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Landowners claim bigger slice of mineral pie in Papua New Guinea

For the moment, the Bougainville crisis is over. Saboteurs demanding $12 billion forced Bougainville Copper Ltd. (BCL) - the world's third-largest copper mine - to shut down for a week in early December. Copper prices worldwide, already rising due to shortages, shot to record levels. The government of Papua New Guinea, which gets 17 percent of its annual revenue from the mine, was as much a hostage as the company.

``Our stand right now is that we will kick the [mining] company out. We have given them until the end of January - that is all,'' says Perpetua Serero, president of the Panguna Landowners Association.

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Police allege that a group of 60 to 70 disgruntled landowners calling themselves ``Black Rambos'' destroyed power pylons and mining machinery - causing more than $1 million in damage since mid-November.

For now, the 5-month-old government of Prime Minister Rabbie Namaliu has succeeded in negotiating a temporary truce, and is collecting kudos for resisting calls to send Army troops after the militants.

But the effect of the Bougainville crisis is likely to be felt for years. Bougainville spotlights a trend gathering momentum for some time in this resource-rich country: Provincial governments and landowners (now better educated) want a bigger slice of the mineral pie.

A constitutional amendment will be sought in the next 6 to 12 months which would give local landowners title to all resources under the ground, said the head of the Bougainville negotiating team, Deputy Prime Minister Akoka Doi in an interview. Minerals under the topsoil now belong to the national government.

On Dec. 9 and 10 landowners and leaders from Enga Province were invited to discuss with company representatives and federal mining officials plans for developing Porgera. Until now, only the national government has negotiated with mining companies.

For the first time, a landowner will sit on the committee reviewing the Bougainville mining agreement, according to Mr. Doi. A ministerial committee was formed on Dec. 15 to expedite the review process.

The impact of such changes is likely to be a throttling back of Papua New Guinea's development. But it is also likely to mean less disruptions of the kind seen at Bougainville.

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``It will slow things down. On the face of it, that's not encouraging to foreign investors,'' says John Millet of the Institute of National Studies, an economic research firm in Port Morseby, the Papuan capital. ``You can short-circuit the consultation and agreement process, and sure, you'll get into production earlier. But you'll run into problems later.''

Australian mining giant, CRA Ltd. is the major shareholder at Bougainville - the first major mine in Papua New Guinea. Since production began in pre-independence 1972, gold and copper sales revenues have topped $5.4 billion. The company has paid out over $1.2 billion to the Papuan government in dividends, taxes, royalties, and compensation. Landowners have received an estimated $26 million in cash compensation payments.

Why then are local landowners rebelling?

One answer is that in 10 years or less, the mine may close. Landowner living standards (some lack water, electricity, and sewage) are still well below those living in BCL housing. And landowners are demanding $12 billion to restore the environment.

But BCL has complied with all financial and environmental requirements as agreed upon. Indeed, in September it agreed to spend an extra $3.7 million on village infrastructure improvements over the next year. Landowners distrust the show of good will as a ploy motivated by a desire to lift a moratorium on expanded mineral exploration on the island.

The problem is more complicated however.

The national government is blamed for not reviewing the Bougainville Copper Agreement (signed by BCL and national government in 1974) every seven years as required. Neither the 1981 and 1988 reviews occurred. But recent events have prompted a review in January.

Some blame the provincial government for not being more involved. Some blame BCL for not keeping in closer touch with landowners.

Aggravating the communication breakdown was a power struggle within the Panguna Landowners Association. A second generation of younger, better-educated landowners, including Mrs. Serero, were voted into control of the association in April. But the elder members still hold the land titles and therefore receive all royalties and compensation payments.

Mining consultant and anthropologist Dr. Colin Filer says one lesson from the BCL case is a need for short-term agreements.

``If you're looking at mine life of 20-30 years. You can start out with an agreement which a group of landowners or their representatives can agree. But 15 years down the track you will find a new generation has emerged in the community. A generation has grown up with the mine, living with it and often not liking it. Members of the younger generation will probably repudiate the agreement made by the older generation. This is what has happened at Bougainville,'' he says.

In fact, the Bougainville crisis may flair up again - at a most untimely moment for Prime Minister Namaliu. The Black Rambos are still at large. Interviews with participants in the truce negotiation indicate sharply differing views on what was agreed upon. The Jan. 30 deadline comes a just a few weeks before the next sitting of Parliament and a possible challenge to Namaliu's leadership.

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