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: Trainee Recruitment Consulant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'