Photo credit: Wafi Golpu Joint Venture - Wafi Camp
Mineral Resources Authority (MRA) executive director Jerry Garry says the state is hoping that agreements for the US$5.4 billion (K18.5 billion) Wafi-Golpu mining project in Morobe would be finalized in the first quarter of this year.
He stated the State Negotiation Team (SNT) was working on a mining development agreement, and that many of the terms in the term sheet had been agreed upon.
According to Garry, there were certain unresolved problems that needed to be resolved with stakeholders, including royalty payments and perks, which the state wanted set at 8%.
“Basically, many of the items in the term sheets were agreed to in principal,” Garry said.
“There were one or two outstanding things, particularly the royalties.
“The state has a National Executive Council decision at eight per cent and the company is saying no and is offering 3.5 per cent, so that’s where the negotiations are.
“Negotiations were suspended last Friday, and was to reconvene either on Monday or today to deal with the royalty issue. The State is embarking on getting higher royalties because it comes at no cost to the state.
“It’s a certainty, a certain stream of revenue that can be collected by the state.
“When we talk about equity and corporate income tax, they are profit based, meaning that state will only realise any of these payments when the company or project declares profit, the payback period is about 10 years. So to enter the state going forward with assurance that there will be definite money coming regardless of profitability or not, the state team has been very strong in getting a decent rate on royalties so that they can be sure of its revenue from the project.”
Garry stated that they had not yet settled on a rate.
“We have looked at the financial modelling and the internal rate of return is very healthy for the project as well as the investor’s internal rate of return,” he said
Reference: Luma, Dale. The National (22 February 2022). “State hoping to seal project deal”.
