Rio Tinto Considers Exiting Papua New Guinea Copper Mine – by Rhiannon Hoyle (Wall Street Journal – August 18, 2014)

New Law Threatens Project, Closed for 25 Years, as It Moves Toward Reopening

SYDNEY— Rio Tinto RIO.LN -1.18% has maintained control of its closed Bougainville copper mine through independence clashes in Papua New Guinea.

But as the mine today edges toward restarting after a quarter-century and copper prices are strong, Rio might head for the exit.

The Anglo-Australian company on Monday said it was reviewing its options for its controlling stake in Bougainville Copper Ltd. BOC.AU +1.22% , after the government passed new laws that could strip the company of its lease on its Panguna mine.

When Panguna—one of the world’s biggest copper deposits—started operations in 1972, Papua New Guinea saw the project in Bougainville as a path to riches. The impoverished country then was still under Australian control and had little industry beyond fishing the schools of tuna that swam near its shores.

But islanders soon became envious that revenue that was flowing to government coffers in Port Moresby rather than to Bougainville schools, health clinics and local incomes. Those frustrations, combined with worries over the mine’s poor environmental record, burst into violence in 1989 when militants forced the mine to shut down.

Just before it closed, the mine was producing around 166,000 metric tons of copper and 450,000 troy ounces of gold a year. That is enough copper for 7.3 million typical American-made cars.

A secessionist rebellion that led to thousands of deaths ended with a cease-fire in 1998 but the mine remained closed.

This year, however, there were signs that the mine was on the path to being rebuilt as rising demand from China for copper in apartment buildings and electric grids pushed prices higher.

Mining executives, landowners and the Bougainville and national governments have been working toward a reconciliation ceremony known as a bel kol—”best translated as a cooling of the heart, or a lowering of the emotional temperature,” said Peter Taylor, the chairman of Bougainville Copper for more than a decade.

But mining laws were passed this month that will transfer mining regulation to Bougainville’s autonomous government from Papua New Guinea’s national government.

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