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
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent