Giving landowners equity

By Wally Hiambohn

CRA’s Mt Kare alluvial mining project, in which local landowners have 49 per cent equity, is unique in the history of PNG mining. It is the only mining project with such a high level of landowner participation. The following is a summary by CRA of issues surrounding this controversial mine.

THE small alluvial mine was born of unusual circumstances set up to re cover what remained after a gold rush in the late 1980 s. CRA exploration has held a prospecting authority over the area since 1985, and soon after the company discovered traces of alluvial gold in late 1987, the previously uninhabited Mt Kare area became the scene of a huge gold rush.

At its peak in mid-1988 there were 10,000 people panning for gold in the creek bed and surrounding areas, and law and order was a serious problem. It is estimated that up to Kl5O million worth of gold was taken off before the supply of easily won nuggets started to dwindle.

The gold rush on CRA’s prospecting

authority interrupted the company’s

exploration program, the main objective of which was to find a hard rock source of the alluvial gold. CRA negotiated with the leaders of 6000 local landowners (identified in a series of genealogical studies) in order to establish a project which would both satisfy the landowners’ interests and allow hard rock exploration to resume once the gold rush tapered off.

The result was a joint venture com pany to build and operate a small alluvial mine for the remaining alluvial gold. The company, Mt Kare Alluvial Mining (MKAM), is managed and 51-per-cent owned by CRA, in partner ship with the landowners’ umbrella

company, Kare-Puga Development Cor

poration (KDC), which owns 49 per cent.

CRA’s aim was to stabilise the area of

its prospecting authority and establish

goodwill with the landowners. From the outset, CRA indicated its intention to transfer its 51 per cent share of the mine equity to the landowners when they became able to financially support and manage the project.

The joint venture was granted a

CRA negotiated with the leaders of 6000 lo cal landowners in or der to establish a proj ect which would both satisfy the land owners’ interests and allow hard rock explo ration to resume once the gold rush tapered off.

special mining lease and began alluvial mining, recovering around 20,000 ounces of gold annually. And 80 per cent of the mine’s 120 employees were local landowners, who worked at the mine on a fly-in-fly-out basis.

Exploration work carried out on the alluvial deposits since the special mining lease was granted has shown that earlier estimates of the alluvial resources were too high. These earlier estimates were made during the gold rush when limited access made it impossible to conduct a thorough exploration program. Revised estimates suggest the volume and grade of the resource are at best only 10 to 15 per cent of the original estimates.

CRA Exploration’s hard rock explo ration program carried out in the adjacent prospecting authority has drilled 32 holes to date, but has also so far to indicate an economic resource.

CRA is committed to continuing hard rock exploration in the area and will seek to have its prospecting authority re newed in September 1993. To date the company has spent approximately K2l million on exploration and development at Mt Kare.

Since August 1992 the mine has been managed, through a management con tract, by a subsidiary of Placer Pacific (PNGj Pty Limited.

From its inception, the Mt Kare project has been dogged by controversy.

CRA’s mining and exploration leases and the partnership with the landowner company KDC have been persistently

challenged by a small group of locals.

This group, which has financial back ing from small Western Australian com panies, Ramsgate Resources and Menzies Gold, has waged a sustained campaign of litigation, political lobbying and public accusations against CRA.

The operations of the mine have also been disrupted by a scries of violent physical attacks. The third and most serious was an armed raid in January 1992 which cost the project K 3.5 million in damage and closure cost, and shut the mine for the first eight months of this year.

The litigation, which consists of four principle areas of dispute encompassing eight different cases, is being conducted on behalf of CRC’s and KDC’s op ponents by a Port Moresby legal firm, Warner Shand, run by expatriates.

CRA has defended the legal actions against it with some success and has in turn mounted a legal challenge to the involvement of Ramsgate and Menzies Gold in Mt Karc dispute by seeking to have the case against the special mining lease dismissed on the basis of champerty, which is the practice whereby outside parties in this case foreign mining companies) without a legal interest in the dispute, seek to fund a case on behalf of another, with the object of gaining an interest in the matter under dispute.

Since early 1992, two of the main litigants opposing the Mt Rare venture have claimed to be directors of KDC.

Proceedings in the National Court disputing these claims have been recently concluded in their favour. CRA said this decision may be appealed.

In October 1992 CRA offered to accelerate the transfer of its 51 per cent interest in the mine to the legitimate landowners, on condition that no outside interests were involved and that CRA’s tenure of prospecting authority in the area be secured. Despite assurances following negotiations with CRA, langalio, has made conflicting public statements on the Mt Kare issue, some of which have been in support of CRA’s opponents.

CRA’s efforts to expedite a resolution of the conflict are continuing.