Papua New Guinea: Mining Journal – PNG gets thumbs up despite obstacles

Last Updated: 1 June 2016
Article by Anthony Latimer and Daniel Ward

PNG gets thumbs up despite obstacles

Papua New Guinea has a wealth of natural resources including rare earth elements, gold, copper, iron, platinum, nickel, cobalt, chromium and molybdenum. Due to these significant natural resources, the country is often regarded as the most important economic power in the Pacific islands region.

As such, the mining sector is a major contributor to PNG's economy,providing a large part of the government tax revenue. Despite global prices for raw materials dropping to multi-year lows, the PNG mining industry remains vibrant and progressive. Even though there has been a slowdown in the world economy, foreign companies continue to invest into PNG's mining industry.

Major mining projects such as Lihir, Ok Tedi, Porgera and the Hidden Valley gold mine joint venture between Harmony Gold and Newcrest Mining have recognised the importance of PNG's natural resources and injected billions of dollars into the country's economy. Other major projects still in the early stages of development, such as the Wafi/Golpu copper-gold project and the Frieda River copper gold project have the potential to inject many more billions of dollars into PNG's economy. These projects and others offer the potential for longterm growth and prosperity for not only PNG but also investors.

As one of only a few countries in the world to grant permits for deep sea mining exploration, companies such as Nautilus Minerals have been given opportunities to commercially explore the seafloor for high grade copper, gold, zinc and silver. But despite a stream of mining projects in PNG, mining investments face certain local challenges. We focus here on some of the current challenges.

Landowner support

One of the greatest challenges effecting offshore companies is gaining support from landowner communities where the mining operations are to take place. Without the support of landowners, long-term success will not be possible. PNG gets thumbs up despite obstacles - Mining Journal Page 1 of 3 20/05/2016

With no written laws governing the use of customary land, negotiations with local landowners are certainly achievable; however, the process is often complex.

Even though the state of PNG is legally empowered to issue exploration and mining leases, the consent of landowning communities to proceed with resource development activities is still required. This is because most of the land (estimated 97%) is still held under a customary tenure system.

There is no obligation to partner with a local PNG entity in mining projects. The state is entitled to enter into an agreement with a mining company in relation to the development of a mine and may under that agreement acquire a participating interest in that mining development.

Given landowner issues are always an important consideration in any proposal to undertake resource development in PNG, developers should ensure any developments have the support of local landowners and a suitable benefit sharing agreement is not only entered into but also understood and capable of implementation.
Finally, in order to maintain ongoing support from effected landowners, mining projects will often include landowners in business opportunities such as providing site security, transport and maintenance.


Even though the PNG Government has significantly increased funding for national infrastructure improvement programs, decades of underfunding has meant PNG continues to lag behind most other major economies in the region in key infrastructure, including transport, electricity, and water supply, according to the Asian Development Bank.

Though there is a real commitment by the PNG government to improve the existing infrastructure, the reality is decades of underfunding has meant the problems of poor infrastructure will not be resolved quickly.

As such, foreign companies are faced with higher costs and a lack of reliability in transport, electricity, telecommunications (including internet) and water infrastructure.

Law and order

PNG has a fiercely independent judicial system. Foreign companies should have confidence their commercial interests can be defended, knowing PNG judges will seek to follow the English common law position. An important consideration for foreign companies undertaking resource development projects in PNG is law and order.

The cost of security is likely to be one of the biggest overheads: more than two-thirds of businesses in PNG employ private security staff and spend an average of 5% of their annual costs on security, according to the World Bank.

Though the security environment in PNG can be considered challenging by some foreigners, there is currently no reported terrorism threat in PNG. Most crime in PNG is opportunistic and minor (for example pickpocketing).

Human resources

Offshore companies wanting to conduct mining operations in PNG need to be aware that skills shortages are widespread.

Though there are highly skilled nationals, most companies operating in PNG are often forced to source experts (including management) from overseas for specialised or highly skilled roles. Employment of foreigners will require additional approvals such as work permits and visas.

A major cost to business in operating in PNG is accommodation. While the cost of expatriate rental accommodation has come down in recent years, it still remains very high. For example, in Port Moresby, the average rental for a two bedroom apartment is still about K4,000 (US$1,320) per week, plus GST.

Registration and approvals

A foreign company wanting to conduct mining activities in PNG can do so, provided it is properly registered as an overseas company, or has incorporated a PNG subsidiary company under the Companies Act 1997. Depending on the structure of the company, it may also be required to obtain the requisite approvals from the Investment Promotion Authority (IPA) pursuant to the Investment Promotion Authority Act 1992 to conduct the business and in order to enter into contracts to engage citizens and non-citizens in employment in PNG. Without IPA certification any contract, agreement or understanding would be considered unlawful and may be found void and unenforceable.

To be registered as an overseas company, the company must appoint a resident agent. A resident agent must be a resident of PNG and can be an individual or a company.

Rights of foreign investors

There are no distinctions between the mining rights that may be acquired by a domestic or a foreign investor. A foreign investor is not required to incorporate a company under local law, in order to be granted a mining licence.

It must, however, obtain certification from the IPA in order to 'carry on business' in PNG, and once certified may hold its interest through a foreign body corporate registered in PNG as an overseas company.

There are no requirements of minimum state or domestic ownership of mining companies or mining licences but the state does have a right (not an obligation) to back-into mining projects in PNG by acquiring up to a 30% interest in any mineral discovery made during the exploration phase.

Enforcement regime

PNG is not a signatory to the New York Convention.

The extent to which foreign arbitral awards may be enforceable in PNG is, accordingly, solely a question of local law.

Judgements entered in certain foreign jurisdictions with reciprocal arrangements may be registered and enforced in PNG in accordance with the Reciprocal Enforcement of Judgements Act 1976.

PNG has also ratified ICSID's Washington Convention. Public sources indicate PNG has bilateral investment treaties (BITs) in force with the UK, Australia and Germany. Those BITs might provide for a right of arbitration for investors in the event of a breach of BIT rights.

Exchange control

Offshore companies wanting to repatriate funds out of PNG need to consider PNG's exchange control approvals.

Under the PNG Central Banking (Foreign Exchange and Gold) Regulation Chapter 138 (Foreign Exchange Regulations), it is an offence if a person, except with the authority of the Bank of PNG, issues, transmits or transfers any security to a person who resides outside PNG.

It is also an offence if a person, except with the authority of the Central Bank, makes an entry in a register that recognises or gives effect to the allotment, issue, transmission or transfer of any security to a person who resides outside PNG.

Capitalisation of a foreign registered company would require exchange control approval, in order to ensure the capital can be repatriated. In the event an offshore company is registered, it would be necessary to make an application for Exchange

Control Approval

Most recently, the Central Bank has restricted the trading range for the PNG kina and the US dollar and has begun rationing foreign exchange. A recent ANZ business survey ( found "88% of firms highlight difficulties (accessing foreign exchange), with 49% of them noting that it is a 'significant' cost to business". Despite challenges, mining companies continue to focus on PNG.

With extraordinary mineral resources, a stable government and a mining-friendly environment, PNG will likely remain a desirable destination for mining investment in the near future.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions