Environmental and social concerns at the Lihir gold mine, Papua New Guinea

Environmental and social issues have marked the Lihir mine. Indigenous land owners use traditional taboo markers made of ginger roots as a customary and non-violent grievance mechanism to denounce tensions and concerns regarding the mining operations.


Description

Papua New Guinea is home to some of the most biodiverse habitats in the world and is rich in natural resources. Having the third largest gold reserves in the world, it has attracted large amounts of investments into mining. Among them is the Lihir mining operation which is one of the two biggest mines in the country [1]. The mine has been operated by Lihir Gold Ltd. and is currently owned by Australian miner Newcrest (see project details). The mine is located on Lihir island, New Ireland Province.

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Basic Data
NameEnvironmental and social concerns at the Lihir gold mine, Papua New Guinea
CountryPapua New Guinea
ProvinceNew Ireland province
SiteLihir Island
Accuracy of LocationHIGH local level
Source of Conflict
Type of Conflict (1st level)Mineral Ores and Building Materials Extraction
Type of Conflict (2nd level)Mineral ore exploration
Specific CommoditiesGold
Land
Project Details and Actors
Project DetailsHISTORY:

Gold reserves were first discovered in 1982. At that time, explorations were conducted by a joint venture between the Kennecott Explorations Australia and Niugini Mining limited [9]. A first feasibility study was conducted by in 1988 that raised concerns over the economic feasibility of the mine [2]. In 1989, Kennecott was bought by Rio Tinto Zinc corporation (RTZ) [2].

In 1995, negotiations between local landowners, company and state were made, following a series of impact assessments and studies [2]. Negotiations were ongoing for a while and first not accepted by local customary landowners. However, they finally agreed when the government promised them a 15% equity stake in the project and 2% of royalty rate of annual output [2]. The agreement was signed during 1995 and included a benefits package for the community that foresaw the payment of royalties as well as the development of infrastructure and social services [6].

The Lihir Special Mining Lease (SML) was granted in 1995 and the Lihir project was transferred to Lihir Gold Limited (LGL) Company, which was managed and operated by the Lihir Management Company – a subsidiary of Rio Tinto. Production started in 1997 [9].

In 2005, Rio Tinto divested its stakes in Lihir and the operations became owned by LGL. In 2010, LGL was taken over by Australian miner Newcrest [9], in a %9.5 billion deal [5].

The mine is an open pit mine, consisting of overlapping pits [1;9].

FINANCE ISSUES:

In 1995, exploration costs had mounted to ca. 150 million USD [2]. Capital cost of mining operation were, at that time, estimated to amount to 600 to 1000 million USD. [2].

Initially, 450 million USD of shares were floated to finance the mine [1].

A study [1] reported that the Union Bank of Switzerland provided a loan for 300 million dollars. The loan was indemnified against political risks and environmental issues by the World Bank’s Multilateral Investment Guarantee Agency (MIGA) [1].

Another study [10] reports a 46 million USD loan from the European Investment Bank in 1996. The CEE Bankwatch Network, supported by many NGOs, demanded the bank to withdraw the loan due to environmental concerns [10].

PRODUCTION CHARACTERISTICS:

In 1999, the mine’s processing plant and related infrastructure covered a land area of about 7.3km2 [1].

In 2011, the mine produced about 600,000 ounces of gold. Output was expected to rise to between 700,000 and 900,000 for 2012 [5]. For the financial year 2016, Lihir produced about 900,000 ounces of gold. Since operations started in 1997, the mine has produced more than 10 million ounces of gold [9].

An article from 2002 [1] estimated that the processing of 104 million tons of ore reserves will create around 341 million tons of waste rock. Most of the waste rocks were going to be disposed into the ocean.

POPULATION:

In 1995, the community that hosted the mining project had a population of approx. 8,000 people [2]. (Since then, the population has grown rapidly [4]). At that time, about 1,000 people were customary owners of land leased to the company. They formed later the Lihir Mining Landowners Association (LMLA) [2].

In 2016, the company reported that about 4,500 people were employed at Lihir [9].
Project Area (in hectares)730 ha (in 1999)
Level of Investment (in USD)600,000,000 - 1,000,000,000 USD
Type of PopulationRural
Potential Affected Population1,000 -8,000
Start Date1995
Company Names or State EnterprisesKennecott Explorations Australia Ltd. from Australia - involved in the pàst
Newcrest Mining Limited from Australia - main current shareholder
Niugini Mining Limited from Papua New Guinea - involved in the past
Lihir Gold Limited (LGL) Company (LGL) from Papua New Guinea - operating company
Rio Tinto Zinc RTZ Mining and Exploration Ltd. (RTZ) from Australia - shareholder (until 2005)
Relevant government actorsNational Department of Minerals and Energy

Department of Environment and Conservation

Mineral Resource Authority
International and Financial InstitutionsMultilateral Investment Guarantee Agency (MIGA)
Union Bank of Switzerland (UBS) (UBS) from Switzerland - provided a loan for the mine developement
European Investment Bank
Environmental justice organisations and other supportersLihir Mining Landowners Association (LMLA), http://www.lihir.info/the-gold-mine/stakeholders/lmala

CEE Bankwatch, https://bankwatch.org/
The Conflict and the Mobilization
Intensity of Conflict (at highest level)MEDIUM (street protests, visible mobilization)
When did the mobilization beginIn REACTION to the implementation (during construction or operation)
Groups MobilizingFarmers
Fishermen
Indigenous groups or traditional communities
International ejos
Local ejos
Neighbours/citizens/communities
Lihir indigenous clans
Forms of MobilizationInvolvement of national and international NGOs
Official complaint letters and petitions
Shareholder/financial activism.
Street protest/marches
Refusal of compensation
Use of non-violent, traditional grievance mechanisms to handle dispute
Impacts
Environmental ImpactsVisible: Loss of landscape/aesthetic degradation, Soil contamination, Waste overflow, Large-scale disturbance of hydro and geological systems, Other Environmental impacts, Mine tailing spills
Potential: Air pollution, Biodiversity loss (wildlife, agro-diversity), Noise pollution, Deforestation and loss of vegetation cover
OtherImpacts on ocean floors and seabeds through disposal of waste rocks and toxic tailings into the sea
Health ImpactsVisible: Mental problems including stress, depression and suicide
Potential: Other environmental related diseases, Health problems related to alcoholism, prostitution
OtherCyanide use in gold extraction process; can accumulate through the food chain
Socio-economic ImpactsVisible: Displacement, Militarization and increased police presence, Social problems (alcoholism, prostitution, etc..), Other socio-economic impacts
Potential: Loss of livelihood, Loss of traditional knowledge/practices/cultures, Specific impacts on women, Loss of landscape/sense of place
OtherLarge influx of migrant workers; community tensions
Outcome
Project StatusIn operation
Pathways for conflict outcome / responseCompensation
Migration/displacement
Fostering a culture of peace
Project temporarily suspended
Do you consider this as a success?No
Why? Explain briefly.Social tensions and environmental concerns continue to be an issue.
Sources and Materials
Legislations

Papua New Guinea 1992 Mining Act and Regulation
[click to view]

Papua New Guinea Mineral Resources Authority Act 2005
[click to view]

Papua New Guinea Environment Act 2000
[click to view]

References

[3] Hughes, D. J. et al. 2015. Ecological impacts of large-scale disposal of mining waste in the deep sea. Nature, scientific reports 5, ; doi: 10.1038/srep09985 (2015).
[click to view]

[1] McKinnon 2002. The environmental effects of mining waste disposal at Lihir Gold Mine, Papua New Guinea. Journal of Rural and Remote Environmental Health 1(2): 40-50 (2002)
[click to view]

[10] 2003 paper "A Case Study on Indigenous People, Extractive Industries and the World Bank. Papua New Guinea". Presented at the workshop on “Indigenous Peoples, the Extractive Industries and the World Bank” held at Exeter College in the University of Oxford, UK 14th and 15th April 2003. (accessed online 27.11.2017).
[click to view]

[4] Gillespie, K., 2013. Ethnomusicology and the Mining Industry: A Case Study from Lihir, Papua New Guinea. Musicology Australia, Vol. 35, No. 2, 178–190
[click to view]

[2] Filer C., 1995. Participation, Governance and Social Impact: The Planning of the Lihir Gold Mine. In: Mining and Mineral Resource Policy Issues in Asia-Pacific - Prospects for the 21st century. Proceedings of the Conference at the Australian National University, Nov. 1-3,. 1995
[click to view]

[6] Bainton, N., 2011. Customary Dispute Handing Processes at the Lihir Gold Mine, Papua New Guinea. Paper Presented at the Pacific Mining Conference, Noumea, November 2011. (accessed online 20.11.2017).
[click to view]

Links

[9] Newcrest Ltd company webpage on the Lihir mine (accessed online, 27.11.2017).
[click to view]

[7] ABC News (8 Jun 2015). Police sent to reopen PNG gold mine after locals use taboo plant to demand talks with Newcrest. Accessed online 27.11.2017.
[click to view]

[5] Financial Times 2012 (August, 28). Dispute forces Newcrest to halt Lihir mining. Accessed online on November 21, 2017.
[click to view]

[8] Post-Courier News (November 16, 2017). Temporary stop to Royalty Payment. Accessed online (27.11.2017).
[click to view]

Media Links

Newcrest company video on the mine
[click to view]

Lihir Mining Area Landowners Association calls on Newcrest to Honour Obligations
[click to view]

Other Documents

The Lihir gold mine Source: Newcrest Ltd. http://www.newcrest.com.au/our-business/operations/lihir/
[click to view]

Traditional taboo markers (gorgor) placed at the mining site Source: http://www.abc.net.au/news/2015-06-08/police-sent-to-png-gold-mine-after-two-day-shutdown/6530424
[click to view]

Meta Information
ContributorEJatlas Southeast Asia Team (ejatlas.asia"at"gmail.com)
Last update28/11/2017
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