JV.

The State has negotiated its rights to take up 30% equity in the both JV.

For the Mining JV, the State will take up the full 30% upfront. For the Marine JV, the State will take up an initial 5% and progressively take up the balance in future.

SOLWARA PROJECT OPERATIONAL ARRANGEMENT

MINING JVMARINE JV

FULL VALUE CHAIN PARTICIPATION

30/7030/70

ML 154

THANK YOU

Department of Mineral Policy and Geohazards Management

An Overview of Geohazards Management Division

June 2011

Nadi , Fiji

John Arumba

1. Geohazards Management Division

2. Key Result Areas

3. Ongoing Projects

4. Collaboration with other Institutions

5. Partnership with PIC

6. Linkages of Geohazards to Offshore Mining

Outline of Talk

Geohazards Management Division

Geohazards Management Division is responsible for monitoring & assessing geological hazards like Volcano, Earthquakes/ Tsunamis and Landslide plus other forms of mass movements

Division provides advice on mitigation measures to relevant authorities and communities and where possible provide early warnings of the effects of these hazards.

The Division comprises 3 Branches;Rabaul Volcanological Observatory (RVO)Port Moresby Geophysical Observatory (PMGO)Engineering Geology (EG)

Key Result Areas

RVO•Volcano monitoring & eruption forecasting•Risk & hazard mapping & assessment on volcanoes •Geological & geophysical studies of volcanoes

PMGO•Strategic assessment of earthquake & tsunami hazards through monitoring•Undertake earthquake & tsunami awareness•Provide advice and early warning

EG•Monitoring of landslides and mass erosion events•Field assessments and mapping of landslide areas•Awareness programmes on landslides•Provide geotechnical advice

Ongoing Projects1. Nationwide Seismic Monitoring Network- EU Funded

and managed by SOPAC2. Disaster Risk Management Mainstreaming in PNG -

UNDP/SOPAC3. Strengthening Natural Hazard Risk Assessment

Capacity in PNG- AusAID/ GA4. RVO Twinning Programme- AusAID/GA

Collaboration with Other Institutions

1. Comprehensive nuclear Test Ban Treaty Organization (CTBTO)/ RVO-Establishment of Infrasound (IS40) & Auxillary Seismic Station (AS76) at CCI in RabaulThe installations will be part of the IMS world-wide network

2. Earth Observatory of Singapore (EOS)/ RVO-Install 3 seismic stations & 1 electronic tiltmeter around the Mt Ulawun volcano

3. University of Natural Resources & Environment (UNRE)/ DMPGM-Establishment of a School of Earth sciences to teach geohazards

Partnership with Pacific Island Countries

• PNG would very much like to partner with countries of the Pacific in so far as disaster is concerned.

•PNG through RVO assisted the Vanuatu Government Geohazards Section with equipment and personnel to investigate & monitor the Ambrym Volcano in May 2009

•PNG further wants to ensure the concept of Melanesian Volcano Network (MVN) is realized. This is a vehicle which will ensure countries of the Pacific Island States that are prone to the same disaster share ideas and assist one another.

Linkages of Geohazards to Offshore Mining

Offshore EL’s lie more or less in areas of high seismicityThrough our RVO and PMGO offices we can be able to inform and issue early warnings of impending volcanic and earthquake activities and the aftermath consequences like tsunami to companies operating in the area to take precautionary measures.

THANK YOU