Chief executives of global companies still lose sleep over political risks, but since the heyday of the British East India Company not many businesses can claim to have played a part in a country’s descent into civil war.
Rio Tinto is one. Protests by landowners about its Panguna mine on the Papua New Guinean island of Bougainville were among the triggers for a decade-long conflict in which as many as 15,000 people died between 1988 and 1998, according to an Australian parliamentary inquiry.
The company’s plan to give away its stake in the mine to landowners and Papua New Guinea’s government shows how times have changed. While the risk of violence has kept the site out of action for a generation, Panguna has about $51 billion of copper in its rock. It would probably count as one of the world’s biggest pits, if only it could be mined.
That’s the rub. There’s a delicate balance between the governments and landowners who control most of the world’s minerals, and the mining companies with the capital and expertise to get them out of the ground. While miners have spent the best part of a generation cleaning up their act to prevent a repeat of the Bougainville conflict, those political risks never really went away.
The proof is a bit further along the vast Indonesia-New Guinea archipelago. On the same day Rio announced its plans for Panguna, Newmont said it’s selling its stake in the Batu Hijau copper mine to an Indonesian consortium for $1.3 billion. The pit’s future has been in jeopardy since 2014, when Jakarta banned the export of some raw metal ores in an attempt to encourage a local smelting industry.
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