The Bougainville bonanza

The Bougainville Mining Ltd. share issue announced on May 11, means there will be more than slm. to be made overnight in Papua New Guinea.

But many individuals probably won’t be able to share in the bonanza.

The company is making a million shares available at $1.55 to eligible territory institutions for New Guineans and long-term expatriate residents.

On the first day of trading in Aus tralia the rights reached a high point of $3, making the effective issue price $4.55 for a 50c share, before easing to about $2.60 the following day and closing at $2.50 for the week.

It is expected, however, that the Papua New Guinea allocation will be so over-subscribed that few indivi duals will have a chance to obtain any.

The Bougainville prospectus was issued on May 11.

While allocation is at the discre tion of the company. Administration officials believe institutions will be given the first opportunity to take them up.

Local government councils, missions and hospitals can apply for up to 10,000 shares each.

As there are about 150 councils in the territory, if all exercised their rights the full issue would be 50 per cent, over-subscribed. In addition, tribal groups are entitled to 2,500 shares —and anthropologists estimate there are about 700 in the territory, although some are very small and not integrated into cash economy.

If any of the allocation is left, in dividuals will then be able to buy up to 200 each, with, the Administration expects, New Guineans being given priority over others.

But relatively few New Guineans are expected to be able to afford to

buy full entitlement—not at least without loans. According to the Re serve Bank there are 360,000 indi genous savings bank accounts with an average of 5395 in Papua and $453 in New Guinea.

But these averages are pushed up by the fact that the substantial num ber of accounts are for native enter prises or clan groups.

Some bankers doubt if the average New Guinean has more than $2O saved. The Public Service Association has estimated that its 12,000 indigen ous members have average savings of no more than $4O. In addition, there is a substantial amount, mainly in coins buried in the Highlands. The Reserve Bank has estimated this “buried treasure” at more than s2m., but the cautious hoarders have re sisted numerous appeals to bank their money and it is doubtful if they are prepared to dig it up, even for so apparently certain a winner as Bougainville Mining shares.

There was a doubt whether public servants could hold shares in Bougain ville Mining, but the Administrator, Mr. L. W. Johnson, resolved this in May, saying that there was no reason why they should not. He added, how ever, that officers should keep in mind the possibility of a conflict of interest.

A regulation prohibits public ser vants from holding shares in any com pany operating in the territory except with the Administrator’s consent, Bougainville Mining expects to pay 20c on each share with the first payment in October, 1973, Produc tion from the Panguna mine is ex pected to start in mid-1972, barely 12 months away. Dividend forecast is based on an assumed average copper price of US5Oc a lb, equal to the London Metal Exchange’s 10 year average.