Canberra, 25 March 1966
[ matter omitted ]
2. The meeting opened with general talks on the mining project and on the stage which the company felt had been reached in the need for more firm titles over its prospecting areas; and then passed on to a discussion of points which are set down as headings in the attachment to C.R.A.’s letter to Mr. Warwick Smith, dated 25th February, 1966.1
General position
3. Mr. Espie pointed out that C.R.A. is now ready to mount a substantially expanded programme. He would like to move fast on making an agreement in order to justify to his Board of Directors a proposed expenditure of $200,000 per month. Additional points which C.R A. representatives made were—
• C.R.A. are not worried about the period while Australian Government remains administering authority but it is concerned to safeguard its position when an independent Government takes office
•There had been rethinking since meeting in Port Moresby of 8th to 10th February2—it is now considered possible that the large area required for storing overburden may require the mill and town to be taken out of the valley and located near the east coast
• Considerable work has to be done before land requirements can be identified— even by 31st December, 1966, these may only be identified in general terms and with alternatives
• If this were to delay making of an agreement then some alternative document was required to cover interim period
4. Mr. Gutman confirmed that the departmental view was that maximum expenditure should be carried out. He pointed out that an agreement could not be executed until land requirements were precisely known and the Government was able to say whether this land could be made available. A form of agreement which gave a future blanket undertaking on land was not favoured. On the basis that C.R.A. had considerable experience in Australia and elsewhere in negotiating such agreements it was suggested that the company prepare and submit a lay draft leaving blanks where necessary.
5. Mr. Henderson—
• disclosed the broad terms of the proposed amendments to the Mining Ordinance including the proposal for compensation of 10/- an acre to private owners of land on which prospecting or mining is carried out
• stated that it was unlikely that these amendments could be made law until after the September/October session of the House of Assembly
•explained that the Administration was spending increased sums on roads etc. in southern Bougainville and were putting increased pressure on local elected representatives to enlighten them on the benefits which the native people would receive from the establishment in the area of the mining project
• suggested that the initial hostile reaction of these people was in line with other areas where development had first intruded—in all previous cases the local people had now accepted this new development when the benefits to them had been understood.
6. After discussion, the company accepted that it would not be possible for an agreement to be made for some months and it agreed that a letter of understanding would be a suitable document to cover the interim period of investigation.
Points raised in company’s letter
Compensation On Resumption
8
• C.R.A. said this was their biggest problem—what they were seeking was something along the lines of the export insurance scheme brought into being last year for Australian investment in overseas countries
• It was pointed out that Commonwealth policy on New Guinea had not been settled—a general Act would have to be promulgated on the subject and a special agreement covering only C.R.A. was not possible
• C.R.A. agreed to put down in writing more specific details of the assurance it was seeking.
Scale Of Operations
9. It was becoming clearer that there may not be sufficient room in the Panguna Valley area for all mining operations and the treatment plant and town may have to be located elsewhere, possibly near the east coast. It was a precise technical problem to specify just where mining should be started and the best sites for overburden and other waste dumps—relative heights above sea level were important.
Financial Interest Of Administration
10. It was pointed out that there is no precedent in Papua and New Guinea and Ministers might have to look at this question broadly to decide their attitude. The Government was, however, already aware that problems will be raised for the incoming independent Government if all large investment were in the hands of foreign companies and the departments concerned are looking at the ways in which local equity in such operations could be arranged. Any suggestion that royalty should be waived would not be agreed with. C.R.A. agreed to outline their views more fully in writing.
Taxation, Municipal Rates, Export Taxes, Etc.
11. C.R.A. explained that they had no objection to paying prescribed income taxes to the new Central Government (when it eventuated) but they did not want to be discriminqted against by State or local government authorities.
12. It was pointed out that the Government would not want to make special agreements on tax with every foreign company and in any case it was exceedingly undesirable to commit a future government. If C.R.A. felt strongly on the point, perhaps they might consider whether a formula along the lines of the 50/50 formula operating in oil producing countries was desirable. A possible alternative {suggested by C.R.A.} was that there should be a specified limit on escalation of. tax within the first 15 years, which is the period required to repay loan capital.
13. C.R.A. agreed to study the position and express their further views in writing.
Land
14. C.R.A. promised to give details of their alternative operations and nominate possible land requirements so that question of land resumption could be considered.
OTHER MINERALS
15. It was agreed that C.R.A. would have first right to work any minerals discovered on the lease area the rights to which were not covered in the original lease.
Adjacent Areas
16. C.R.A. enquired whether there was any way in which they could get quickly into the Minoki, Karato and Dharatui areas, i.e. before waiting for the people to be told of the benefits provided under the new mining amendments. The company said it was opposed to the use of force, i.e. police protection. It was explained that Administration officers at the district level were working on this problem and C.R.A. would be told if the climate of feeling changed to an extent where it was believed their entry would not be opposed.
Next Meeting
17. The next meeting was tentatively set down for Thursday and Friday, 5th and 6th May. C.R.A. undertook to prepare and distribute before that meeting (if possible, before Easter week-end) the following—
• draft letter of understanding to cover interim period
• draft agreement
• papers on subjects referred to above.3
[NAA: A452, 1967/1107]
1 Document 19.
2 Document 11.
3 CRA later forwarded a draft agreement and a draft letter of understanding that would provide assurance of priority rights to obtain permanent lease and other titles to areas under exploration in Bougainville. The company was subsequently informed that talks proposed for 6–7 May were not practicable, perhaps because, as Ahrens remarked, ‘there may need to be major as well as minor revisions [to the draft agreement] before the proposals can be accepted’. ‘In addition to policy aspects of concern to this department’, he wrote, ‘the style of the draft agreement appears to be too restrictive in relation to matters of interest to other departments … Interdepartmental discussions may be necessary in addition to discussions with the Administration’ (minute, Ahrens to Ballard, 22 April 1966, NAA: A452, 1966/1445). Meanwhile, Barnes wrote to Mawby, assuring him that ‘As holder of a Special Prospecting Authority and Exclusive Prospecting Licences your company in effect has priority rights under … the New Guinea Mining Ordinance … The Government has no intention of detracting from this position’ (18 May, ibid.). Ahrens explained to the Administration that CRA’s draft letter had been deemed to require ‘too broad an understanding neither consistent with legal requirements nor desirable in view of the necessity to negotiate favourable terms and conditions before granting of leases’ (memorandum, 26 May, ibid.).