The President of the Papua New Guinea Chamber of Resources and Energy (PNG CORE), Anthony Smare, recently gave a comprehensive presentation on the "catastrophic impact" of the proposed National Gold Bill 2022 in an Information Session held on Thursday, 9th of May, 2024 at the University of Papua New Guinea (New Lecture Theatre).
Mr Smare emphasised how the bill would be "destructive" to the economy and legislation of Papua New Guinea if passed on the floor of Parliament on the 29th of May, 2024.
"This 500-plus pages of Gold Bill is quite astonishing. I don't think a politician would have time to read through this comprehensive bill that I think is highly dubious and not grounded in any realistic understanding of the refining industry or gold industry in PNG," he said.
"Anybody with any experience in the gold business knows that gold refining is a very difficult business model with razor-thin margins, and it requires significant volumes to carve out any meaningful profit. Any gold expert would know this, and PNG is lucky to have many of its local gold industry experts who could have been consulted at any time to verify numbers."
"Based on the numbers they have shared, it appears that the promoters of the proposed Gold Corporation are effectively claiming that they will make nearly three times the profit of Australia's largest refinery and mint, despite processing 8 percent of the volume of the Australian refinery," said Mr Smare.
Here are the key concerns of PNG CORE regarding the bill:
- The bill creates a National Gold Corporation, National Gold Bank, and National Gold Mint to be majority owned by a foreign company, but taking key powers from the Bank of Papua New Guinea and the MRA, including holding the country's gold reserves, the sovereign right to issue legal tender and regulation of gold exports. The issuing of national currency is a sovereign right usually reserved to the country's central bank, but for the first time, the bill proposes to also give this right to a Singaporean-based company.
- No obligation to refine in PNG: Despite the bill providing extraordinary regulatory monopoly powers over PNG's Gold sector to entities controlled by foreign companies, the likely catastrophic impact on PNG's gold sector, the erosion of the mandate of the state agencies such as the Bank of Papua New Guinea and the Mineral Resource Authority, and the unlimited unconditional state guarantee provided by the State, PNG CORE is shocked to note that the bill does not require the proponents of the National Gold Corporation to build a gold refinery in PNG and allows it to send gold overseas to be refined and processed if it so wishes.
- Impact on existing and future mines: The bill seeks to override existing project agreements for PNG's existing mines, which will jeopardize existing financial arrangements for these projects and undermine viability and investor and financing confidence in current proposed new mines.
- * Broad Application: The bill's extension to encompass all precious metals, not just gold, introduces a layer of complexity and broad impact that could have unforeseen consequences across the mining sector.
- Statutory Monopoly Concerns: The Bill's attempt to establish a statutory monopoly in a global context of oversupply and minimal refining costs is fundamentally flawed. Such a strategy, especially if enforced by statutory compulsion, poses grave risks to the stability and sustainability of the gold sector in PNG.
- Excessive Powers and Marginalisation of State Agencies: The extraordinary powers granted to the National Gold Corporation and related entities risk duplicating and overshadowing the roles of established state agencies. The introduction of a 'Gold Police' with sweeping powers to search, seize, and detain Papua New Guineans raises alarms over potential overreach and abuse, which can be done at the request of the foreign company.
- Unprecedented State Guarantee: The bill's provision for an unconditional state guarantee to be provided for the obligations of the foreign-owned National Gold Corporation, National Gold Mint, and National Gold Bank is unparalleled and raises concerns about the implications for PNG's fiscal responsibility and international reputation.
- Transparency and Accountability Issues: The lack of detailed information on the administrative structure, governance, capital resources, and relevant experience and shareholders of the foreign owner of the National Gold Corporation undermines transparency and accountability, essential for the fair and effective management of national resources.
Given these concerns, PNG Core urged the National Government to engage in transparency with the industry and not to progress this Bill to Parliament, Smare said.
