Commodities: All that's gold does not glister for RTZ

LAST Thursday sophisticated young men and women sat in front of their sophisticated computers in the City and watched as New York speculators drove the gold price down through the dollars 370 an ounce mark.

Meanwhile, on the other side of the world, another gold drama was unfolding. On a remote island off Papua New Guinea, the biggest mining company in the world was struggling to salvage its interest in a huge gold deposit. Its problems were in their own way more sophisticated than those of the traders: they involved religious rituals, cargo cults and tribes of people who would know just what to do with a New York speculator.

Lihir Island and RTZ had seemed made for each other. The island contains the world's largest undeveloped gold reserves, worth about pounds 5bn at today's prices, which RTZ, the world's biggest mining company, had been quietly and confidently preparing for production.

Now there are grave doubts whether RTZ will go ahead after a bizarre series of events that say much about the problems of business in one of the least developed regions of the world.

Early this month RTZ said it wanted to bring in a third partner - Venezuela Goldfields of Canada - to join itself and Niugini Mining, part of Battle Mountain Gold of Texas. Paias Wingti, PNG's Prime Minister, was furious, saying this broke previous agreements. He declared PNG would take a 50 per cent stake in the Lihir project and attacked 'the decisions of foreign companies which are taken in flagrant violation of my government's decision'.

There are several sub-texts to all this, which inevitably lead to the same conclusion of a mounting crisis of confidence in PNG among international investors. In some respects, the instability is understandable given the country's headlong rush into the 20th century and its problems in coping with the realisation that it contains some of the world's most dazzling mineral resources.

The 7,000 Lihirian islanders were largely unknown to the outside world before a geologist arriving by boat in 1982 touched on what later proved to be this century's biggest gold discovery outside South Africa. RTZ acquired the stake when it took over BP Minerals in 1989, and has since been seeking equity partners to reduce its exposure to an investment that involves financial and political risks. About dollars 125m has been spent on the island so far, with further construction costs estimated at dollars 600m.

Much of the preparation has involved developing agreements with the landowners, for whom life has changed irrevocably since the first mining helicopter landed 10 years ago. Smack in the middle of the proposed mine is a sacred site, a rock known as the Ilaia, or the place where many believe their souls enter the next world. To mine the volcanic rock would involve crushing the Ilaia, so compensation agreements will have to be worked out. This may prove delicate on an island where some follow cargo cults revolving around such diverse figures as Jesus Christ and the late President Lyndon Johnson.

The Lihir Landowners Association is led by Mark Soipang, a 43- year-old former engineering student, who says wryly that RTZ has begun to understand the islanders' ways. 'Give them time, and they will even learn to think like us. If not, they might chew some betel nut until they do.'

Lihir is just one of the mining projects where giant corporations have been thwarted by determined locals. The biggest is on the nearby island of Bougainville, where one of the world's biggest open-pit copper mines, which once provided almost half PNG's exports, has been shut since 1989 after an armed revolution by local landowners. The mine's operator, Conzinc Rio Tinto of Australia (CRA), an affiliate of RTZ, has virtually abandoned the island and written off millions.

Bougainville was a textbook case of a Western mining company failing to come to terms with landowner grievances that had been simmering since before PNG's independence from Australia in 1975. Recent attempts elsewhere to avoid a Bougainville-style clash of cultures have not been entirely successful. Earlier this year, CRA announced it was pulling out of the Mount Kare alluvial gold mine operation in the highlands of the PNG mainland. The Mount Kare gold was discovered only in 1987, and was quickly followed by a Klondike-style gold rush from highland tribes. Since 1990, rival landowners have attacked CRA's mine three times, on one occasion forcing the manager at gunpoint to set fire to a helicopter and buildings.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor