I. Basic Information

Papua New Guinea is located in the southwestern Pacific Ocean. It borders Indonesia’s Papua Province to the west and faces Australia across the Torres Strait to the south. It is part of the Melanesian archipelago. Its area is 462,840 square kilometers. Areas above 1,000 meters in elevation have a mountainous climate, while the rest of the country has a tropical climate. The dry season runs from May to October, and the rainy season lasts from November to April. The average temperature along the coastal regions ranges from 21.1°C to 32.2°C, while mountainous areas are 5–6°C cooler than the coast. The annual average rainfall is 2,500 millimeters.

Papua New Guinea has a population of 5.62 million (as of 2006). Its official language is English, and 95% of the population are Christians. Papua New Guinea is a developing country with abundant natural resources, yet its economy remains underdeveloped, and a significant portion of its people still live in primitive tribal communities engaged in subsistence economies. Nearly 40% of the population lives below the international poverty line. The country’s economic pillars include mining, oil production, and the cultivation of cash crops. It is also rich in forestry and fishery resources. Major agricultural products include dried coconut meat, cocoa beans, coffee, natural rubber, and palm oil. The country’s industrial base is weak.

In recent years, the Government of Papua New Guinea has focused its efforts on economic development and formulated the “Medium-Term Development Strategy 2005–2010,” successfully reversing the downward economic trend. As a result, Papua New Guinea’s economy has shifted from negative growth of 8% in 2002 to four consecutive years of positive growth, with the government achieving fiscal surpluses. The kina exchange rate against both the U.S. dollar and the Australian dollar has remained stable (in 2006, 1 kina = 0.32 U.S. dollars), and loan interest rates have continued to decline. By the end of 2006, foreign exchange reserves stood at 1.45 billion U.S. dollars. The primary reasons for the country’s strong economic performance, aside from rising global prices for raw materials exported to international markets, include the effectiveness of the government’s policies aimed at tightening fiscal expenditures, fostering private-sector development, and vigorously attracting foreign investment. Investment projects such as the construction of a natural gas pipeline from Papua New Guinea’s Southern Highlands to Queensland, Australia, and the Ramu nickel-cobalt mine are all progressing smoothly, enabling Papua New Guinea’s economy to gradually emerge from its difficulties. In 2006, the country’s gross national product reached 4.1 billion U.S. dollars, representing a 4.5% increase over the previous year.

     II. Mineral Resources

Papua New Guinea is extremely rich in mineral resources, with major minerals including copper, gold, silver, cobalt, nickel, petroleum, and natural gas. Among these, its copper and gold reserves rank among the world’s largest.

1. Copper

Papua New Guinea is exceptionally rich in copper deposits, with currently proven reserves exceeding 12 million tons. This means that, on average, there are nearly 26 tons of copper per square kilometer across the country. The copper resources are concentrated in four major mining districts: Panguna on Bougainville Island; Ok Tedi in the Fubilan Hills of the Western Province (the Ok Tedi copper mine is the world’s eighth-largest copper deposit); Florida south of the Sepik River; and Yandara in the Bismarck Range—all of which are Cenozoic porphyry-skarn-type copper-gold deposits. Among these, the copper deposits in the central mountainous region of Bougainville Island are estimated to hold ore reserves of over 800 million tons, making it one of the world’s largest copper mining regions.

2. Gold, silver

Papua New Guinea’s gold deposits are predominantly of the volcanic rock type and porphyry copper-gold type, with total gold reserves estimated at about 1,756 tons. These gold deposits are mainly located in provinces such as New Ireland, Enga, Bougainville, Western Province, Milne Bay, and Central Province. Among them, the Porgera gold deposit and the Lihir Island thermal (or hot spring)-type gold deposit are particularly well-known. Both deposits were discovered in the 1990s and are of enormous scale, ranking among the world’s largest gold deposits. The Lihir Island gold deposit is situated on Lihir Island in New Ireland Province, approximately 700 kilometers northeast of the capital, Port Moresby, with gold reserves totaling 573 tons. The Porgera gold deposit is located in Enga Province, about 620 kilometers northwest of Port Moresby, and has gold reserves of 420 tons. Additionally, the Panguna porphyry copper-gold deposit on Bougainville Island holds gold resources exceeding 500 tons. The Oktedi copper-gold deposit in Western Province also boasts abundant gold resources. Silver deposits often occur in association with gold deposits and are primarily found in Western Province, Bougainville Province, Enga Province, and Central Province.

3. Nickel, cobalt

Papua New Guinea’s nickel and cobalt resources are primarily concentrated in Madang Province, located in the southeastern part of the main island. Among these, the Ramu nickel-cobalt deposit is a world-class, large-scale laterite nickel deposit with known reserves of approximately 1.4443 million tons of nickel and 143,000 tons of cobalt.

4. Oil and natural gas

Papua New Guinea’s oil and gas resources are primarily located onshore in the Papua Basin, with the Southern Highlands Province being the most concentrated area. The Eastern Highlands Province and the Gulf Province follow closely behind. The Papua Gulf holds significant potential for oil and gas resources, and current offshore oil and gas exploration activities are largely focused on this region. In 2006, Papua New Guinea’s remaining proven oil reserves stood at 32.88 million tons, while its natural gas reserves totaled 345.667 billion cubic meters. Major oil and gas fields include Central Moran, Kutubu, Gobe, Hides, Agogo, Hedinia, and Usano, among others.
    
     III. Current Status of Mineral Resource Development

The mining industry is a pillar of Papua New Guinea’s economy. In 2005, the value of mineral exports—including petroleum—accounted for approximately 49.7% of the country’s GDP. In 2006, total mineral exports reached US$3.391 billion, representing 80.6% of the nation’s total export revenue. Employment in this sector accounts for roughly 2% of the country’s total labor force. The country’s main mineral products include crude oil, natural gas, copper, gold, and silver (Table 1).

1. Petroleum

In 2006, Papua New Guinea’s crude oil production totaled approximately 17.3 million barrels, ranking it ninth in the Asia-Pacific region. The primary producer is Chevron Niugini Ltd., which operates the Central Moran field, the Gobe field, and the Kutubu field in the Southern Highlands Province. Santos Ltd. produces a small amount of crude oil from the Se Gobe field also located in the Southern Highlands Province. Exxon Mobil is another major player in oilfield development and operations. While these three companies are the primary operators and managers of Papua New Guinea’s oil production, the true majority shareholder of the country’s oil fields is Oil Search Ltd.—a Papua New Guinean state-owned company engaged in oil and gas exploration and development. Oil Search has been operating in Papua New Guinea since 1929 and was later listed on the Australian stock exchange. Today, it is one of Papua New Guinea’s largest companies, holding about 70% of the country’s oil reserves, contributing roughly 14% of its GDP, and accounting for 20% of its export revenues. Oil Search Ltd. employs around 900 people in Papua New Guinea, Australia, Yemen, and the United Arab Emirates. Thanks to sustained high international oil prices, the company has maintained profit growth for five consecutive years. In 2006, its after-tax profit reached US$412 million, representing a 106% increase over the previous year—the highest level in the company’s 77-year history. Oil and gas production totaled 10.2 million barrels, slightly down from the 12.2 million barrels produced in 2005. The average selling price of oil was US$67.22 per barrel, up 16% year-on-year. Peter Botten, CEO of the oil exploration company, stated that over the next three years, the company’s daily oil production will remain stable at around 50,000 barrels.

Papua New Guinea’s only oil refining project is located in Port Moresby, with a capacity of 32,500 barrels per day. The operator of this project is Canada’s InterOil Corporation. In addition to meeting domestic demand, 50% of the refined petroleum products are exported to neighboring countries and regions.

2. Natural gas

Papua New Guinea boasts relatively abundant natural gas resources, yet the current level of development remains low. In 2006, natural gas production totaled approximately 155 million cubic meters, primarily from the Hides gas field located in the Southern Highlands Province. The operator of this field is the U.S.-based Exxon Mobil, with Oil Search holding a 21.5% equity stake. In addition to the Hides gas field, Papua New Guinea has several other gas or oil-and-gas fields, including Aghogo, Gobe Main, Hedinia, Kutubu, Moran, Angore, Juha, ELK-1, Se Gobe, and Usano. However, these fields have not yet been put into effective use.

To develop its domestic natural gas resources on a large scale, Papua New Guinea is currently planning to attract international mining capital to build a liquefied natural gas (LNG) project. In 2007, the government announced plans to launch what was touted as “the world’s largest LNG project.” On May 22, 2008, the Papua New Guinean government signed an agreement for this massive LNG project. The project will be operated by ExxonMobil and will undergo Front-End Engineering and Design (FEED) studies—a preliminary engineering and construction feasibility assessment—costing 400 million U.S. dollars and taking 16 months to complete. The joint venture partners include ExxonMobil (41.5%), Oil Search (34%), Santos (17.7%), AGL (3.6%), and landowners (1.2%). The project’s total direct investment amounts to 10 billion U.S. dollars, with a project lifespan of 30 years. The projected production capacity is 6.3 million tons per year, and at least two LNG production lines are expected to be built. The natural gas will primarily come from the Hides gas field; nearby Angore and Juha gas fields will also provide additional supply. The timing of when the project’s investment will commence will not be decided until after the completion of the feasibility study later next year. Once completed, Papua New Guinea will become a major LNG exporter in the Asia-Pacific region.

In addition, to more effectively develop the remaining discovered natural gas resources, Oil Search signed a domestic natural gas development agreement with the Government of Papua New Guinea in July 2008. The key provisions of the agreement include: 1) establishing an energy enterprise in the Southern Highlands region to assess the area’s energy supply potential and other small-scale natural gas development opportunities; 2) forming a joint venture with Papua New Guinea Sustainable Development Corporation and the Government of Papua New Guinea to conduct research on natural gas development in Western Province; 3) partnering with Japan’s ITOCHU Corporation and Mitsubishi Chemicals to establish a joint venture for evaluating methanol and dimethyl ether (DME) projects; 4) conducting studies aimed at ensuring a secure and stable power supply for Port Moresby. We believe that in the coming years, the level of natural gas development in Papua New Guinea will significantly increase.

3. Copper

Copper is a key mineral resource in Papua New Guinea, with annual mine production reaching approximately 200,000 tons. In recent years, copper production has slightly declined; in 2006, output was about 194,000 tons, all coming from the Ok Tedi Mine in the Western Province. This mine is currently the only copper mine in Papua New Guinea operating at full capacity. The mine is operated by Ok Tedi Mining Limited—a company in which the Papua New Guinea National Sustainable Development Project Corporation holds a 52% stake, the Papua New Guinea government owns 30%, and Canada’s Inmet Mining Corporation holds an 8% stake. In 2006, the company produced 62.2 tons of copper-gold concentrate (containing 178,000 tons of copper and 15.7 tons of gold). Since the Panguna copper mine was forced to shut down in 1989, the Ok Tedi Mine has become Papua New Guinea’s primary economic source, accounting for one-fifth of the country’s total export revenue. According to the 2006 annual report of Ok Tedi Mining Limited, due to the rapid rise in international copper prices, the company’s sales revenue in 2006 reached 4.6 billion Kina (approximately US$1.53 billion), representing a 40% increase over the previous year. After-tax profits amounted to 1.9 billion Kina (approximately US$630 million), up 79% from the previous year, marking the highest profit level in the company’s 25-year history. Currently, the mine employs 2,000 permanent staff and 2,000 contract workers.

The Ok Tedi copper mine is scheduled to close in 2013, but this closure will not affect Papua New Guinea’s copper production. Currently, several large-scale copper mining projects are either underway or planned for launch, including three projects each with investments exceeding US$1 billion. These include the Yandera copper project by Marengo Minerals, the gold project by South Africa’s Harmony Gold, and the copper-gold project by Stelco Mining. Together, these three copper projects are expected to produce 350,000 tons of copper annually. In the near future, Papua New Guinea’s seabed mineral projects will also significantly boost the country’s copper production capacity. In 1997, the Papua New Guinean government issued the world’s first seabed exploration license to Australia’s Nautilus Minerals, authorizing exploration and evaluation of high-grade copper-gold-silver-zinc sulfide deposits located on the seabed off the west coast of New Ireland Province (at a water depth of approximately 1,700 meters). Nautilus Minerals’ strategy is to become the world’s first company to engage in commercial deep-sea mining. Currently, the company plans to commercially develop the seabed mineral deposits off the west coast of New Ireland Province in Papua New Guinea. The company’s Papua New Guinea regional manager has already submitted a mineral project development plan to the New Ireland Provincial Government. According to a report from the Information Department of the Papua New Guinean New Ireland Provincial Government, the company’s final technical design—including its processing methods—meets all the necessary conditions for exploration and development, and commercial production from the seabed mineral deposits is expected to begin in 2009. Belgium’s Jan De Nul—a company that is the world’s second-largest dredging firm and currently owns the world’s largest dredging vessel—will be responsible for designing the remote-control technology required for the seabed mineral development. If this project comes to fruition, Papua New Guinea could become the world’s first country to engage in deep-sea mining.

In addition, Australia’s Bougainville Copper Ltd. is currently assessing the feasibility of restarting operations at the abandoned Panguna copper mine on Bougainville Island, with the goal of restoring profitable mining activities. The Panguna copper mine began production in 1972 and was once Papua New Guinea’s most important mine. It was shut down in 1989—then the world’s fifth-largest copper mine—due to a separatist conflict triggered by land-ownership disputes and environmental damage on Bougainville Island. At the height of the conflict in the 1990s, thousands of Bougainville residents lost their lives. Later, the conflicting parties signed a peace agreement. Since the Panguna mine closed, no officials from Bougainville Copper Ltd. have been permitted to enter the site. Currently, Bougainville Copper Ltd. is consulting with broadly representative local community groups on Bougainville Island regarding the resumption of mining operations. The Bougainville Autonomous Government hopes that the resumption of mining on the island will generate revenue—but stresses that this can only proceed with the full consent of landowners and local residents.

4. Gold, silver

Papua New Guinea’s gold and silver mine production both hover between 50 and 60 tons. In 2005, mine production stood at 68.5 tons for gold and 51.1 tons for silver, though it declined somewhat in 2006. The major producing mines include Kainantu (gold), Lihir (gold), Ok Tedi (copper, gold, and silver), Porgera (gold and silver), and Tolukuma (gold and silver). The largest gold mine is the Porgera mine, located in Enga Province, with a capacity of 28 tons of gold in 2006. Its operator is the Porgera Joint Venture (75% owned by Canada’s Placer Dome). Another significant gold producer is Lihir Gold Ltd., which operates the Lihir gold mine in New Ireland Province. This mine has reserves of approximately 23.6 million ounces. The mine’s projected lifespan is 37 years; during the first 15 years, it will be mined using open-pit methods, with an average annual output of about 19 tons. For the subsequent 22 years, the average annual output is expected to be around 7 tons. Ok Tedi is the largest silver-producing mine, with a production capacity of 40 tons in 2006.

5. Nickel, cobalt

Currently, Papua New Guinea does not yet produce nickel or cobalt. However, a world-class nickel-cobalt mining project is under development—the Ramu Nickel-Cobalt Project, located in Madang Province, Papua New Guinea. In November 2006, Papua New Guinea’s Prime Minister Somare personally attended the groundbreaking ceremony for the Ramu Nickel-Cobalt Project held in Basamuk, marking the official launch of the project. The project is jointly developed by China Metallurgical Construction Group (hereinafter referred to as “MCC”) and Australia’s Highlands Pacific. MCC holds an 85% stake in the joint venture and is responsible for the project’s engineering construction, providing construction funding, as well as undertaking the initial development and construction phases. Meanwhile, Ramu Nickel, a subsidiary of Highlands Pacific, holds an 8.56% stake in the joint venture. At the time, the total estimated investment for the project was approximately US$650 million, making it currently the largest overseas mineral resource investment project undertaken by a Chinese company—excluding oil investments.

Initially, Highland Pacific held an 8.56% stake in the Lamu Nickel-Cobalt Project. However, after repaying the project’s financing debts, its ownership stake will increase to 11.3%. The company also holds an option to repurchase an additional 9.25% of the Lamu Nickel-Cobalt Project at market prices. If this option is exercised, Highland Pacific’s total ownership stake will rise to 20.55%. The Lamu Nickel-Cobalt Project is estimated to hold mineral resources totaling 143 million tons, with nickel and cobalt contents of 1.01% and 0.10%, respectively. Approximately 50% of these resources have already been confirmed as reserves. Based on an estimated annual nickel production of 32,800 tons and cobalt production of 3,280 tons, the mine’s operational lifespan is expected to exceed 20 years. The ore mined from the site will be transported via a 132-kilometer slurry pipeline to a processing plant located in Basamuk Bay on the Rai Coast. The mine is scheduled to begin operations in the second half of 2009, with an anticipated annual output of 32,800 tons of nickel and 3,280 tons of cobalt. The mine’s operational life is projected to last more than 20 years. Development costs are estimated at US$800 million (Kina 2.5 billion), and construction of the processing plant and mine infrastructure is expected to commence in April 2007. Additionally, it was reported in November 2006 that China Jilin Nickel Industry Group had joined the joint venture. Meanwhile, China Jinchuan Group is currently in negotiations to join the joint venture as well.

     IV. Mining Management

The government authorities responsible for mining in Papua New Guinea are the Ministry of Mining and the Ministry of Petroleum and Energy, which respectively oversee solid mineral resources and oil and gas resources.

1. Mining Rights Management

In 1992, Papua New Guinea enacted the Mining Act and the Petroleum Act separately, establishing a modern system of concessions for the management of mineral and petroleum resources. According to the law, ownership of mineral and petroleum resources is vested in the State. The government has the authority to grant licenses for the exploration and production of minerals and petroleum. The 1992 Mining Act specifies the types of mining rights for solid minerals, the forms of mining development contracts, the payment of royalties, related fees, and concession fees, the registration of land-use rights and transactions, as well as compensation for landowners affected by mining activities. Under the Mining Act, the principal mining rights for large-scale operations include exploration licenses and special mining leases. For small- and medium-scale mining operations, the mining rights include mining leases and sand-mining leases. In addition, there are also several ancillary permits, such as mining easements. Specific provisions are set forth below:

1) Exploration License: The term shall not exceed 2 years, with the possibility of a 2-year extension. The maximum area covered shall not exceed 2,500 square kilometers. The holder shall have exclusive rights to explore certain minerals within the designated area.

2) Mining Lease (ML): The term of the lease shall not exceed 20 years and may be extended for an additional 10 years. Such leases typically apply to small- and medium-sized mines as well as certain sand mining operations. Leaseholders must act in accordance with the approved development plan and other conditions stipulated in the mining lease.

3) Special Mining Lease (SML): The term of this lease does not exceed 40 years and can be extended for an additional 20 years. Such leases are typically granted for large-scale mining projects and require the signing of a Mining Development Contract (MDC). Leaseholders must act in accordance with the approved development proposal and other conditions stipulated in the mining lease.

4) Sand mining lease: The term of the lease shall not exceed 5 years, with a possible extension of another 5 years. The maximum area covered by the lease shall not exceed 5 hectares. The lessee must be a citizen who owns the land.

5) Mining support contract: Used for the construction of infrastructure for mining projects.

6) Mining Easement: The right to construct facilities such as roads, power transmission lines, drainage systems, pipelines, bridges, and tunnels.

With the exception of special mining leases, all of the above-mentioned mineral rights are approved by the Minister of Mines. Special mining leases, however, are approved by the head of government. Furthermore, it is also required to reach an agreement with landholders on the basis of appropriate compensation. The 1992 Petroleum Law provides for three types of licenses: 1) a petroleum exploration license, which permits the holder to carry out petroleum and natural gas exploration activities within a designated area; this license confers exclusive rights to explore for petroleum within the specified area, but the license holder must also sign an agreement with the government regarding petroleum exploration and development on the leased land; 2) a petroleum development license, which entitles the holder to develop petroleum resources within the designated area and to construct related infrastructure; 3) a pipeline license, which grants the holder the right to construct and operate oil pipelines and associated facilities. According to current national policies, the state has the right to acquire equity stakes of up to 30% in large-scale mining projects and up to 22.5% in petroleum projects. When a project receives development approval, the state purchases shares from the developer based on the developer’s invested costs. The state does not take equity stakes in small- and medium-sized projects.

2. Protection of Landowners’ Rights and Interests

1) Landowner Equity: In major mining and oil projects, a portion of the equity held by the state is allocated to provincial governments and landowners within the project areas, recognizing the landowners’ traditional ownership rights. For oil projects, landowners can obtain a 2% equity stake; the costs incurred before the start of commercial production will be covered by the 22.5% equity held by the government, but thereafter, landowners will bear all costs corresponding to their equity interest. For large-scale mining projects, the state may hold up to 30% of the equity, with landowners eligible to receive up to 5% of the equity. Before the project begins commercial production, landowners are not required to pay any fees; however, once commercial production starts, landowners must cover all associated costs. The specific terms of landowners’ equity interests will be determined through negotiation when special mining leases are granted.

2) Landowner Compensation: According to the Mining Act and the Petroleum Act, developers are required to provide fair compensation to landowners, occupiers, and other right holders affected by the project. The specific amount of compensation will be determined through negotiations between the developer and the landowners and occupiers.

3. Mining Taxes

1) Income Tax: In 2000, the government implemented adjustments to the tax system, reducing the income tax rate for mining companies from 35% to 30% and lowering the withholding tax on dividends to 10%. Companies are now permitted to deduct 25% of their total revenue as exploration expenses. The new tax regime applies only to projects currently under development and ensures financial stability throughout the projects’ fiscal periods.

Oil projects and large-scale mining projects also adhere to project-based tax assessments. With certain exceptions for special circumstances, taxpayers of such projects pay taxes based on the specific project itself, and other activities are aggregated and calculated together with the project.

2) Excess Profit Tax: When a taxpayer has recovered its investment and its net cash flow exceeds a specified rate of return, an excess profit tax is imposed. For oil projects, the specified rate of return is 27%; any net cash flow exceeding this threshold is subject to an excess profit tax of 50%. For natural gas projects, the specified rate of return is 20%; any net cash flow exceeding this threshold is taxed at an excess profit tax rate of 30%. For oil projects located in remote areas, the specified rate of return is 20%; any net cash flow exceeding this threshold is subject to an excess profit tax of 35%. For large-scale mining projects, the specified rate of return is either 20% or the average interest rate of U.S. Treasury bills for the current year plus 12%, whichever the taxpayer chooses. Any net cash flow exceeding this specified rate of return is taxed at an excess profit tax rate of 35%. During the 2000 tax reform, the specified rate of return (threshold) for the excess profit tax on mining projects was lowered to 15%.

3) Royalty: All oil and mineral products produced under this project shall be subject to a royalty rate of 2% paid to the national government. These revenues are distributed between the provincial governments and landowners. For mining operations, if the mineral products are exported without undergoing refining, the royalty shall be calculated based on the export FOB price. If the minerals are refined in Papua New Guinea, the royalty shall be calculated based on the smelter’s revenue. For petroleum operations, the royalty shall be calculated based on the value of the oil at the wellhead. Of the 2% royalty rate, 1.25% may be deducted from taxable income for income tax purposes, while the remaining 0.75% is eligible for tax relief.

4. Environmental Management

Protecting the environment is an obligation stipulated in the Constitution of Papua New Guinea. The Ministry of Environment and Conservation is the government’s primary agency responsible for environmental protection, managing and overseeing all resource development projects. Currently, the country’s main environmental regulations include: the Environmental Planning Act, which requires projects with significant environmental impacts to submit environmental plans; the Environmental Pollution Act, which mandates that those discharging pollutants into the environment obtain permits; the Water Resources Act, which provides detailed provisions regarding compensation payments to water resource owners, formal access rights, water withdrawal rights, and water use permits; the Protected Areas Act, which offers protection to areas of particular biological, geomorphological, geological, historical, scientific, and social significance; and the Marine Waste Disposal Act, which stipulates that a permit is required for disposing of waste into the ocean.

     V. International Assessment of the Mining Investment Environment

Papua New Guinea boasts abundant mineral resources, yet its economic development remains underdeveloped, its infrastructure is inadequate, the quality of its workforce is relatively low, and public security needs further improvement. According to the 2006/2007 Global Mining Companies Survey released by Canada’s Fraser Institute, Papua New Guinea’s mining investment environment ranked toward the lower end overall; however, among the nine Asia-Pacific countries surveyed (excluding Australia), it ranked in the middle-to-upper range. Specifically, its “Policy Potential Index”—which measures indicators such as political stability, policy clarity, regulatory enforcement, environmental considerations, environmental controls, taxation, land tenure systems, relevant economic agreements, geological databases, safety, and labor issues—ranked 60th, placing it near the bottom among the nine Asia-Pacific countries and ahead of Mongolia and the Philippines, at seventh place (Table 2). This index showed a slight improvement compared to the previous year, when Papua New Guinea ranked 63rd globally, second from the bottom. Under current regulations and land-use constraints, its mineral potential ranked 40th, placing it in the middle-to-lower range; yet, within the Asia-Pacific region, it ranked first. If land-use restrictions and policy impacts were disregarded, its mineral potential would rank 10th worldwide, placing it among the top globally—but this represents a decline from its first-place ranking in the previous year.
     VI. China-Pakistan Mining Cooperation

China and Papua New Guinea established diplomatic relations in 1976, and since then, economic and trade ties between the two countries have developed smoothly. In July 1996, during Vice Premier Qian Qichen’s visit to Papua New Guinea, the Chinese and Papua New Guinean governments jointly signed a bilateral trade agreement, laying a solid foundation for the development of economic and trade cooperation between the two countries. In recent years, as high-level exchanges between the two countries have continued to deepen, their economic and trade relations have grown robustly, with cooperation expanding steadily across multiple sectors. Currently, Papua New Guinea is China’s largest trading partner among Pacific Island nations and a major buyer of export commodities such as timber and petroleum. According to data from the Papua New Guinea Investment Promotion Agency, in 2006, Papua New Guinea attracted total foreign investment amounting to 2.1 billion Kina (approximately US$700 million). Of this total, Chinese investment in Papua New Guinea reached 319.7 million Kina (approximately US$107 million), representing a year-on-year increase of 1,154% and making China the second-largest source of foreign investment in Papua New Guinea (Australia remains Papua New Guinea’s largest investor, with investments totaling 379.7 million Kina in 2006).

Papua New Guinea is rich in mineral resources, particularly copper, cobalt, nickel, oil, and natural gas, which exhibit strong complementarity with China. In recent years, as cooperation between the two countries in the resource sector has continued to deepen, China and Papua New Guinea have made significant progress in their collaboration on mineral development. In March 2005, the China Metallurgical Construction Corporation and the Government of Papua New Guinea formally signed a Memorandum of Understanding on the “Lamu Nickel-Cobalt” project. This nickel-cobalt mining project, with a total investment of approximately 650 million U.S. dollars, is currently the largest overseas investment project by a Chinese company in the field of metal mineral resources. In November 2006, the Lamu Nickel-Cobalt Project was officially launched. The successful development of this project will further promote the growth of Papua New Guinea’s mining industry, enhance Papua New Guinea’s image and standing in the international community, and at the same time substantially alleviate China’s severe shortage of nickel and cobalt resources, thereby better facilitating the expansion of Sino-Papuan economic and trade cooperation into broader areas.

In addition to the projects mentioned above, work has also begun in the field of oil and gas development. As early as October 2003, PetroChina signed a memorandum of cooperation with Papua New Guinea’s energy sector. In 2004, the China National Petroleum Corporation completed on-site surveys of several oil and gas fields in Papua New Guinea and began discussions with the Papua New Guinean government on oil and gas development as well as related chemical production. On March 9, 2007, COSL, a subsidiary of CNOOC, officially signed a cementing operations contract with the Philippine National Oil Company for Papua New Guinea’s LIHIR Company. The signing of this contract marks another significant breakthrough for COSL’s oilfield technology division in overseas markets. COSL won the contract through an international bidding process. The contract will commence shortly and is scheduled to last one year, covering a total of 20 wells. According to the terms of the contract, COSL will provide services including cementing engineering design, cementing pumps, personnel, downhole tools, additives, and certain mud materials.

In short, China’s mining cooperation with Papua New Guinea is currently progressing smoothly. As Papua New Guinea’s investment environment continues to improve, more Chinese enterprises will enter the country.
 
Main reference materials:

1. USGS, Minerals Yearbook, 2000, 2002, 2003, 2004, 2005, 2006
2. Fraser Institute Annual Survey of Mining Companies, 2006/2007