The Mine


The gold fever that gripped the mainland New Guinea in the 1920s and 1930s spread to Bougainville as well, where small quantities of gold and traces of copper were discovered in the mountains behind Kieta. Beginning in 1934 a gold mine was operated at Kupei, but on such a small scale that it was regarded by most European residents as a pathetic pipe-dream: by the time the Japanese invasion ended its operation, only about 1789 ounces of gold and 80 ounces of silver had been extracted from it. After World War II traces of alluvial gold were discovered in the mountains west of Kupei, but only a few attempts were made to extract it.
In 1960 a geologist of the Australian Bureau of Mine Resources, Geology and Geophysics re-examined the country around Kupei and confirmed the presence of intensive low-grade copper mineralization. Again, this would have been dismissed as nothing more than a scientifically 'interesting' discovery but for certain current developments elsewhere. At the start of the 1960s, disparate developments around the world combined to produce the possibility of profitable large-scale mining on the island. Each by itself was unlikely to have achieved that; together, and with the foresight of some remarkable individuals, they changed low-grade mineralization on the island from a matter of academic geological interest to one of major risk investment.
A layman hesitates to assign priorities to these factors, which included new theories of ore genesis and novel techniques in geological exploration' new prospecting techniques, ranging from stream sampling for dissolved metal ions to innovative use of helicopters for both human and equipment transport in heavy jungle; technological breakthroughs in the scale of machinery, both for materials handling and for minerals concentration, and a worldwide market uncertainty about the future assured availability of copper as a vital industrial commodity. In Australia, the vision of one mine executive from Broken Hill had already led to a series of new discoveries undreamed of twenty years earlier. Maurice Mawby had spent heavily on diversified risk exploration of the bauxite resources of Weipa in north Queensland, and for a token fee had operated for the Australian government the uranium mine at Rum Jungle in the Northern Territory. Another visionary, Canadian geologist Haddon King, began to envisage new theories of ore genesis: if you were right about how minerals became concentrated, the likelihood of finding economic mineralization was greatly improved.
Meanwhile, in the United Kingdom, an entrepreneurial financier, Val Duncan, began to create a world-size mining company on the tiny initial base of Rio Tinto, a rundown Spanish mine operated since the days of the Romans; Australia, and particularly uranium, became his chosen fields of opportunity. Australia had a stable and pro-development government, unlike those of mineral-rich countries in Africa and Latin America which wee then in the process of decolonization and nationalization. In due course Duncan's Rio Tinto merged with the London-based mining house consolidated Zinc (created by L.B. Robinson) to form RTZ in London and CRA in Melbourne, with Mawby at its head.
Would entrepreneurial flair, geological foresight and a pro-development Australian overseer have automatically led to mineral development to Papua New Guinea? It was 'at best highly improbable' without the other factors of technology and world demand. World demand went through a turbulent decade, as forced nationalizations of major producers such as those of Chile and Zambia caused fears of involuntary or deliberate restrictions of supply. In addition, prices on metal exchanges for copper were fluctuating; as a result, several developing countries formed the Conseil Internationale des Pays of d'Exportation de Cuivre, or CIPEC, the attempted copper equivalent of oil's OPEC. While all those events were taking place, new technology in material handling and scale of metallurgical concentration made remarkable advances in economies of scale. the visible growth of ore trucks from a carrying capacity of 50 tonnes to 170 and then 210 tonnes was only the outward manifestation of this. New techniques and skills were also developed in planting of open pits, in size of ball mills, and in production scheduling.
The consequence of those technological innovations was that, given a large enough ore resource to justify the investment over years, huge quantities of mineralized rock at 1 per cent copper or less became mineable, where a generation earlier the 'cut-off grade' which divides economic ore and waste had been perhaps 4 per cent. In a true sense, technology created new reserves. In Australia and elsewhere, this dramatic increase in the ability to mine and process low-grade ore profitably extended across the whole field of minerals commodities, not simply to copper ore. So, were technology and demand the extra determining factors? Again, 'not so'. In 1960, RTZ and CRA were entrepreneurial but not cash-rich miners. The Panguna deposit had no 'cap' or 'pod' of high-grade gold which might have paid for a modest self-financing start. Neither the Australian government nor Australian banks were willing financial backers of larger minerals projects in their own homeland, let alone in a UN Trust Territory. International banks, sensitive of the disruptive nationalizations taking place elsewhere in what was coming to be called the 'third world', were also unenthusiastic about risk in a not yet independent nation and in the fluctuations of copper prices.  
The final necessary element was the ability to have in place - long before even final production details were firmly settled - a system which would make both the high capital cost and the proposed output from a probable mine securely 'bankable' in the eyes of lenders. That might not have been achieved at all except for independent feasibility studies and for innovatory international marketing of a new financial concept, namely, that long-term contracts for supply of premium copper concentrate to smelter firms in Japan, Germany and elsewhere in Europe, could be a financeable prudent risk. In 1960 almost no Australian mining engineers, even the most experienced, had themselves much more than seen operation on this scale. The Australian tradition, of which Mawby was a part, was then centred on underground mining of relatively high-value ore. The experts in the new skills of large-scale open-pit mining and large-scale metallurgy were mostly North American, as were the bulk of the relevant lending banks. In consequence, American expatriates joined Australians in the initial top management level of these new ventures in Papua New guinea, just as they did in similar ventures in Australia and elsewhere. It was transfer of technology on a giant scale.
In 1968, exploratory drilling and road-making were already on a huge scale by South Pacific standards. It was as hard for anybody as for other non-miners to conceive that the activity was only a 'project' supported by risk capital, and neither a proved deposit nor as yet a financeable mine. The new economics of scale imposed their own stern disciplines. both the exploration companies and the potential lenders crunched members ever many months - a 'small' mine on low-grade ore was simply not possible. Indeed, even the mining and treating of 30,000 tonnes a day, which the original plan envisaged, was calculated to be insufficient for profitable operations. A very costly and extensive exploratory drilling programme had to be undertaken in order to produce forecasts large enough (80,000 tonnes a day) to repay the borrowings needed to finance the operation, given the expected fluctuations in the world price of copper over a ten-year period. In the course of that exploration the most promising area was found to be in the Panguna Valley.
After eight years of exploration, evaluation, and construction, mining began there in April 1972 and continued, probably, until May 19898, when hostile actions by some local residents forced it to that shut down. During its seventeen years of operation this mine was the largest industrial enterprise in Papua New guinea in a number of respects, including especially its production of national revenue. It produced and shipped to overseas buyers concentrate containing nearly three million tonnes of copper, 304,412 kilograms of gold, and 780,875 kilograms of silver, for a net sales revenue of about 1900 million kina. Up to the end of 1988 a total of some K685 million had been paid to the Territorial, later national, Papua New Guinea governments in direct taxation, customs duties, retail sales taxes, and withholding taxes on dividends; plus another K166 million in dividends on shares owned by the government. Altogether, these sums constituted an average of about 17 per cent of the government's internal revenues, and the overseas sales of the ore concentrates amounted to about 40-50 per cent of the nation's foreign earnings.
In addition, the new country received as early as 1967 (long before leases were granted) an unparalleled 'free trade' into what was to become its largest single industry, source of finance, and exporter. The miners offered the Administration 20 per cent of equity in the development at par (rather than the much higher price later offered to other investors). Australia took up the offer much later when the project's viability was established. This acquisition passed to the new country almost unnoticed with the other transfers of decolonization, As D. S. Carruthers and D.C. Vernon wrote in 1990:

Given the CRA was taking all of the risks on exploration and feasibility, this was an offer unprecedented in mining projects in underdeveloped countries, and to the authors' knowledge, but still not been matched voluntarily by any other company anywhere in the world.

Moreover, up to the closing of the mine the company had paid about K75 million to the government of the North Solomon Province in royalties and taxes, plus another K22 million to Bougainvillian landowners in the form of royalties, rent and compensation. these figures do not include the monies paid by the mining company to the Administration in the form of rents, etc., not the amounts paid by the company to Papua New Guinea residents in dividends, nor the income taxes paid to the Administration by company employees. The number of individuals employed by the company and its contractors varied over the years. During the exploration and evaluation phase it was in the hundreds; during the construction phase it reached more than ten thousand. since the beginning of mining the number averaged about four thousand, of which about 80 per cent were indigenous Papua New Guineans. How much of the salaries and wages of those employees remained in Papua New Guinea is impossible to discover, but it cannot be ignored when judging the economic impact of the mine, particularly on Bougainville.
Members of five district Bougainville ethnic (i.e. language-cultural) units resided in the region directly affected by the mine. Of them a large majority were Nasioi, and most of these were rural villagers engaged in subsistence farming and some cash-cropping of cocoa. Although mainly 'rural' in lifestyle, most of these Nasioi were well acquainted with the local colonial institution and with many individual Europeans. As will be recalled, it was along this region's eastern coast where Europeans first settled: first the Catholic mission, in 1904; next, colonial officials, German and then Australian; then Australian planters and Chinese merchants; then a detachment of Japanese and finally a return of all of the pre-war types of outsiders - officials, planters, merchants and missionaries. Individuals among the region's Nassioi doubtless differed to the content and degree of their Westernization and in their attitudes towards outsiders, but their contacts with persons and things Western were on the average far more frequent than those experienced by most other Bougainvillians, including most other Nasioi.
The second of Bougainville's native peoples to experience the direct impact of mining activities were the Austronesian-speaking Rorovanans, it will be recalled, were descendants of fleets of Shortland Islanders who had 'colonized' - seized and settled on - this coastal area in the nineteenth century and had remained ethnically 'intact' ever since. They appear to have adjusted more comfortably to the immediately adjacent Europeans than had their Nasioi neighbours. By the mid-1960s the nearby village of Uruava (Arawa) was more Nasioi than Uruavan. As related earlier, when this writer was on Bougainville in 1938-9 the residents of this village still spoke the Austronesian language of their ancestors, who like the Rorovanans had migrated here from Shortland Island, but a century or so earlier. by the mid-1960s, however, intermarriage with the neighbouring Nasioi had led to the near-extinction of the Uruava language, along with many other Uruavan customs.
The fourth set of Bougainvillians to be directly affected by the mine were those of the Nagovisi people who resided west of Panguna along the southern borders of what was to become the mine's tailings. The fifth were a community of Austronesian-speaking Banoni, whose small coastal village near the outlet of the Jaba River had to be moved to avoid flooding by that tailings-widened stream. Now to unravel the corporate transformations undergone by the company that discovered, developed, and operated the mine.
The Consolidated Zinc Comapny Ltd of London (CZC) owned the Zinc Corporation Ltd of Broken Hill, Australia, and had a managing interest in new Broken Hill Consolidated. In 1962 it merged with the Rio Tinto company Ltd to form the Rio Tinto-Zinc Corporation Ltd (RTZ). At the same time, in Australia, Consolidated Zinc Proprietary, a wholly owned subsidiary of CZC, merged with Rio Tinto Mining Company of Australia Ltd to form Conzinc Riotinto of Australia (CRA). To reduce this (incestuous!) genealogy to its essentials: London-based RTZ owned 85 per cent of Australia-based CRA in April 1965. When it was decided that CRA would undertake a systematic search for copper deposits in the Southwest Pacific, New Broken Hill Consolidated Ltd joined with it as a junior partner, and it was this combination that launched the exploration on Bougainville in the form of an entity, named CRA Exploration (CRAE), which was created for that and other mineral searches in the southwest Pacific. (Among other facilities, (CRAE possessed the Craestar, a former Japanese tuna-fishing vessel, fitted out with a laboratory, a helicopter landing deck, and accommodation for an exploration party of ten.)
After CRAE's exploration had turned up promising prospects on Bougainville, the work of evaluation was handed over to yet another new entry. Bougainville Copper Pty Ltd, which was a subsidiary of Bougainville Mining Ltd. Then, after the commencement of mining, in 1972, the company was registered in the Territory of Papua and New Guinea and renamed Bougainville-Copper Ltd (BCL) - which, it has remained ever since. In the account that follows, all these transformation will be simplified by referring to the organization as either the company of BCL. The governmental entities which initially regulated the exploration and over all Papua and New Guinea matters, including those of Bougainville, rested with the Australian government in Canberra, and specifically the Minister for Territories. The Bureau of Mineral Resources, Geology and Geophysics played a role in copper search throughout Australia, and its regional geologist stationed in Port Moresby and visited Bopugainville in 1960 and found porphyry-type copper mineralization there, but the bureau did not follow up this lead.
The Territory's Administrator in Port Moresby was of course subordinate to Canberra, but could, and often did, propose and administer minor changes in policy, including changes regulating mining. In port Moresby the mine company's principal contacts were with the Assistant Administrator, Economic Affairs, and the Department of Lands, Surveys, and Mines. On Bougainville, the company's main governmental contact for the first few years was with the Assistant District Officer (later, commissioner), stationed at Kieta, the District Officer being headquartered at Buka Passage at that time. In 1966 a Mining Warden's Court was set up in Kieta to adjudicate complaints ('plants') against the company for damage to property. In 1969 a new office was set up, the Chief Liaison Office in the Bougainville District, charged with overseeing all relations between the company and residents of Bougainville. Also in 1969, the Public Solicitor's Office based in Port Moresby began to be more deeply involved in relations between the company and Bougainvillians; it actively championed the latter's definitions of their rights and claims, taking out writs against the Administration itself, and pursuing litigation up to Australia's High Court. 
Another governmental personality closely concerned with the mine in its early years was the Hon. (later Sir) Paul Lapun, Bougainville District's first member in the Territory's House of Assembly. In addition to the entities just listed, during the early years of its operations the company had some relations with members of some of Bougainville District's local government councils, including those of the Kieta Council, but those elected officials had very limited functions and authorities, and the institutions themselves did not last long. Individual Catholic clergymen have played influential roles in the company's relations with Bougainvillians from start to present. A few have been silent or neutral, but many have been vocally against the company, some loudly and effectively so. They have not only championed Bougainvillians' claims for larger shares of company revenues, but also denounced the mine's effects on the physical environment and on public morality. Moreover, some of the most influential Bougainvillians with whom the company dealt over the years had been trained in Catholic schools, some of whom had reached, and later left, the priesthood.
Other players on the Bougainville scene during the early years of the company were the island's plantation managers and merchants - the former mostly Europeans, the latter mostly Chinese. By the late 1980s nearly all of the former had left, after selling off their properties. Even while still there, few of them had much to do with the company, except to experience increasing difficulties in recruiting and keeping their workers in the face of the company's higher wages and more 'interesting' jobs. As for the merchants, the increased in the sales receipts in the early days of mining diminished when company-sponsored supermarkets opened in Aarawa and Pangua. 
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