Papua New Guinea - Mining

The mining of gold, silver, and copper was a leading industry in Papua New Guinea—mining contributed 17.1% of GDP in 2000, when the country ranked 11th in gold mining and 13th in copper. Crude oil production and construction were other leading industries. Oil, gold, and copper ore ranked as the top three export commodities in 2002. Mining and petroleum supplied 70% of export earnings in 2000 and employed 2% of the workforce. The country also produced cement, common clays, sand and gravel, stone, natural gas, natural gas liquids, and crude petroleum.

Gold output in 2000 was 74,300 kg (metal content), up from 48,482 in 1997. In 1888, gold was discovered on Misima Island, marking the start of mining on Papua New Guinea. Prior to World War II, gold mining contributed 75% of export earnings. This proportion declined greatly in subsequent years, reaching 40% in 1995. Reserves on Lihir Island have been estimated to contain 613 tons of recoverable gold, and deposits at Porgera, near Ok Tedi, in the Star Mountains, were considered to hold another 470 tons. Production of silver in 2000 totaled 73,200 kg, up from 59,294 in 1998.

Copper output (metal content) in 2000 was 200,900 tons. All copper came from the Ok Tedi mine, near the Indonesian border. In 1971/72, the Bougainville copper mine, one of the richest in the world, began to export copper ores and concentrates, which totaled 220,000 tons in 1988 and accounted for 44% of all exports in the years the mine operated. The mine closed in 1989 because of civil unrest caused by Bougainville Revolutionary Army militants. Nine years of civil unrest were temporarily halted by a cease-fire in 1997.

Mineral exploration was being expanded. Bauxite was known to exist on Manus Island, in the Admiralty Islands, and on New Ireland Island. Additionally, lead, manganese, molybdenum, zinc, limestone, and phosphate guano and rock deposits were present. Major deposits of chromite, cobalt, and nickel were believed to be recoverable at a site on the Ramu River, northeast of Ok Tedi. Mineral resources in Papua New Guinea were difficult and expensive to mine, and exploration and mining were hampered by rugged terrain, the nation's poor road infrastructure, and the high cost of developing infrastructure. Ethnic strife has become commonplace, and has had a negative impact on mining exploration and investment. Land disputes have become common as well, because land was communally held and there was no real system of land registration. To revive waning mineral exploration interest, the government announced a major overhaul of the tax system, which has been criticized for making investment in mining too expensive. The new tax regime was applicable only when a project was under way, and included guaranteed fiscal stability for the financing period of a project, the lowering of corporate tax rates, and the reduction of dividend holding tax. Companies were also able to deduct 25% of exploration expenditure against income, and were required to pay an additional profit tax. The mining levy would be phased out within a four-year period.