Economy. Papua New Guinea press review
Treasurer of Papua New Guinea (PNG) Ian Ling-Stuckey says the international community had offered poorer countries a debt-repayment holiday because of the COVID-19 pandemic. Therefore, he was responding to a statement this week by former prime minister Peter O’Neill accusing the Government of «begging the Paris Club of creditor nations to suspend PNG’s debt service obligations» which could «further downgrade PNG’s credit ratings».
Mr. Ling-Stuckey explained that the debt-repayment holiday through the Paris Club was strongly supported by the World Bank and the International Monetary Fund (IMF): «They get this debt repayment holiday by writing to the Paris Club,» said Ian Ling-Stuckey. However, Mr. Ling-Stuckey dismissed claims that the request stopped access to commercial loans: « We can borrow up to K1,200 million in commercial funding in 2020 because this was part of the IMF staff monitored programme».
Gulf Governor Chris Haiveta pointed out that the P’nyang LNG Project negotiations have taken over 12 months with no outcome, which is a grave concern to his people. In response, Prime Minister of Papua New Guinea, Hon. J. Marape said: «Unlike in the past where Prime Ministers and powerful parliamentarians have bulldozed through long term project agreements, where the State gives too much away in terms of revenue concessions, I choose to defer and take considered advice».
Prime Minister noted that departments and industry are best placed to provide advice to Government, but that more must be done to ensure that everything possible is gained from critical resource projects: «Instead of chasing the dreams of so-called billions of Kina under hasty agreements that give our rights away, we should ensure that we safeguard our nation’s interests and the wealth of generations to come» – marked Mr. Marape. Prime Minister also noted that he shared Governor Haiveta’s genuine concern for the State to secure a project agreement for P’nyang, but the long term financial security of the country must not be sacrificed for short lived and short term gains: «Our Government is committed to ensuring that negotiations are undertaken through the eyes, minds and hands of specialised officials who have the expertise to provide the best advice to Government». Prime Minister Hon. J. Marape also noted that under the approach pursued by his Government, the advice of experts, including those in the petroleum sector, the State Solicitor, Kumul Petroleum Holdings, Mineral Resources Development Company and other relevant offices were playing a critical role as part of the State Negotiating Team.
«Since 31st May 2019, we have had many progressive meetings on P’nyang and all other resource projects, including Wafi-Golpu, Porgera and Pasca, and we continue to remind Total of the need to progress discussions on Papua LNG,» – said Prime Minister. According to Mr. Marape, the negotiations between the State Negotiation Team and Exxon and Oil Search are turning in the right direction. The Prime Minister concluded by placing on record his sincere gratitude to Minister Kerenga Kua, Ambassador Isaac Lupari and the State Negotiation Team for their continued efforts in ensuring that the Government’s mandate is achieved so that negotiations can conclude.
One of the leading mining companies of Papua New Guinea OK Tedi Mining Ltd (OTML) has recorded a net profit of K754 million (US$219,86 million) for the 2019 financial year. It represents an increase of K289 million (61%, US$84,27 million), compared to the previous year. Chairman Sir Moi Avei told the company’s annual general meeting: «The company distributed K400 million ($US116,64 million) in dividends during 2019 while investing a further K408 million ($US118,97 million) in the strategically important crusher replacement project […] This project will be completed later this year enabling access to higher grade ore and delivering an increase in production and cash generation in 2022 and beyond». Moreover, «mine production increased by 18% compared to the previous year, while copper and gold production were up by 3% and 9% respectively».
It is necessary to mention that production costs, determined «decreased from US$1.22 (K4.12)/lb in 2018 to US$0.49 (K1.65)/lb in 2019, “comfortably within the lowest cost quartile of global copper producers». “As we move into uncertain times in 2020 due to the Covid-19 pandemic, Ok Tedi Mining Limited is well prepared […] At the end of 2019, the company was in a solid financial position holding K357 million in cash and debt-free». Sir Moi said.
However, Following the Ok Tedi Mining Limited 2019 Annual General Meeting held on 22 May 2020, Chairman of Ok Tedi Mining Limited Sir Moi Avei KBE announced today the appointment of Mr Musje Werror as MD / CEO of Ok Tedi Mining Limited effective 1 June 2020. He will replace Mr Peter Graham who has been in the role since May 2015. Mr Werror’s career spans more than 30 years with Ok Tedi, having joined via the Company’s Graduate Development Scheme. Mr Werror has played a leading role in the management of community relations in Western Province and is currently Chairman of Ok Tedi Development Foundation and Chairman, Western Province Health Authority. It is important to note that with the transfer of the State’s 67% shareholding in OTML to Kumul Minerals Holdings Limited now approved, Mr Graham will assume the role of Chairman and Acting Managing Director, Kumul Minerals Holdings Limited on a full-time basis to progress the development of the national mining company.
The Bank South Pacific (BSP) also recorded a net profit of K890 million (UD$259,52 million) in the 2019 financial year – an increase of K46.3 million (US$13,5 million) from 2018. It means a total dividend payment of K1.34 per share, generating 11% yield, according to the bank. The full-year dividend represents K626.10 million (US$182,56 million) to BSP shareholders.
According to the statement of Chief executive officer Robin Fleming said 2019 was a very positive year for the bank. Mr. Fleming, however, says: «We did see across the various countries in which we are operating some of the Gross Domestic Product (GDP) and economic activity start to slow down in some degree […] In PNG, we were in the situation where we were coming off an earthquake-related situation for the oil and gas sector […] While some of the GDP, from an oil and gas perspective, was being able to rebound, some of the other activities, from an economic perspective, did start to taper off at the end of 2019». According to Mr. Fleming, 2020 would be far more difficult, particularly the support recognized from a shareholders’ perspective.
Moreover, Bank South Pacific is assisting over 5,000 customers who are affected by the COVID-19 with either loan repayment holidays or interest only payments. Chief executive officer Robin Fleming explained that individuals were given three-month loan repayment holidays while impacted businesses were allowed interest-only payments. Mr. Fleming noted that the bank was in constant dialogues with its customers and also with different businesses and different countries.
The National Superannuation Fund (NASFUND) highly commended the BSP results for the 2019 financial year despite the challenging economic environment. NASFUND owns 9.7% of BSP. Chairman Charles Vee said: “As one of the top five shareholders of the bank, NASFUND is pleased with the achievements of this investment, and looks forward to continued positive returns. I turn, Chairman Charles Vee said: «As one of the top five shareholders of the bank, NASFUND is pleased with the achievements of this investment, and looks forward to continued positive returns […] In the last five years, Nasfund has received K246.53 million (US$ 71,89 million) in dividends from BSP, representing on average 15% of the fund’s cash income […] BSP continues to be NASFUND’s best performing investment in terms of yield (dividend) and capital value».
the Australian-funded Market Development Facility (MDA) and Paradise Foods Ltd signed a new agreement, which will a boost in locally-manufactured cocoa products. It’s expected that partnership will improve Paradise Foods Ltd production capacity to produce a new range of cocoa products. The MDA will support the Queen Emma Chocolate Company (Queen Emma), a subsidiary of Paradise Foods Ltd, with expansion of its processing facility.
According to the MDA Country Director Sharif Islam, the support for downstream processing of cocoa products in PNG would benefit smallholder cocoa farmers. However, Paradise Foods Ltd Chief Executive James Rice said the cocoa industry in PNG had steadily improved and had great potential to compete internationally on cocoa products: «Papua New Guinea produces some of the best cocoa beans in the world, and with support and expertise on proper farming techniques right up to processing, cocoa products in Papua New Guinea can be the best, even globally». Traditionally, most agriculture commodities in PNG are exported as raw products, including cocoa. The MDA is a multi-country initiative supported by the Australian government to help farmers and workers, including women thrive in the agriculture sector.
Air Niugini Limited has proposed to acquire controlling (up to 60%) interest in PNG Air Limited through its subsidiary Link PNG. Independent Consumer and Competition Commission (ICCC) Commissioner and chief executive officer, Paulus Ain said the proposed transaction is going through various regulatory approvals, and one of them is seeking authorization from the ICCC. Mr. Ain said because there are only two airlines competing in the domestic freight and passenger services, ICCC will assess this application carefully. Meanwhile, NASFUND’s Board has approved the sale of its shares in PNG Air to Link PNG. The same offer will be extended to all of PNG Air’s shareholders.