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 Mining
Glenn Banks
This chapter addresses the exploitation of minerals and petroleum
hydrocarbons in the island Pacific, extending from Papua Province
in Indonesia to New Zealand. The discussion tends to focus on
mining because in terms of investment, economic contribution,
areal extent, and particularly social and environmental change it
has generally had, to date at least, a greater impact than oil and gas
production. In the decade since the first edition of this book was
published, there have been dramatic changes in the global mining
industry and mining operations in the Pacific, as well in the extent
of the literature on mining and oil extraction in the region. Given
the breadth of this literature, as well as the size and complexity of
the industry and the issues that it raises, this review can be little
more than introductory. The historical development of mining in
the region, covered in the earlier edition, is excluded here to pro-
vide more scope to discuss contemporary and future developments.
I am grateful to Frank McShane for his kind review and input to the
first edition of this chapter.
Digging Deeper: Mining as a Development
Dilemma?
As in other parts of the world, Pacific Island states have often
found a rich mineral endowment to be a mixed blessing. Papua
New Guinea has been disrupted by a separatist uprising and civil
war associated with the Panguna copper mine on Bougainville
(May and Spriggs 1990); the oil-rich Southern Highlands Province
descended into chaos from the late 1990s (Haley and May 2007);
the spectacular Mount Kare gold rush of 1987–1989 made global
headlines; and the Ok Tedi mine attracted international attention
regarding the environmental effects of its mine waste (Banks and
Ballard 1997). In the 1990s Fiji was troubled by poor labor rela-
tions and revenue sharing at its Emperor (Vatukoula) gold mine
(Emberson-Bain 1994a), then the mine abruptly closed in 2006
only to reopen in 2009, the country’s other smaller mines closed,
and all the while the Namosi copper deposit has seen a number
of potential investors come and go over the past twenty years
(McShane 1994). The controversial Freeport mine in Papua Prov-
ince, Indonesia, has been the center of international scrutiny over
long-standing human rights and environmental abuses (Ballard
and Banks 2009). Nauru has witnessed a protracted battle in the
international courts over compensation for environmental damage
FOR PERSONAL USE ONLY
31
caused by phosphate mining (Weeramentry 1992; Connell 2006).
In New Caledonia mines have been a target for Kanak separatist
resistance (Howard 1988) and concerns over their environmen-
tal and social impact (Pascal et al. 2008; Horowitz 2004; Le Meur
2009). New Zealand has seen historically prolonged legal battles by
Maori for the recognition of their land and resource rights in the
Hauraki gold mining area (Williams 2003), the Tainui tribal lands
in the North Island coal mining areas (Mahutu 1992), and most
recently the national foreshore and seabed (Bargh 2006). These
high-profile, contentious, and significant issues, among others,
warrant a critical appraisal of the mining industry’s role in Pacific
Island development.
Early inquiries into mining in the region focused on the mac-
roeconomic characteristics of mining development and analysis of
the political economy of mining, raising questions about resource
ownership and management and in particular the role of the
state in minerals development (Howard 1988; Henningham and
May 1992). The 1990s saw a much-needed analysis of local-scale
social and economic dynamics and an increased emphasis on the
environmental practices of mining companies and the issue of
sustainability (see Denoon et al. 1995). The embroiling of mining
operations in local and regional conflicts and the dynamics of the
industry in terms of commodity prices and corporate structures in
the early years of the twenty-first century have reshaped the mining
map of the Pacific. The response by the global mining industry to
these challenges (through initiatives such as the Mining, Minerals
and Sustainable Development [MMSD] project) has again shifted
the configuration of the corporate-community-state relationships
in the region.
The following sections offer some perspectives on these issues.
First, a summary of the major mineral deposits in the region is pre-
sented. A discussion of the macroeconomic implications of min-
ing and the links to resource conflicts is followed by consideration
of the politics of resource ownership and the local-scale effects of
mining on traditional communities and the environment. Finally,
the future of mining in the region and the relevance of corporate
responsibility, stewardship, community participation, and the con-
cept of sustainable development for the future of the industry in the
Pacific is discussed. What emerges clearly is the dilemma created
by mining, often encouraged by host countries and some commu-
nities but often introducing unanticipated consequences.
379
Figure 31.1. The location of the major mineral and oil deposits in the southwest Pacific Islands.

current mine production and exploration are shown on the map

Where Are the Resources?
The islands in the southwest Pacific with rich mineral endowments
are part of the Melanesian island arc that marks the meeting point
of the Indo-Australian and the Pacific tectonic plates. The geology
of arc terrains is known to favor mineral formation; accordingly
many of the high volcanic islands are sources of base and pre-
cious metals, particularly gold, silver, and copper. The locations of
above (Figure 31.1).
Papua New Guinea has substantial deposits of gold, silver, and
copper, which are currently extracted at several “world class” mines
(Table 31.1). The Ok Tedi mine (Figure 31.2) for example produced
160,000 tonnes of copper and 486,000 ounces of gold in 2010.
Porgera remains a major gold producer, with production of more
than 500,000 ounces of gold in 2010, while the Lihir gold mine in

380 ■ The Pacific Islands

FOR PERSONAL USE ONLY
New Ireland Province, where production started in 1997, produced Table 31.1
800,000 ounces of gold. There are smaller although still sizeable Comparative Mineral Production Statistics
gold projects at Tolukuma (near Port Moresby), Simberi (New Ire- for Selected Countries
land), Sinivit (East New Britain), and Kainantu (in Eastern High-
lands Province). Small-scale, mostly alluvial gold mining occurs 1992 2010
in a number of sites, with around fifty thousand people earning a Copper, metal content
living from this (Crispin 2003). Oil is produced from the Kutubu, (000 tons)
Moran, and Gobe oil fields while natural gas is produced from the Papua New Guinea
193.4 160
Hides gas field. A refinery, established close to Port Moresby, means (Ok Tedi)
Papua New Guinea supplies a significant proportion of its own oil Australia 331.5 900
needs. Long-standing plans to develop large onshore and offshore
USA 1,778.80 1,120
gas deposits in the Gulf and Southern Highlands Provinces, after
barely advancing in the past decade, have rapidly crystalized, with World 9,320.00 16,200.00
current plans for the US$15 billion ExxonMobil operation seeing Gold, metal content (tons)
production beginning in 2014. Papua New Guinea 68.3 60
New Zealand 10.5 13.5
Fiji (Emperor) 3.7 1.9
South Africa 609.3 190
Australia 233.8 255
World 2,250.00 2,500.00
Nickel, metal content
(000 tons)
New Caledonia 100 138
Canada 188 155
Australia 55 139
Russia 257 265
Figure 31.2. Ok Tedi mine, Papua New Guinea (photo GB).
World 900 1,550
Coal (000 tons)
Exploration projects continue to attract investors in Papua New Zealand 2,979.70 5,300.00
New Guinea, particularly with the recent boom in commodity
prices, driven in large part by Chinese demand for industrial met- Source: Adapted from USGS 2007 and 2011; MED 2007.
als. By 2010 agreements had been finalized and advanced construc-
tion was under way at the US$800 million Ramu Nickel project in
Madang Province, with the Chinese Metallurgical Construction a significant part of the economy, with the extraction of 13 mil-
Group (MCC) holding 85 percent of the project. Hidden Valley, lion tonnes of sand and rock for roads alone worth NZ$133 million
a gold complex in Morobe Province jointly owned by Australian (MED 2009).
Newcrest Mining and South African–based Harmony Gold Min- Fiji has produced gold from the underground Emperor mine
ing, began production in 2010 and produced more than 200,000 at Vatukoula for more than seventy years. Increasing costs, labor
ounces of gold in 2011. Exploration, planning, and construction relations, and concern with political events led to the closure of the
work was at various stages in relation to other large copper and/ mine in late 2006. The property was sold in 2008 and reopened in
or gold deposits at Freida/Nena (East Sepik Province), Wafi-Golpu 2009 under its new UK-based owner, River Diamonds Ltd. A num-
(Morobe), and Yandera (Madang) (Wu 2007a). ber of other mineral occurrences are known (including the large
There are currently two large gold producers in New Zealand, Namosi copper/gold deposit currently being explored by Japanese
Macraes Flat in Central Otago, and Martha Hill in Waihi in the investors), but their development has been stalled largely by politi-
Bay of Plenty. These two mines between them produced 13.4 of cal uncertainty.
the 16.2 tonnes of gold produced in 2008, with a total value of over New Caledonia was the world’s fifth largest producer of nickel
NZ$600 million. Alluvial mining is still significant in New Zealand, in 2006 (Wu 2007b). Société Le Nickel (SLN) has mines at Nepoui-
with the bulk of the alluvial gold produced in 2010 coming from Kopeto, Poro, Kouaoua, Thio, Tiebaghi, and Etoile du Nord, while
the West Coast of the South Island. Coal mining, for export and the two other major companies, Société Minière du Sud Pacifique
domestic consumption, is a significant industry in New Zealand, (SMSP) and Société des Mine de la Tontouta (SMT), operated
with $1.2 billion worth of coal mined in 2007, more than 40 percent another six laterite (limonite) nickel mines across the island. Vale
of which was exported. This was produced from four underground Inco, a Canadian-based subsidiary of Brazilian-based Companhia
and twenty-two open-pit coal mines, concentrated in the Waikato, Vale do Rio Doce (Vale), is developing a US$3.2 billion laterite
West Coast, and Southland. The production of aggregate remained nickel mine at Goro, with limited production beginning in 2009

Mining ■ 381
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leading to full production in 2013. Japanese interests hold a signifi- Table 31.2
cant share of the project, with the two New Caledonian provinces Mining’s Contribution to Some Pacific Island Economies
also both holding equity in the project. In late 2007 Swiss-based
Xstrata announced the development of the Koniambo nickel-cobalt 1990 2000 2007
mine in North Province, with the majority partner being Société Fiji
Minière du Sud Pacifique, the development arm of the North Prov-
Mining contribution
ince. Full production is due to begin from the US$5 billion invest- to GDP (%)*
0.2 1.5 0.01
ment in 2012. SMSP is a joint venture partner in the development.
These developments will keep New Caledonia among the most Contribution to
12.5 9.2 0.3
export earnings (%)*
significant global nickel producers for many decades.
Freeport McMoRan, an American multinational, operates one Persons employed† 1660 1724 -
of the largest copper/gold mines in the world in Papua Province, Papua New Guinea
Indonesia. In 2008 the mine produced 68.5 tonnes of gold and
more than 540,000 tonnes of copper (more than the entire Papua Mining and
petroleum
New Guinea industry). Elsewhere in Papua, the long-standing oil contribution
14.7 28.8 26.5
industry in Sorong is about to be joined by a massive new natural to GDP (%)
gas operation at Bintuni Bay in West Papua at the western end of
Contribution to
the island.
exports earnings 67 77.4 78.6
The Gold Ridge gold mine on Guadalcanal in Solomon Islands (%)‡
opened in 1997 and by 1999 was producing 3.5 tons of gold a year.
It was closed by the ethnic and political conflict that erupted in New Zealand
2000. A small Australian miner, Allied Gold, reopened the mine Mining and
in 2011. There were also small alluvial deposits being worked at petroleum
1.2 1.3 0.9
Chovohio. Low-grade nickel deposits are reported from other contribution
to GDP (%)§
islands (Government of Solomon Islands 1993). By the start of the
twenty-first century, Nauru’s phosphate production had effectively Contribution to
3 3.3 5.1
export earnings (%)§
ended—production in 2001 was a mere 250,000 tonnes, down from
its peak of 2.3 million tonnes in 1974 (Connell 2006: 54), although
Sources:
production apparently increased again in 2008. * Reserve Bank of Fiji 1994, 2008
Elsewhere in the Pacific there is a lot of interest in the offshore †
UN 1994, PNG Department of Treasury 2008
areas around Papua New Guinea, Vanuatu, Fiji, Tonga, and New ‡
Bank of Papua New Guinea 1995, 2008
Zealand, both as hydrocarbon reservoirs (although apart from New §
New Zealand Yearbook 1996; NZ Statistics, 2001, 2008, includes
Zealand they have failed to produce any major finds to date) and as mineral fuels and precious metals.
a potential source of high-grade deep-sea mineral nodes. The most
advanced of the latter is the Solwara gold and base metal project
operated by Nautilus Minerals off the coast of New Britain Prov- is regarded as a potential source or driver of broader-based growth
ince in Papua New Guinea, which expects to commence produc- for economic development. Table 31.2 indicates the contribution of
tion in 2013. And in late 2007 Neptune Minerals was granted ten minerals production to the economies of some Pacific Island coun-
prospecting licenses covering 914 km2 in the exclusive economic tries in recent years using several common indicators.
zone (EEZ) of Vanuatu to explore for commercial, high-grade, sea- Important in the case of both Fiji and Papua New Guinea, min-
bed mineral deposits. ing has been a significant contributor to export earnings but gener-
It is a sign of changes in broader political and economic pat- ally contributed much less to GDP. Elsewhere, but not included in
terns that whereas the industry in the region used to be dominated the table, are New Caledonia, where nickel contributed 11 percent
by Australian, Canadian, and UK-based multinationals, much of of GDP and 94 percent of export earnings in 2006 (David et al 2010),
the recent interest and investment has come from Asia—China, and Nauru, where until its exhaustion at the turn of the twenty-first
Japan, and Korea in particular. This highlights the changing pat- century, phosphate accounted for virtually all the island’s economic
terns of industrial growth and demand, particularly in terms of the production. Within Papua Province, the PT Freeport Indonesia has
drive for base metals such as nickel and copper. a similar economic presence, accounting for the bulk of exports (90
percent) and a significant component of GDP (50 percent) (Ballard
and Banks 2009). But while a large minerals endowment can be a
Issues in Mineral Extraction desirable national resource, recent history shows that in economic
terms it poses several management challenges.
Mining and the Economy
New Zealand is clearly different in this regard from other
Where minerals have formed a significant part of the national econ- Pacific Island cases. Mining is a relatively limited component of
omy, they have generally been a central component of the formal the formal economy and is much more integrated in the economic
economy and a key sector in terms of planning for economic devel- structure of the country. Much of the coal mined (almost 50 percent)
opment in the respective nation. In short, a minerals endowment is used in energy production within New Zealand, particularly in

382 ■ The Pacific Islands

FOR PERSONAL USE ONLY
industrial uses such as steel making. Likewise, the sand and gravel
mined is used internally for maintenance of the road network. This
is in sharp contrast to the rest of the Pacific, where mineral extrac-
tion is primarily directed at export. As a result, much of the discus-
sion below does not apply to New Zealand.
Papua New Guinea provides an example of the dilemmas
that may stem from strong growth in the minerals sector. From
independence in 1975 the government encouraged commercial
exploitation of minerals and oil with attractive investment incen-
tives. When a new government took office in 1992, increased min-
erals revenues were used to introduce tax cuts, and government
spending rose, which increased the budget deficit. With the fiscal
deficit at 8 percent of GDP, domestic public debt at 30 percent of
GDP, and facing insolvency, the government devalued the kina in
1994. Devaluation led to a capital flight and loss of confidence in
the economy. This triggered effectively a decade of economic and
political uncertainty that stalled mineral exploration and new
investment. Accumulated funds derived from the sector were
plundered to pay off external debt in the late 1990s. The relative
stability of the Somare government from 2002 combined with the
rapid rise in commodity process has led to a significant increase
in exploration and mining investment. Enhanced government rev-
enues, derived in significant part from this commodity boom, have
produced significant government budget surpluses and allowed for
the repayment of external debt that resulted from previous excess
(Government of Papua New Guinea 2008).
Clearly, economic management of the minerals sector raises
several questions for Pacific Island states. First, how can the maxi-
mum share of profits be obtained from mining by national gov-
ernments without dissuading the foreign corporate investment the
industry requires? The design and subsequent reshaping of fiscal
regimes is both critical to government attempts to secure what they
regard as a reasonable share of mineral rents, and to investor inter-
est and confidence in the country. The role of state equity in mining
operations as a means of ensuring a fair return to the country from
these mineral assets remains contentious and open to changes in
policy decisions—after selling off state mining assets from the late
1990s, Papua New Guinea recently re-established a state vehicle
(Petromin PNG Holdings) to try and maximize country ownership
and economic gains from the sector. Second, what can be done to
stabilize minerals revenues that vary due to fluctuations of miner-
als commodity prices on the world market, or due to changes in
both the rate of mining and the grade of ore being mined? This
has potentially severe implications for states when they receive
a resource windfall for a short period of time. The Papua New
Guinea government received a significant boost in its internal
revenue over the period from 2006 to 2008 due to enhanced com-
modity prices (to the extent that these flows made up more than
50 percent of all internal revenue), but was still actively engaged
in trying to prudently plan for reduced revenues in future years.
Third, what alternatives remain when minerals are exhausted? All
the policy decisions that arise from these questions are made under
conditions of high risk and uncertainty that generally pertain in the
minerals sector (see Nankani 1980; Daniel 1992; Auty 1993, 1995).
Management of the mining sector is complicated by the ten-
dency of mines to act as enclaves in isolation from the local economy
(Emerson 1982). Foreign mining corporations are generally obliged
FOR PERSONAL USE ONLY
to source both specialized technology and skilled labor overseas
as these do not exist in-country. The increase in foreign exchange
that accompanies increased exports of minerals may lead to rises
in the real exchange rate and a relative decline in the competitive-
ness of the nonminerals sectors, a situation described as “Dutch
disease” after the economic effects of the North Sea oil boom on the
Dutch economy (Auty 1995). A profitable minerals sector can lead
to demands for increased wages, which, in the absence of strong
wage restraint policies, bring higher salaries, particularly in min-
ing. Politically and economically powerful local elites, supported
through legitimate and sometime illegitimate resource rents, fur-
ther shape economic patterns through their increasing consump-
tion of foreign imports, shifting the trade balance and squeezing
domestic industry. As consumption increases, wage restraint
becomes more difficult, particularly with the entry of highly paid
expatriate mine workers. The public sector also grows as new jobs
are created because new capacity to monitor and evaluate the min-
ing industry is required (Auty 1993). Fiscal control, and the control
over corruption, typically suffer during resource booms.
The net effect of mining enclaves is to create a dual economy
in which the minerals sector enjoys preferential fiscal arrangements
while manufacturing, agricultural, and service sectors decline. The
reorientation of the economy toward the minerals sector can create
a dependency on minerals exports, characterized by initially rapid
growth and spending as the minerals revenues are absorbed and
economic collapse when minerals revenues fall through decreased
production or declining commodity prices. The underperformance
of developing country economies based on minerals as opposed
to those with no mineral endowment has been such a common
feature that the term “resource curse” has been applied to the
phenomena (Gelb and Associates 1988; Auty 1993, 1995). More
recently the links between resource-dependent, export-oriented
economies such as Papua New Guinea and Solomon Islands and
the outbreak of civil conflict has led to these countries being incor-
porated into a global discourse whereby this resource dependence
is itself regarded as a key factor contributing to the conflict (see
Collier and Hoeffler 2004; Banks 2008 for a counterview).
Several mechanisms are available to the government for con-
trol of minerals projects and their revenue arrangements. The most
important of these is that while the mining codes lay down the
statutory conditions for mining practice, in reality these can often
be just a starting point for the negotiation of individual project
agreements. Such agreements typically reflect the spirit of minerals
policy and the mining code, but they must also reflect differences
in ore bodies, the economic objectives of the government, and
changing conditions of national and international trade, among
other things. One of the potentially most far-reaching changes to
minerals agreements has been the incorporation of renegotiation
clauses, which allow contract review after specific periods of time
so that new mining and trade conditions can be taken into account.
The Politics of Resource Ownership
In most parts of the Pacific, prior to the arrival of Europeans, the
notion that anyone other than the landowner could possess the
rights to resources on or under that land was a foreign one. Owner-
ship of these resources, like other natural resources (see chapter 16)
Mining ■ 383
was communal, and, subject to certain rules, all members of the
clan had access to the resources of the land.
The arrival of the European powers and prospectors intro-
duced new mineral ownership regimes, which vested the owner-
ship of precious mineral resources with the Crown or the state.
These new regimes were based on the mineral laws that applied in
the home country of the colonial power (in Papua New Guinea’s
case, on the Queensland mining ordinance).
This fundamental difference in notions of rights to resources,
and the enforcement by the colonial powers and postcolonial
governments of their own versions, has been implicated in all the
major mineral resource conflict issues in the Pacific. The estab-
lishment of the Bougainville mine in the late 1960s saw continued
conflicts between the administration and the local communities
over the rights to mineral resources and access to land (Bedford
and Mamak 1977). Since independence, there has been a gradual
shift in many parts of the Pacific toward local participation in and
control over mineral developments. To an extent this represents
the acknowledgment by the governments that the legal regimes
relating to minerals do not reflect the realities of ownership in the
Pacific context. Development of the Porgera mine (Figure 31.3) in
1989 saw a significant change in this trend when the Papua New
Guinea government included the Porgera landowners, the provin-
cial government, and the mine developers in negotiations over the
project (West 1992).
Figure 31.3. Porgera mine, Papua New Guinea (photo GB).
The outcome of this process was a much greater proportion
of the mine’s benefits going to the local community in the form of
royalties, equity, and government infrastructure and services (Filer
1999). In the past two decades this trend has intensified. Policy
changes in Papua New Guinea now see all the royalties (currently
set at 1.25 percent of the value of production) from new large mines
go to local communities, along with an option to purchase a car-
ried 5 percent shareholding in the development and their integral
involvement in development negotiations. Another direction is
signaled by developments in the Kanak-dominated Northern Prov-
ince of New Caledonia, where in 1990 an ailing nickel mine was
purchased by the new provincial investment company. After five
years the mine had increased production tenfold and accounted
for more than half of New Caledonia’s nickel output, and the com-
pany, SMSP, is currently the second largest New Caledonia nickel
384 ■ The Pacific Islands
FOR PERSONAL USE ONLY
producer. Profits have been reinvested in new capital and a range
of diversifications—agriculture, aquaculture, and hotels (Keith-
Reid 1996: 46). Increasingly these forms of local equity, control,
and ownership amount to a de facto sovereignty over resources,
one that is subverting legal categories and definitions and lead-
ing to outcomes more in line with traditional notions of resource
ownership.
Such developments also reshape the relationship between
these communities and their respective national governments. In
Papua New Guinea the legitimacy of the national government is
questioned in many rural areas, which have seen a decline in health
and education services over the past twenty years. As a result, when
they are involved in negotiations over a mine development, local
communities are both eager to see an improvement in these ser-
vices and reluctant to rely on the rhetoric of government alone.
Mine developments since the 1990s have therefore seen communi-
ties enter into contracts with the government and the mining com-
pany for the delivery of health and other services (see, for example,
Imbun 1994). While this has resulted in some improvements in
infrastructure and services for these mining areas, the lack of will
and capacity of the government to fulfill its commitments is a con-
stant source of concern for communities and companies.
Finally, in parts of the Pacific where specific groups have an
identity distinct from the broader national culture (such as the
Kanak of New Caledonia, the Bougainvilleans within Papua New
Guinea, Papuans within Indonesia, and the Maori in Aotearoa/
New Zealand), these groups are able to use disputes over resource
sovereignty as a focal point for their claims to greater self-determi-
nation. In these situations, questions of resource ownership become
entangled with the discourses of nationalism and international
geopolitics (Howitt, Connell, and Hirsh 1996: 1). On New Caledo-
nia, nickel mining is a central tool in the official policy of economic
“rebalancing” between the wealthy South and the Kanak-domi-
nated Northern Province. The politics of the PT Freeport Indonesia
mine in Papua Province are closely linked to broader questions of
Papuan autonomy and separatism. In New Zealand, resource own-
ership questions are inextricably enmeshed with Maori claims for
land and reparations under the Treaty of Waitangi (Barclay-Kerr
1991; Williams 2003). Decisions over mineral resource develop-
ments in the Pacific have become intensely political for communi-
ties. On the one hand, rights to the wealth under their land, which
most still believe they hold, are abruptly taken from them by the
minerals laws of the country. On the other, they are able to use the
mineral development as a strong bargaining chip in securing access
to better infrastructure, services, material wealth, and redress for
past wrongs. The outcomes of these processes for local communi-
ties are not always, however, what they anticipate.
Social, Cultural, and Economic Impacts:
Local-Scale Effects
Mining clearly brings changes to traditional economies, demo-
graphic structures, polities, and social organization that have far-
reaching implications for the integrity and identity of local groups
in the locality of a mine (Filer 1990; Connell and Howitt 1991).
These changes are the subject of a now substantial literature that
includes nuanced anthropological studies of the ways communities
across the Pacific understand and respond to the intrusion of
large-scale mining operations (see, for example, edited collections
by Filer [1999], Rumsey and Weiner [2001], Imbun and McGavin
[2001], and special issues of Social Analysis [1998] and The Con-
temporary Pacific [2006]). For most traditional Pacific societies,
land is inalienable, communal, intricately bound into social net-
works, and of spiritual and cultural importance. Land lies at the
heart of social, cultural, and economic structures. Its loss may
mean reduced areas for subsistence gardening and a shift from
self-sufficiency to dependence on imported foods and a monied
economy; loss of economic resources, particularly for those who
work the land under traditional agreements but are not part of
landowning clans eligible for compensation; rural-urban migration
for those who cannot find alternatives to subsistence agriculture Figure 31.4. Suyan Mining Camp, Porgera 1994 (photo GB).
locally, and the breakdown of traditional family structures centered
on sharing land and working on it together (Connell and Howitt
1991; Emberson-Bain 1994b). The most traumatic circumstance of
land loss has been expropriation under colonial rule as happened in
Banaba, Bougainville, New Caledonia, and New Zealand. Equally,
compensation and royalty payments for land occupation and dam-
age have brought their own dilemmas (Bedford and Mamak 1977;
Filer 1990; Gerritsen and MacIntyre 1991; Connell 1992; Macintyre
and Foale 2002). Indeed it can be argued that the monetary benefits
of mining bring as much disruption and conflict as the direct costs.
Internecine rivalry may lead to community conflict as local elites
compete to increase their wealth and power through control of
compensation monies and lucrative business spin-offs from a mine.
Clan leaders who fail to accumulate and disburse the new forms of
wealth may lose respect, power, and influence. Massive migration
into areas around mining operations can be especially damaging
in terms of local identity, claims to ownership, and environmental Figure 31.5. New hospital, Porgera (photo GB).
stresses (Jorgensen 1997).
Where mining has come to remote rural areas, the locus of cocktail that regularly descends into chaos and violence—without
social activity becomes the “mining town” (Figure 31.4). Initially, any external intervention. But the bottom line is that mine and
the town comprises housing compounds, local shops, a health state security are often implicated in episodic violence and people
center (Figure 31.5), and perhaps a school. Yet invariably these are injured or killed. This does much fundamental damage to the
settlements attract a migrant population of hopeful people, both building of relationships of trust between the companies and the
from surrounding villages and farther afield, looking for access to surrounding communities.
benefits from the project. The growth of such settlements is hard Arguably the greatest social and economic impact falls on
to avoid even when mine workers are segregated from the resident women (Figure 31.6). Absentee partners working at the mine
rural community. Piecemeal dwellings spring up around the core; may mean increased workloads for women, who may be denied
often poorly serviced, they become centers for prostitution, alco- access to salaried work at the project (Jorgensen 2006). Alterna-
holism, petty crime, and violence (Polier 1994; Hyndman 1994; tively, women may only be eligible for low-paying work considered
Emberson-Bain 1994b). Health problems including malnutrition unsuitable for men (Emberson-Bain 1994b). Communal activity is
among children may surface. Cross-cultural tension is often high, replaced with individual rent-seeking activity and the competition
particularly in the context of labor relations (Imbun 2002). for benefits. Women fare worse in this process, losing the labor and
Critically, the last decade has linked the large-scale mines emotional support of the extended family. Alcohol may consume a
in the region to human rights abuses. Communities at Freeport, large part of the family income, and violence toward women is com-
Porgera, and other sites have been subjected to extrajudicial kill- mon. Teenage pregnancy and rape are other common symptoms of
ings by state or corporate security forces, and there are widespread women’s marginalization in mining towns (Pollock 1996; Bonnell
allegations of other abuses: rape, assaults, and more generalized 1999). Meanwhile, few of the other benefits such as business loans
threats of violence and loss of rights such as the right to a healthy have been available to women because men control most avenues
environment (Human Rights Watch 2011). The details of these of commerce. A recent statement from a Women and Mining Net-
situations are often complex: at Porgera, the effects of migration, work meeting in Madang reiterated many of these points and called
informal mining by migrants and locals within the open pit and for women to be involved in decision making over whether or not
waste dumps, and the crowded, high-consumption living condi- mining could proceed (Pacific Region International Women and
tions immediately adjacent to the mine operation, provide a potent Mining Network 2007).

Mining ■ 385
FOR PERSONAL USE ONLY

Figure 31.6. Women’s Association meeting, Porgera (photo GB).
In discussing these local-scale impacts of mining, three addi-
tional points are worthy of note. First, these impacts have often
been recognized by developers, and attempts, in various forms,
are usually made to address them. The boomtown phenomena are
ameliorated by “fly-in, fly-out” policies that avoid the establishment
of a town at the mine site; community liaison officers are appointed
to address community concerns; funds are established for commu-
nity development; employment preference is often given to local
community members. As will be discussed below, these efforts
are typically not as far-reaching (or as altruistic) as they could be.
Second, reification of the “traditional village” is misplaced. Tradi-
tional societies do not all exist in an absence of social dilemma,
political maneuvering, economic inequality, or the marginalization
of women. The metamorphosis of traditional structures was not
invented by the mining industry; it is part and parcel of the changes
such villages are exposed to. Third, as Emberson-Bain (1994b)
points out, the community opposition to mining and its impacts
takes different paths where the mine is the raison d’être for a settle-
ment in previously uninhabited rural areas and where settlement
existed prior to mining. At Vatukoula in Fiji, for example, the focus
of attention has not been compensation for land access, but wage
ceilings, the hierarchical employment structure that favors expatri-
ates, appalling living conditions, and the mine’s fiscal agreements
with the government, which benefited expatriate investors at the
expense of local workers (Emberson-Bain 1994a).
Most corporations and governments, through the various
agreements, have sought to channel sustainable benefits, not just
cash, to the local level through the use of support grants, business
programs, infrastructural development programs, and community
infrastructure grants, among others (Stephens 1995; Imbun 1994;
Gilberthorpe and Banks 2012). More recently, there has been an
increase in the involvement of women in mining projects (Bon-
nell 1995). Yet the expertise and commitment of mining corpora-
tions to the soft skills has been questioned. Burton (1999) and Filer,
Banks, and Burton (2008) maintain that despite the rhetoric aimed
at addressing social impacts, what materializes is often a piecemeal
effort at addressing immediate problems with little coordinated
long-term planning. Disputes and long-standing grievances that
continue to dog all the major Pacific resource sites demonstrate
that a rational, monetized approach is unlikely to capture the
deeply culturally embedded (and often, from a Western perspec-
tive, hopelessly unrealistic) expectations and aspirations of the
affected communities.
386 ■ The Pacific Islands
FOR PERSONAL USE ONLY
Environmental Aspects
A large-scale mine such as the Panguna mine on Bougainville, the
Ok Tedi mine, or the Freeport mine in Papua processes more than
80,000 tonnes of ore per day (much more in Freeport’s case). Of this
amount only the 1 or 2 percent copper and small quantities of gold
are extracted, and the rest (known as tailing) must be disposed of,
along with often even larger quantities of waste rock that is shifted
to gain access to the ore (Figure 31.7). The disposal of both the
tailings and the waste rock requires land, river, or ocean dumping
sites. While the large-scale copper/gold deposits rely primarily on
mechanical processes to recover ore, gold mining in the region has
often utilized chemical processes (involving mercury or cyanide) in
the gold-recovery process (Hughes and Sullivan 1992; Sisto 1999).
Figure 31.7. Tailings from Freeport mine, West Papua, Indonesia (photo GB).
Pacific Island environments are certainly sensitive to these
forms of disruption, although there are also many factors inherent
within these tropical systems that work to reduce these impacts.
These include the dynamic nature of the physical systems (with
high rainfall, steep relief, and high natural erosion rates—the Ok
Tedi catchment, for example, experienced a massive landslide in
1989 that added more sediment to the river system over a short
period than the mine delivered over several years) and the rapid
recovery of many of the environments to disturbance. Evidence
from the past ten years, though, shows that the sheer scale of dam-
age at Ok Tedi and Freeport (Figure 31.8), and the concentrations
of particularly copper in the tailing, means the effects will persist
for decades, even centuries (Paull et al. 2006; World Bank 2000).
The large scale open-pit mines bring a range of environmental
effects. The most obvious and significant impacts are in the imme-
diate mine area. Land is permanently disturbed and lost for open-
pit mines. On Bougainville a mountain became a pit more than
200 m deep—similar processes are underway at Ok Tedi, Porgera,
Freeport, and in New Caledonia. On Nauru, a century of phosphate
mining consumed two-thirds of the area of the island, turning it
into an unusable wasteland with few prospects for rehabilitation
(Dupon 1989; Weeramentry 1992; Connell 2006). In addition, land
is required for the mine’s supporting infrastructure—processing
plant, workshops, offices, accommodation, and township etc.

Figure 31.8. Open pit Freeport mine, West Papua (photo GB).
Land is also required for waste dumps, some of which are dis-
persed by natural erosion into river systems. Where river systems
are used for waste disposal, this can cause flooding and inunda-
tion in downstream areas—Ok Tedi mine waste has covered more
than 1,500 km2 of rain forest and riverbank gardens in the lower
Ok Tedi area, more than 100 km downstream from the mine
(World Bank 2000). This damage sparked the high-profile lawsuit
and subsequent exit of BHP from the mine operation (Banks and
Ballard 1997; Kirsch 2008). The environmental damage is often
inflected through cultural lenses and worked into broader com-
munity understandings of social and environmental change. Issues
of equity can then arise as those downstream communities most
affected rarely receive the same level of attention or compensation
as communities located adjacent to the mine operation (Jorgensen
2006; Banks 2002).
Despite the insidious presence of various heavy metals in most
tailing, the most significant impact on the ecology of the affected
river systems appears to be physical, due to the vastly higher sedi-
ment loads produced by the mines. The Ok Tedi River prior to
the mine, for example, carried an average of 30 million tonnes of
sediment annually. The mine trebled this, and added 40 percent to
the sediment load carried by the Fly River, into which the Ok Tedi
flowed. This had the effect of rendering the Ok Tedi river biologi-
cally dead and affecting the biology of the middle Fly River (World
Bank 2000). Similar effects have been recorded on New Caledonia
(Dupon 1986; Winslow 1993, Pascal et al. 2008). Ocean disposal
of tailings such as occurred at Misima and continues at Lihir in
Papua New Guinea appears to be a more environmentally accept-
able solution, particularly where the sediment is delivered at depth
to steep ocean slopes. The longer-term impacts of this method of
disposal in tropical environments are, however, still unclear at this
stage (Brewer et al. 2007).
New Zealand has a long history of environmentally destructive
mining. Large parts of the Central Otago provide a stark reminder
of the long-term damage that can be done by large dredging opera-
tions. At the other extreme, the tailings dam at the Golden Cross
mine on the Coromandel Peninsula began to move during 1996,
threatening to spill tailings into the downstream environment. This
illustrates that in the wrong circumstances not even best practice
technologies can provide complete protection from the environ-
mental risks associated with mining.
FOR PERSONAL USE ONLY
Generally, the environmental protection legislation within
most Pacific islands is poor (Hughes and Sullivan 1989). Papua
New Guinea’s environmental legislation is probably the most com-
prehensive, but the capacity of the government to regulate the envi-
ronmental performance of the mines is limited. The Department
of Environment and Conservation, for example, is underresourced
and finds it hard to attract and retain quality graduates. Critics also
point out that the government in Papua New Guinea has a signifi-
cant financial stake in the mines through equity holding and taxa-
tion receipts, and this sets up a potential conflict of interest with
their role as environmental regulators (Rosenbaum 1993; Hughes
and Sullivan 1989).
Increasingly the transnational mining companies face pres-
sure to provide enhanced environmental management and per-
formance. International court action against BHP by Papua New
Guinean landowners at Ok Tedi highlighted the growing sensi-
tivity to and power of communities in relation to environmental
issues and the new avenues they are able to pursue to seek rem-
edies (Banks and Ballard 1997; Kirsch 2008). Court action against
Britain, Australia, and New Zealand by Nauru for environmental
damage caused during the colonial period (like the Ok Tedi law-
suit, settled out of court) shows that polluters may be held respon-
sible for environmental damage that occurred at some time in
the past. This principle has also been supported by a number of
other international torts against mining multinationals, includ-
ing Freeport and Bougainville Copper, even though these cases
themselves did not succeed. Likewise, multinational mining com-
panies face increasing scrutiny and pressure for better environ-
mental practice from lobby groups based in their home countries.
Mining Watch Canada and the Australian-based Mineral Policy
Institute, for example, regularly highlight perceived social and
environmental abuses in the Pacific perpetrated by multination-
als from their respective countries, and this can translate into
shareholder pressure on the corporation (Emel 2002). Several of
the multinational operators in the region (including Rio Tinto
and Barrick) have activist websites devoted to monitoring their
activities.
The industry response to this pressure has been a general
improvement of standards, more research into improved envi-
ronmental management, and, to be cynical, glossier brochures.
Instances of specific breaches of environmental requirements and
conditions are rare: the central issue is that these regulations and
requirements permit environmental practices (such as riverine
disposal of tailings) that are not permitted in most other parts of
the world. This may not itself be an issue if it can be shown that
the “environmental best practice” employed reflects the culture,
priorities, and geographic context of the country where they are
operating (Nelson 1996). Hence environmental “trade-offs” that
see sustainable development benefits accrue to host countries and
communities may be justified in some instances, but this decision
is rarely an uncontested process: in the Ok Tedi case the Papua New
Guinea government believes the development benefits outweigh
the massive environmental damage, even though the World Bank
felt otherwise (World Bank 2000). And a cynical manipulation of
the “trade-off ” rhetoric can be used by corporations and govern-
ments to justify actions that often bring few benefits to those most
affected.
Mining ■ 387
The Future
There is no doubt that mining will be an integral part of the future
development path of the region. With increasing demand driv-
ing higher commodity prices, exploration is intensifying in Papua
New Guinea and elsewhere in the Pacific. New Caledonia’s nickel
reserves are anticipated to last well into the later part of this cen-
tury. The Papua New Guinea oil and gas industry is set for a mas-
sive expansion and promising oil seeps have also been located in
Bligh Sound and off the shores of Fiji and Tonga. The economic
potential of the Pacific’s mineral-rich deep ocean nodules is also
likely to be unlocked over the next few decades.
Leon Davis, the former chief executive of Con Rio-Tinto Aus-
tralia (CRA), said more than a decade ago that part of the chal-
lenge of mining in the twenty-first century will be “re-capturing
the public mandate that we in the mining industry have partially
lost” (Davis 1995). This mandate (which one suspects may not
have existed among local groups in much of the non-industrialized
world) eroded when it became apparent that sections of the host
societies derived few benefits from the mining projects on their
doorsteps. Environmental strategies, particularly for waste dis-
posal, have been questionable at best, and there is increasing dis-
illusion among Pacific people about whether mining can deliver
on its developmental promises: public confidence in mining as a
development panacea has diluted considerably.
Following the Rio Summit of 1992, the rhetoric of “sustainable
development” has been incorporated into the policy statements of
most governments and mining companies mindful of their pub-
lic image. Yet what does sustainability mean in the context of an
industry based on extracting minerals at the lowest cost and over
a finite time span? Robert Solow (1993: 163) states that the term
is an “injunction to preserve productive capacity for the indefinite
future, [while] society as a whole replaces used up resources with
something else.” A framework for achieving this has been suggested
by Auty (1995), who maintains that sustainable minerals-driven
development requires pragmatic, prudent, and orthodox economic
policies, substitution of alternative wealth-generating assets for
when the ore is depleted, and incentives to curb environmental
degradation. The MMSD project, a two-year global project (cor-
porately funded, in part to recapture some of the public mandate
Davis talked of) came to a similar, albeit broader, set of conclu-
sions. Some of the mechanisms for achieving these objectives are
dealt with in brief below.
Managing Mineral Wealth
The Pacific has seen a number of attempts at the long-term man-
agement of mineral revenues, most of which have failed. Nauru is
an extreme case (Connell 2006), but other instruments, such as
the Mineral Resources Stabilisation Fund in Papua New Guinea,
have also failed to provide stable, sustainable, resource-derived
revenue flows. The key at the national level remains finding a way
to translate nonrenewable resource wealth into long-term devel-
opment. Recent government policies in Papua New Guinea aim
to use 30 percent of windfall revenues from the sector (defined as
revenues in excess of 4 percent of GDP) to repay public debt and
the remaining 70 percent to bring forward planned spending on
388 ■ The Pacific Islands
FOR PERSONAL USE ONLY
the rehabilitation, maintenance, and enhancement of public infra-
structure: roads, schools, hospitals, and the like (Government of
Papua New Guinea 2008). This blend of debt repayment (a form
of investment) and developmental spending appears to be a model
that offers a pragmatic and prudent approach to the translation of
mineral wealth into sustainable benefits. The problem, of course, is
the realization of these benefits in contexts where governance and
capacity is poor.
Environmental Management
Environmental management of such a visible industry (Freeport,
Ok Tedi, and Lihir are easily viewed on Google Earth these days) is
crucial to its public profile and reputation. There is no doubt that
evolving technologies and practices have improved environmental
management in the mining sector. As noted earlier, though, there
are limits to the effectiveness of these regimes when the fundamen-
tal issue is the enormous scale of the impacts. Future developments
in environmental management will center around three central
players—state, corporation, and community—each of which has
different approaches, tools, and agendas. Policy and regulation that
can be exercised through the minerals agreements and the mining
code to promote environmental “best practice” will continue to be
critical, as will the capacity and will of nation-states in the Pacific to
enforce their own statutes. In a similar fashion, governments may
opt for command-and-control regulations that control emission
standards (the amount of pollution discharged), quality standards
(which focus on the quality of the receiving environment), and
process and product standards (ISO14001, for example). Alter-
natively, economic incentives such as reduced taxes for reduced
pollution output can be applied. Liability, environmental litigation,
and financial penalties can also be used as economic disincentives
to pollution. Given their relatively novel status in many parts of
the world, though, it is unlikely that such approaches will become
widespread in the Pacific in the short term.
Corporate environmental policies and practices have evolved
considerably in the past decade and will no doubt continue to do
so in the future. Despite the well-documented limitations of rely-
ing on corporate social responsibility to improve practice, and
the formidable environmental legacy issues the reputation of the
industry has to overcome, self-initiated corporate changes (albeit
often under external duress or at least pressure) will be critical to
improving practices in the region, simply because of the continuing
unwillingness or incapacity of the state to do so.
And finally, in tandem with the state and corporate trajectories
outlined above, it is inevitable that existing levels of community
involvement in environmental management will increase. Not
only does this reflect trends elsewhere (O’Faircheallaigh 2007), but
there is now acceptance by corporations and states that inclusive
approaches are more likely to result in more secure and stable long-
term partnerships and hence longer-term profit-making mining
operations. Community participation provides greater legitimacy
and acceptance of the decisions that are made, and local knowledge
of ecological conditions and traditional interactions with these eco-
systems in the Pacific can enhance the understanding by others of
these systems. This has been done poorly in the past, ensuring that
there is considerable distrust and suspicion (often well-founded as
noted above) of the environmental effects of the mining operations
by local communities. Working with international environmental
NGOs has led to the environmental concerns of affected communi-
ties being aired in a global context, although again the outcomes are
not always predictable (Kirsch 2008).
Community Participation
Satisfying community aspirations for involvement in decision
making has been the slowest of the “soft skills” to evolve in the
mining industry. Labonne (1996: 113) remarked that community
involvement has to be enforceable through contracts that guarantee
information access, economic sustainability, the prioritizing of sus-
tainable technologies, and a range of implementation mechanisms
including inspection agreements, external audits of health, safety,
and environmental conditions, and enforcement provisions for
arbitration, dispute resolution, and penalties. Even today, few com-
munity agreements would meet such standards (O’Faircheallaigh
2007).
Several UN charters recognize the community’s “right to
know,” the “power to act,” and the “principle of subsidiarity” enun-
ciated in the Agenda 21 of the 1992 Rio Summit, which states that
decisions must be made as close as possible to the level at which
they impact (Labonne 1996). Many of these principles have since
been included in the Berlin Guidelines on Mining and the Envi-
ronment (United Nations 1992) and became central pillars of the
MMSD project findings (MMSD 2002). The MMSD project con-
cluded that subsidiarity, best practice, capacity building, and collec-
tive efforts were critical to the industry moving forward in terms of
its relationships with local communities; interestingly some of the
examples of such practices used in the MMSD report came from
the Pacific region, most notably the Development Forum concept
from Papua New Guinea.
Corporate Social Responsibility
Many Pacific Island countries are still refining policy and incor-
porating these cutting-edge concepts into practice, and many are
unable to effectively implement policy due to a lack of capacity
and resources. In this case, mining corporations may be asked to
assume many of the responsibilities of government in determin-
ing “best practice” in environmental performance and monitor-
ing. “Good neighbor” policies involving communication with and
accountability to local communities (Figure 31.9) have been the
industry’s response to its critics’ calls for sustainability in mining.
The result has been increased involvement by mining companies in
community affairs, funding of business development cooperatives,
the setting up of trust funds, and encouraging community organi-
zation. The boundaries and effectiveness of this “corporate social
responsibility” are, though, unclear and vary markedly depending
on the company and the context (see Banks 2006; Filer, Banks, and
Burton 2008; Gilberthorpe and Banks 2012).
Mining corporations have to balance the often conflicting
objectives of Pacific Islands governments and local peoples for
development, the demands of shareholders for low-cost, high-
profit minerals production, and the demands of others for minimal
environmental and social impact. Achieving the environmental
FOR PERSONAL USE ONLY
Figure 31.9. Company meeting with community, Porgera (photo GB).
and social standards demanded by stakeholders involves a reassess-
ment of the paradigms that have governed the industry in the past,
internalizing many social and environmental costs, which may in
turn mean reduced short-term profit in exchange for greater long-
term security. Grassroots awareness of the vulnerability of miner-
als projects to delays forced by community protest, the potency
of international media attention, and the financial costs of ignor-
ing these issues (A$500 million in the case of Ok Tedi) have now
focused stakeholder attentions on the local dimensions of minerals
development. The challenge is to include communities in all stages
of planning and development; the dilemma is how this objective
can be achieved in a planning process that is still capital-driven and
rooted in formal Western knowledge–based ideas of development,
which may not be shared by Pacific Islanders.
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