Cost Benefit Analysis of Re-Developing the Defunct Panguna Copper Deposit in Autonomous Region of Bougainville

Abstract

The Autonomous Bougainville Government (ABG) has been obliged to devise socially inclusive mining legislation and policies that were realised through enactment of Mining Act (2015). It recognises community ownership of minerals found in predominantly maternal system of land ownership. The enactment of a separate mining legislation from that of Papua New Guinea (PNG) was a response to socio-political and environmental legacies associated with former Panguna mine. The cost benefit analysis (CBA) study was conducted using historical data from former Panguna mine and conceptual model of redeveloping the defunct Panguna resource. The results show redevelopment of the remaining copper resource could exceed the net benefits of the former mine. The historical and conceptual efficiency ratios (CBR) being greater than 1 depicted that monetary benefits could exceed production and opportunity costs of mining. Despite excluding social and environmental costs of mining, the positive NPV and IRR create opportunities to forge workable partnerships to enhance low-risk options to reduce net costs and maximize the benefits of mining. A major finding of the CBA study was that despite the local ownership of minerals, the mining lease permits and land access are competitive, similar to regalian ownership system. Also, the benefit redistribution structure was found to be similar to PNG’s regalian system where local ownership of minerals may not be a direct form of nationalisation.