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.
