Via Financial Times

An independence vote that could lead to the creation of the world’s newest nation wraps up on Saturday in Bougainville, an island in Papua New Guinea that witnessed a brutal civil war linked to one of the world’s largest copper deposits. 

The referendum has raised hopes for a better future among Bougainville’s “lost generation” of youth, who missed out on education during the decade-long war that cost 20,000 lives — about a tenth of the population — before a peace agreement in 2001. But it has also sparked a scramble for political influence among foreign mining companies, which want to establish operations in an area that contains copper and gold reserves estimated to be worth tens of billions of dollars. 

Fortescue, the world’s fourth-biggest iron ore producer, controlled by Australian billionaire Andrew Forrest, is among half a dozen miners building relationships with landowners and politicians who could hold the key to securing mining leases. Chinese companies are also active on the island, which analysts warn could become a new front in an intensifying battle for influence in the Pacific. 

“Bougainville’s mineral wealth is obviously a big factor in its strategic importance, and the potential maritime territory it would control would have implications for fisheries and other resource developments in the region,” said Shane McLeod, analyst at the Lowy Institute. 

Bougainville has already been a victim of the “resource curse”, otherwise known as the paradox of plenty, which refers to the poor economic growth, conflict and authoritarianism that mean many resource-rich countries fail to benefit fully from their resource wealth.

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Between 1972 and 1989 a company controlled by Rio Tinto, the Anglo-Australian miner, operated the massive Panguna copper and gold mine on the island, generating huge profits and almost half of Papua New Guinea’s export income. But the activity caused serious pollution and tensions to flare with locals, which erupted into civil war in 1989 and forced Panguna to close. 

The referendum on Bougainville, which is about the size of the French island of Corsica, forms part of a commitment made in a 2001 peace deal between Papua New Guinea and Bougainville leaders. That led to an autonomous government being formed on the island. 

Such has been the excitement that voters queued up long before electoral officers arrived at polling stations. Many brandished the Bougainville flag, a symbol of the independence movement, said Kylie McKenna, one of 100 international observers of the referendum. 

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When the referendum result is announced on December 20 most analysts forecast it will be a resounding vote in favour of independence from Papua New Guinea, rather than for greater autonomy — the alternative option on ballot papers. But the non-binding nature of the poll means the leaders of the Autonomous Bougainville Government will need to negotiate its future relationship with the Papua New Guinea government, which is not obliged to grant independence. 

James Marape, PNG’s prime minister, has remained coy about his government’s intentions. He suggests that political independence would be meaningless for Bougainville without it first achieving economic independence — a goal of the 2001 peace deal that has never been realised. 

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The PNG government is concerned that granting independence to Bougainville could encourage other PNG provinces to seek the same. But ignoring a clear vote for independence could provoke frustration in Bougainville and attract pressure from the international community, which has overseen the peace process. 

In this Nov. 29, 2019, photo released by Bougainville Referendum Commission (BRC), the ballot boxes are returned in the Bougainville referendum in Buka, Bougainville, Papua New Guinea. All across the Pacific region of Bougainville, people have been voting in a historic referendum to decide if they want to become the world’s newest nation by gaining independence from Papua New Guinea. (Jeremy Miller/BRC via AP)
Ballot boxes being returned in the Bougainville referendum © AP

“I think they [PNG] will be trying to convince people in [Bougainville] to stay within the umbrella of PNG,” Bertie Ahern, chair of the Bougainville Referendum Commission, told the FT, adding that this could involve more funds. But he said it would be difficult because of past failures of PNG governments to deliver on promises. 

Bougainville relies on PNG for the bulk of its funds. Plans by its autonomous government to restart mining at Panguna to generate an income stream to prepare for independence foundered when Rio Tinto relinquished its shareholding in the mine in 2016.

“When Rio pulled out, it was a bitter blow. It cut the legs out from under the process,” said Ciaran O’Faircheallaigh, a professor at Griffith University in Brisbane and former adviser to the Autonomous Bougainville Government on its mining regime. 

He warned that the departure of Rio, which was the controlling shareholder of Bougainville Copper Limited, provided an opportunity for ineffectual “carpet baggers”— both landowners and companies with limited ties to the resources — to become involved in plans to restart mining. 

“Many of the companies involved at the moment don’t have the capacity to develop Panguna — they are gatekeepers that will aim to bring in other larger players later. There is a real risk of the resources curse happening again,” he said.

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The scramble for resources

  • Rio handed its shares in Bougainville Copper Ltd to the Autonomous Bougainville Government and Papua New Guinea in 2016, judging that the Panguna mine was too risky to develop. But shares in the ASX-listed company have surged over the past month, as investors speculate on whether the referendum may enable BCL to restart mining at Panguna. 

  • RTG Mining, a Toronto and ASX-listed miner, claims the right to develop Panguna following a deal struck with a local landowner group. But BCL is challenging the autonomous government’s decision to strip it of its mining leases in Papua New Guinea’s courts.

  • Prior to the referendum, John Momis, president of the Autonomous Bougainville Government, announced that Caballus Mining, a company controlled by a West Australian businessman, Jeffrey McGlinn, should be handed a monopoly over Bougainville’s mineral rights. The proposal has not been confirmed by the autonomous government. 

  • Andrew Forrest’s iron ore miner, Fortescue, recently held talks with local landowners, including Sam Kaouna, a former rebel commander who is a contender to become the next president of the autonomous government, to “learn about the region and potential opportunities”. 

  • Mr Kaouna has suggested that a Chinese delegation in 2018 offered to invest substantial sums in mining, tourism and agriculture, as part of a development package to help the island make the transition to independence.