Sequel to the New Narrative on Infrastructure Development for PNG [ Part 2]
A case Study of The Sicomine , Mining Development Contract between China & the Democratic Republic of Congo
By Gabriel RamoiWhen Xi Jinping became Premier of China the first trip he took outside of China in 2013 was not to Australia where it imports most of its mineral from nor did he go to the United States to discuss world global security issues with Obama in his role as a leader of an emerging world power instead Xi Jinping travelled to the poorest Nation on earth , the Democratic Republic of Congo [ Formerly Zaire] to stamp his mark internationally on the trajectory of Chinese peaceful intension to engage the world economically by financing Infrastructure Development in that Country. Xi Jinping arrived in Congo with two of his State Banks , The China Development Bank and the Import Export Bank of China to sign off a loan of US$9.25 Billion to the Government of DRC to build essential infrastructure in that country in exchange for Congo’s Cobalt and Copper .
Why Congo ? Congo is a county with a tragic history similar in many ways to West Papua and to a larger extend is a mirror of what can become of our county too if we a not careful in understanding the way in which Global Multinational Firms think and operate. Congo’s tragedy lies in the fact that it is the richest state in Africa endowed with Minerals that Western Multinational corporations and Western Government need . It includes Uranium , Colton, Cobalt, Copper and Gold not counting its rich Timber and Fertile Land. Western Government have for a long time manipulated the political landscape of Congo to the extent of allowing it to become a failed State so they can get into the country take out the mineral wealth .
First Some lesson in Political History
After Dr. Nkrumah of Ghana , the next great African Leader to emerge in the 1950s and 60s was the Soviet Trained Socialist Patrice Lumumba of the Congo who after fighting and gaining independence from Belgium in 1960 , found to his great dismay that the departing Belgium’s had created and armed the mineral rich Province of Katanga to break away from the newly Independent Congo with Belgium firms entering into mining concessions with the new Government in Katanga to continue mining operations there. This Situation bears a remarkable similarity to that of West Papua which was specifically taken out of the new Indonesian State because the Dutch having discover the Largest Gold and Copper Deposit in the world in 1938 in Timika now wants to develop this mineral resources themselves and have secretly asked the United States to help keep Indonesia out of West Papua so they can both can develop this resource together. The United States saw it differently . Just as the life of the great Patrice Lumumba was cut short in mysterious circumstances and murder with the complicit involvement of the CIA in1961 and the installing of the pro US Dictator Mobutu in 1965 a world away in the same year the United States worked very hard to put Soharto into Power in Indonesia which paved the way for that Great United States Copper and Gold Multinational Freeport- McMoRan to enter into a Mining agreement in 1968 with the New Indonesian Government to mine the Grasberg Mine in West Papua minus the Dutch. The History of West Papua and Congo are linked inextricably because of the curse of their resources and the uncanny presence of the same Multinational company in both countries. In Congo Freeport owns and operates the Tenke Fungerume Mine which contributes to 10% of world total copper production. In both countries liberation struggles to free their countries from exploiters have been fought for a long time without the support of the West with Congo only recently managing to free itself out of the hands of Warlords and opportunist. The struggle to rid the exploiting powers in West Paua on the other hand continues unabated up to today with Indonesia unwilling to let the mineral rich West Papua gain Independence. The presence of Western Multinational Corporations currently extracting resources out of Papua makes it unlikely any time soon for the United states or Britain to speak out for West Papua Independence despite the despicable level of State sponsored cruelty and violence committed against the people of West Papua because without police subjugation West Papua Rejects Indonesian rule for what it is , a Predatory State who’s only design is to suck off the wealth of Papua. Many will recall just last week that while Indonesia has asked Freeport to build a smelter in Indonesia it did not insist for the Copper smelter to be built in West Papua instead Copper from Papua is being shipped to be processed in Surubaya ,Eastern Java. . While Freeport is more known by followers of events in West Papua little is known of the British firm BP who sold out to Exxon Mobile in the Southern Highlands of PNG only to remerge across the border in Bintuni Bay in West Papua having just build a LNG plant on a similar size and scale as our own LNG project were the price tag is estimated at US$35 Billion and of which Prince Andrew has able to launch recently.
Now Back to the Sincomines & the terms of the Mining Development Agreement reached between the DRC and China
The visit of Xin Jinping to Congo in 2013 for the first time allowed Congo in its tumultuous history to leverage an agreement with the IMF to write off its debt incurred under Mobutu and forced upon the new Government of Joseph Kabila and to allow Congo to start afresh to rebuilt the country away from the World Bank IMF dictate which continue to help perpetuate the Resource Curse in the Congo and other mineral rich states such as ours by getting us to adopt policies aimed at allowing private capital inflow to lead export growth in the Extractive Industry Sector with little linkages with the rest of the economy through resource rent which allows room for abuse by the Nations elite . China on the other hand under the terms of the Sicomine , Mining Development contract with the Government of the DRC was able to reach a deal valued at US$9.25Billion to undertake extensive infrastructure works to be guaranteed and financed through revenues through a joint Mining venture. The value of the mine is estimated at US$80-85 Billion [ similar incidentally to the Value of our Frieda Mine Endowment ] Chinese enterprises will take 60% share in the venture while the Government of the DRC will retain 32%. US$6Billion of the mining deal will finance a number of infrastructure rehabilitation and construction projects which will be the biggest ever seen in the DRC since colonization and will see the construction of 3,215Km of railway, 3,500Km of Asphalt road and another 2,738 Km of gravel road. There will also be 32 Hospitals constructed 145 Heath Centres built Two Hydro Power Electric Dams constructed , Two new Universities , two Polytechnics, and additional two National Power grid for the Country. Under the agreement 5,000 houses will also be built in the Capital to house civil servants. Local Content for the deal is set at 12% for each of the infrastructure work undertaken and that Chinese workforce should constitute only 20% of the total. There is also a clause for the Chinese to transfer technology equated at 0.5% of each of the value of the project undertaken. The disbursements of the US$9.25Billion will be staged. The First Stage is set at US$3Billion being reimbursement by Exim China to the Chinese companies building the mine to offset mine cost and the balance will allow for reimbursements of Infrastructure cost carried out by Chinese contractors after independent certification on the quality of workmanship and budget integrity.
Finally upon the mine going into production ,the venture will run commercially with the government financing new projects through its 32% stake through its normal budgetary processes.
The young president of the DRC Mr .Joseph Kabila [ son of Laurent Kabila a compatriot of Patrice Lumumba ] was quoted at the signing of the deal as saying “ For the first time since colonialism Congo will fell what its Copper Gold and Nickel is good For.”
Post Srcipt.
This year 2015 Sicomine will start producing Gold and Copper Ingot. What is of interest for us in PNG is to learn from this new innovation in the extractive Industry negotiations in the Congo and to apply the lessons learnt in the Congo to the next generation of mine we want to build in PNG.
Readers of this Blog will note my persistent plea to Civil Servant s and technocrats in particular to ensure that our next Generation of Mines are not Given away cheaply. The case of Frieda is of Contention and as I have said else where Pan Aust and Xstrata Mining cannot bypass the Government of PNG in the way it wants to proceed with the development of the Frieda Mine and that Xstrata Mining was disrespectful to the Government of PNG to ignore the offer from the PNG Government to acquire their Interest in The Frieda Mine on the same terms as agreed to between Xstrata Mining and Pan Aust Ltd. This is not yet the end of the issues surrounding the Future of Frieda . On the 2nd of September 2014. Following my persistence , Cabinet with the implicit endorsement of The treasury Minister, the State Enterprise Minister , the Mining Minister and the Prime Minister made a decision to reject the Deal between Pan Aust Ltd and Xstrata Mining and authorised a State negotiating team to begin renewed negotiation to acquire their interest in the PNG Company know as Frieda River Ltd which currently has the Exploration rights to explore the resources of the Frieda River Deposit through EL58. The Cabinet in Decision 265/2014 based on Policy Submission Number 242/2014 also appointed the Secretary of the Ministry of State Enterprises to coordinate and lead the negotiations with Xstrata Mining and Pan Aust Ltd to divest their interest in Frieda river Ltd to the state. PNG Government agencies are urged in the strongest possible term to abide by Cabinet Decision and desists from transferring any interest in Frieda River Ltd to Pan Aust Ltd or any other company that may want to take over the Interest in Frieda and EL. 58 to do so would in my view amount to treason against the interest of the state.
Again let me reiterate that Pan Aust Ltd does not have the resources to carry out the type of infrastructures that I have out lined in the first part of this essay as this kind of deal can only be put together among and between Governments. It is not as if Pan Aust has spent any money in discovering the Frieda resources and I detest the predatory nature in which Pan Aust Ltd has tried to manipulate its way into the Frieda mine and more importantly in the way in which it is dealing with our leaders and country with Contempt. Again I make the case that Xstrata and Pan Aust Ltd must agree to divest their interest to the state on the same terms and on the same price as was reached between the two with not a penny more and not a penny less..
Finally it is not my intention to see the whole content of the Sicomines Mining development contract transferred in total to PNG as we have a unique situation where the State takes into account its land owners and Provincial Governments and one would imagine their needs would be also carted for adequately in next generations of mine we build in PNG Starting with the Frieda Mine.
