Much has changed since that time, Bougainville has more autonomy now and it is scheduled to have a referendum on independence between 2015 and 2020.
The mine could provide Bougainville with the economic resources it needs to make independence a viable possibility.
Peter Taylor worked at Panguna in the late-1980's, and is now Chairman and Managing Director of Bougainville Copper which owns the mine.
Jemima Garrett asked him how confident he is that he will be able to get the mine up and running again.
Presenter: Jemima Garrett
Speaker: Peter Taylor, Chairman and Managing Director of Bougainville Copper.
TAYLOR: I am confident that as far as the company is concerned it can be done, that it can be done economically. The real issue is whether the landowners at Panguna and the government want the mine re-opened.
GARRETT: What do you see as the major obstacles in that area?
TAYLOR: Well I wouldn't like to call them obstacles so much as challenges that need to be met. Any mining operation has always got challenges. Obviously the landowners at the mine site will have certain terms and conditions they'd want met in relation to the environment, in relations to compensation, indeed in relation to having a share in the operation.
GARRETT: The closure of the mine resulted from landowner grievances, particularly from the younger generation who felt they'd missed out on some of the mine. How will you approach landowner relations?
TAYLOR: It will be very different this time. One has to look at the history of the mine to appreciate where it got to. It wasn't opened in the best of circumstances. It was opened on the eve of Papua New Guinea becoming independent. There wasn't a province of Bougainville at the time, constitutionally, so neither the province nor the landowners were consulted to any great degree. There was some resistance to the mine being opened, particularly in the circumstances in which it was opened, so all of that will be very different. My approach is to allow the landowners, or in fact encourage the landowners and the Bougainville government to set the agenda. I would expect that there will be share ownership in the mine, with the landowners and the government. I think they need to have equity in the project so the fortunes of the mine are also the fortunes for them. There will obviously be the employment which was there before, and the business which spins off the mine. There'll be infrastructure that used to be there and is no longer there, like schools and hospitals and reticulated water, safe water, all those sorts of things which people expect when these big projects are developed in their area.
GARRETT: You spent 2 years on Bougainville in the late 80's and you've been Managing Director of Bougainville Copper for 10 years. What did you learn during those 2 years on Bougainville that might help you negotiate the new arrangement with landowners?
TAYLOR: Well very importantly, I developed a great passion for Bougainville and Bougainville people. It is actually a fabulous place and they are lovely people. It is very difficult for me, even now, to understand how the problems that arose got to the stage of actually having the mine close and there being a civil war. Personally, I have a desire to make sure the future of Bougainville is assured, both economically and educational and health facilities are made available to all the people.
GARRETT: There are still some small pockets of strong resistance to the mine reopening, for instance landowner leader, Damien Dameng, who was a mentor to rebel leader in the 1980's Francis Ona, is still opposed to opening the mine. What sort of problems does that pose?
TAYLOR: Well, I don't think any major infrastructure project whether it be mining or otherwise, or even a road in Sydney, for example, opens without some people objecting to it. Its always a balance between what I might just loosely call the economic gain and benefits you can get from these sorts of projects and the social disruption that is inevitable. I mean things will change. There is no doubt when you have a large project like this. And some people are just resistant to change. They simply want the status quo to go on forever but the reality is, the world doesn't work that way.
GARRETT: How will you approach people like Damien Dameng who are against the reopening of the mine?
TAYLOR: My approach is to invite everybody to the table. I mean we've got quite a way to go in terms of working out the regime under which the mine will re-open and as far as Bougainville Copper is the invitation is there for all interested parties to be there at the table to put their points of view to all of the people around the table and hopefully, we'll be able to work out a workable compromise.
GARRETT: At this stage what is your assessment of public opinion on Bougainville in terms of reopening the mine?
TAYLOR: Well I'm encouraged because with time I think a combination of things ..I think the economic reality, particularly with respect to being able to genuinely decide if the Bougainvilleans want to be independence or not. I think to do that there is a general recognition that one needs economic self-sufficiency, and really, in the time frame available, the 5-10 years from now, the only way that is going to come about is with a major project like the mine reopening. But, in addition to that, I think people, particularly the older generation, look back on what they had when the mine was operating and compared to what they've got now, it was pretty good.
GARRETT: The key to reopening the mine is the renegotiation of the Bougainville Copper Agreement - which was the colonial era benefits sharing agreement - How different will that new agreement look?
TAYLOR: I don't want to pre-empt the outcome of that process but clearly what was put in place in the ..well really it was the mid-60's towards the late 60's, . The world has moved on and one would expect, .. and it was intended that that be renegotiated every 7 years. Now that didn't happen. What we are going to have to do, ..it is almost a great leap forward. This is a new era so there is nothing off the agenda. Everything that needs to be discussed should be on the agenda at the discussions around, not just the Bougainville Copper Agreement, but the mining regime, and everything else to do with operating the mine.
GARRETT: In July, Bougainville President, John Momis, sent a letter to Prime Minister, Sir Michael Somare, asking that he restart negotiations for a Bougainville Copper Agreement. He still has had no response to that letter, or to his follow-up letter. Does that concern you?
TAYLOR: Well, um , my general feeling about the national government is that it is quite willing to come to the table. In fact, quite the opposite happened with the previous President. It was the national government that invited the Bougainville government to renegotiate the Bougainville Copper Agreement. I think, what needs to happen immediately is for the various landowner groups and there are rival landowner groups, about 6 in all. For those landowner groups to form a single body, and once we've got that single body then we have got landowner representatives at the table. I think the national government and the Bougainville government will easily fall in behind once that happens.
GARRETT: There have been suggestions that PM Somare is thinking of re-opening the mine with Chinese investment rather than with Bougainville Copper. What is your response to that?
TAYLOR: Well, there has been no approach to the company regarding a plan for the Chinese to open the mine. I mean obviously, if the Chinese were interested in investing the company would have to look at that. Indeed, if anyone were interested in investing in the mine we would look at it. I don't think there is anything necessarily wrong with Chinese investment, or any other kind of investment, but the company has the legal rights to the lease and to the infrastructure and so anybody who is interested in getting involved will have to deal with the company and our door is open to that.
GARRETT: John Momis, the President of the autonomous Bougainville government was ambassador to China. Australia's former Prime Minister, Bob Hawke, has well-known links with business in China and, in November, both of those men met with Prime Minister Somare. That's a pretty high powered triumvirate. Does Bougainville Copper have something to worry about in terms of Chinese interests wanting to take over Bougainville copper?
TAYLOR: Well, as I said, there is nothing necessarily wrong with Chinese investment in Bougainville copper. There's been no formal approach to the company directly from Chinese interests or from Prime Minister Somare, or President Momis, with a plan to include the Chinese but as I said I am willing to listen to any proposition. At the end of the day the investors in the company will have to decide whether they want a partner or not.
GARRETT: What would it take if the Chinese wanted to buy out Bougainville Copper?
TAYLOR: Well, Bougainville Copper is a public company, a listed company. There is obviously the one very large shareholder, which is Rio Tinto Ltd, but the PNG government is the second biggest with 19% interest and without getting one or both of those parties interested in selling, I am not sure that it would be possible for the Chinese to buy it.
GARRETT: PNG landowners in the LNG project, the ExxonMobil LNG project, some of them have been more interested in Chinese investment because they say they are interested in resource security rather than profits. What do you say to landowners and people in the PNG government who may be thinking about Chinese investment in the Bougainville mine?
TAYLOR: As I said I am not concerned about chinese investment or any other country investing, or a private investor. That's not really an issue for me. The Bougainville government and the Bougainville people may have something to say about it. It's not really an issue for a company like BCL.
GARRETT: Apart from Chinese companies there have also been a number of smaller companies that have been on Bougainville promising the world - do landowners and the autonomous government of Bougainville need to careful of carpet baggers at this point?
TAYLOR: Well they do. There is nothing unusual about having what I call the fringe dwellers circle a new major development anywhere in the world. Bougainville has had its share, that so far, I think, its fair to say have been disappointing to Bougainvilleans and I think in one sense that's actually been of benefit to Bougainville Copper because, having seen the alternatives, the Bougainvilleans are saying, they actually prefer Bougainville Copper to reopen the mine.
GARRETT: When the mine was closed it was thought it had a 15 to 20 year life left in it. Technology has improved a lot since then. What's your latest estimate of the mine life?
TAYLOR: We've done one study in recent years, which we call an order of magnitude study, the accuracy is plus or minus 30%, but we've done that on the basis of the production that we had when the mining was suspended. On that basis which is about 50 million tonnes a year of production, it would have something like 17 to 20 years left. In fact, it has a little longer mine life now, simply because with copper and gold prices the way we are we can treat a lower grade ore which gives us a longer life. But I think one of the exciting things about Panguna is that we don't know the full extent of the ore body. We know that in geological terms its open to depth in one particular direction and of course the prospectivity around the mine site is very good and relatively unexplored so there is always the prospect that there will be new discoveries and we would certainly be seeking to make new discoveries.
GARRETT: In fact, you have plenty of exploration leases that you haven't used. Just how much potential is there to significantly extend the resource you have there?
TAYLOR: Well that's right. There are only 7 exploration licences that have been granted on Bougainville and Bougainville Copper owns all of those. And we think they are amongst the most prospective pieces of ground. Its very exciting. There was a moratorium put on further exploration when the mine first opened so there has been nothing other than an aero-magnetic survey which was done as an aid project by the German government in the mid 80's. But that survey actually confirmed some of the geochemical anomalies that we'd found on the ground and so we've got some very nice targets there, and our geologists are very excited about getting back one day and doing some further exploration.
GARRETT: So at this stage, in lay terms, what have you got there in terms of gold and copper and how does it compare with other projects in PNG?
TAYLOR: Compared to other projects in PNG its an Ok Tedi size mine if that means something to people. For those who know what production figures are all about, it would produce somewhere between 150,000 and 170,000 tonnes of copper a year and about half a million ounces of gold. Now to give you a comparison I think the biggest gold mine is Lihir and I believe it produces about 700,000 to 800,000 ounces at this stage so it makes Bougainville Copper a pretty big gold mine. Lihir's got no copper, and of course Bougainville Copper has got lots of it.
GARRETT: Let's look now at the logistical side of getting the mine up and running again. What will it take to rehabilitate the mine site and also to deal with those issues of past wrongs, say people along the Jaba River who want compensation for health issues or so forth.
TAYLOR: Alright there are 2 questions there. One is the environment at the mine site. There is a lot of misinformation about the Jaba river and the so-called environmental damage. The problem was that the material that was put into the river is a very finely ground rock so you get this siltation in the river which means we keep having to keep putting levy banks up because the river bed rises. There was never any toxic material put down there. And quite often I read articles about there being cyanide etc. People have to remember gold and copper was never produced at the mine; only a concentrate, so those sorts of chemicals were never used. So we will have to look at the available tailings disposal mechanisms. Technology has moved on so we've now got options we didn't have before but at the end of the day the landowners and the government are going to have to have a fairly significant input into that and they'll have to decide which method they want. They can't have the mine without tailings so they have to go together. In terms of compensation there are a few questions about that. There was a compensation agreement in place between the landowners and the company directly, and that's the one that is generally talked about and when the mining was suspended that compensation agreement, as it turned out, lapsed at the same time. In timing, it was due for renewal and it wasn't renewed. So there's a question of what is equitable for compensating for the period between mining being suspended and when it starts again. Most of the compensation was paid by way of royalty and it was paid initially directly to the PNG government which was always a bone of contention, and then paid back to the provincial government, which in turn, paid the landowners only part of that. And of course, that was another bone of contention. This renegotiation we are going to have, we'll have to look at all of that and look at what sort of regime is appropriate for the future not what happened in the past.
GARRETT: There is a very large old tailings dump at Panguna. What will it take to find out if it is stable and how much of a job is it to stabilise it, if you need to?
TAYLOR: Well that's actually the waste rock dump rather than the tailings but leaving the technicalities aside, I understand what you mean. Its fairly stable. I mean one of the things about having mining operations suspended for more than 20 years now is that we have been able to have a pretty good look at what happens if nature alone is allowed to take its course. And the engineering when we were there was pretty good because, for example the pit has to drain and that drainage tunnel still works. There is not water accumulating in the pit. The faces of the pit are stable. There's been some minor degradation, but pretty good. The tailings disposal area is rehabilitating itself, the river is rehabilitating itself and the waste dumps are still intact so it was an excellent engineering job.
GARRETT: Lets turn to the economic side - what will it mean to PNG and Bougainville if the mine reopens?
TAYLOR: As you know PNG has a very large and exciting gas project that is being developed so for PNG the importance Bougainville had when it first opened - it was the only major project in the whole country, not just Bougainville - it won't be quite the same. For Bougainville it is quite different. It depends how much of the revenue Bougainvlle is able to keep but potentially it is large enough to support the Bougainville economy and also to produce a large number of jobs and businesses that always develop around a major project. There are stats about how many direct employees will lead to how many indirect employees and the ratio is about 5 to 1 so if we are employing 3000 people you can expect another 15,000 people to be employed locally. That's the sort of thing that will help, not only in terms of revenue, but also in employment, which is very important for the young people.
GARRETT: Rio Tinto is one of the world's biggest mining companies- where does the Bougainville mine sit in its firmament?
TAYLOR: You'd have to ask Rio Tinto about that. I can only talk to you as Chairman of Bougainville copper. But in the scheme of things at the moment copper is in great demand. And 150,000 to 170,000 tonnes per annum would be a very interesting and exciting new prize for any company so I imagine Rio Tinto is rather interested.
GARRETT: In terms of Boug Copper, what do you see as a plausible timetable in getting the mine up and running again?
TAYLOR: A lot depends on the permitting because you know this is almost ..well it is as good as starting again. There will be a new regime. I expect by the time it opens Bougainvlle itself will be administering the mining regime, rather than the national government, but none of that legislation is in place yet, none of the regimes there, so its going to take time to do that. The company itself will have to do a feasibility study that is acceptable to lenders. That typically takes about a year and it's a very expensive process so we don't want to commit to that until we know what the new mining regime will look like; what the tax regime will be, what the royalty regime will be, compensation and so on. We need to have all those in place before we can do that study. So whilst the time frame might be around the 3 to 5 year mark, when we get started on it is a question I can't answer because I am not the only one involved. There's the landowners, the Bougainville government and the national govt to be considered.
GARRETT: What sort of progress would you regard as positive this year?
TAYLOR: Well, if we can actually formally start the negotiation process this year and I do think that is feasible, and indeed perhaps even likely, because the reconciliation process on Bougainville generally is going very well. Amongst the landowners it seems to be going very well. They've agreed on a process to elect their representatives. I'm not sure how long that will take. I know President Momis was hoping that that would have been done by the end of last year. Time has slipped a little bit but we are certainly moving in the right direction and we are certainly moving a lot faster than has occurred in the past.