- Panguna mine with copper and gold reserves shuttered in 1989
- Miner had been reviewing its Bougainville stake since 2014
Rio Tinto Group has given away its stake in the company that owns an abandoned mine in Papua New Guinea with potential copper and gold reserves worth $51 billion.
The London-based miner has transferred its 54 percent holding in Bougainville Copper Ltd., owner of the Panguna project, to an independent trustee “for no consideration,” Rio said in a statement Thursday. The trustee will manage the distribution of shares to national and local governments.
The divestment comes as the world’s second-biggest miner prepares for a change in leadership, with Jean-Sebastien Jacques to replace Sam Walsh as chief executive officer from July 2.
Panguna, Bougainville Copper’s asset on Bougainville Island, was shut due to local unrest in 1989. The company estimated in its 2014 annual report that reserves stood at 5.3 million metric tons of copper and 19.3 million ounces of gold. That would be worth about $51 billion at today’s prices.
“The dollar-value sum is not significant, not to Rio Tinto, but it’s quite a symbolic gesture to the people of Bougainville,” Peter O’Connor, a Sydney-based analyst with Shaw and Partners Ltd., said by phone. “It’s been a 30-year long saga. To draw to a close at some point is inevitable.”
Rio had said it was reviewing its stake in 2014 after the provincial government passed laws that might adversely affect Bougainville Copper’s mining rights. Reopening the mine could cost more than $4 billion, PNG’s then-Prime Minister said in 2010.
Rio’s decision will provide “a platform for the ABG and PNG Government to work together on future options for the resource,” Rio’s copper & coal chief executive Chris Salisbury said in the statement, referring to the Autonomous Bougainville Government.
Rio will no longer hold any interest in Bougainville Copper. The PNG government currently owns 19 percent of the company and public shareholders the rest. Bougainville’s Sydney-listed shares surged 55 percent to 31 Australian cents at the close. Rio’s shares were 1.5 percent higher.
Bougainville Copper said its board of directors is considering the implications of Rio’s action, according to a separate statement. The company’s Chairman and Managing Director Peter Taylor will resign, and Robert Burns has been appointed acting chairman.
“They now have a situation where they can sit back and review, and decide on their journey from here, maybe include another owner,” Shaw and Partners’ O’Connor said. The chances of the mine restarting are “probably closer to zero, but it’s still a globally significant ore body, which may one day be mined.”