Part IV of the Mining Act 1992 contains two things: a general power for the State to make agreements about mining developments, and the mining development contract for the largest projects.
Section 17 — the power to enter agreements
The State may enter into an agreement, not inconsistent with this Act, relating to a mining development or the financing of a mining development under a tenement — and such an agreement may contain provisions relating to:
(a) the circumstances or manner in which the Minister or the Managing Director shall exercise any discretion conferred by this Act;
(b) the settlement of disputes, including by international arbitration;
(c) the acquisition by the State, directly or indirectly, of a participating interest in a mining development; and
(d) any other connected matter the parties consider necessary.
Nothing in section 17(1) authorises the State to enter into a special agreement relating to the payment of any applicable tax, duty, fee or other fiscal impost, or to grant any exemption, moratorium, tax holiday, or other indulgence howsoever described.
That is a deliberate and unusually blunt prohibition. Fiscal terms are for the tax legislation, not for a project agreement. The words “howsoever described” are there to defeat re-labelling.
Where the Act confers a discretion on the Minister or the Managing Director, that discretion shall be exercised subject to and in accordance with any relevant stipulation in a section 17 agreement.
So an agreement can lawfully structure how statutory discretions are exercised for that project — provided the agreement itself is not inconsistent with the Act (s 17(1)).
Section 18 — when the Minister may require a contract
Where the Minister considers, on reasonable grounds, that:
— the size or distribution of a mineral deposit;
— the method of mining or treating it;
— the infrastructure required for it; or
— financial or economic considerations,
make a mining development contract necessary, the Minister may require that the mining of that deposit takes place under a special mining lease and under the terms of a mining development contract.
This is the mechanism that turns a large discovery into a special mining lease project. Note the link back to section 33(1): a special mining lease may be granted only to the holder of an exploration licence who is also a party to a mining development contract, or that person’s assignee. No contract, no special mining lease.
| Mining lease | Special mining lease | |
|---|---|---|
| Granted by | The Minister — s 38 | The Head of State, acting on advice — s 33 |
| Prerequisite | An exploration licence, or unencumbered land | An exploration licence and a mining development contract |
| Maximum term | 20 years | 40 years |
| Area | 60 km² | As applied for |
| Consultation | The Minister shall consult the provincial government — s 3(3) | A development forum shall be convened — s 3(1) |
| Conditions | Compliance with approved proposals, plus any the Minister determines | Compliance with approved proposals, plus conditions consistent with the mining development contract |
Section 19 — the effect of the contract
The mining development of a deposit for which a mining development contract has been entered into shall be undertaken in accordance with the provisions of the contract — except that, to the extent of any conflict between the contract and this Act, the provisions of this Act shall prevail.
This is the answer to the most common misconception about major project agreements in Papua New Guinea. A mining development contract governs the development — but where it conflicts with the Mining Act, the Act prevails.
So the contract cannot displace: the compensation provisions in Part VII, including the prohibition in section 154(4) on paying for entry or for the value of minerals; the requirement in section 155 that there be no entry until compensation is agreed or determined; the objection and Warden’s hearing process; or the security requirement in section 150.
It also cannot displace the Environment Act 2000 or the Mining (Safety) Act (Chapter 195A), each of which operates in its own right.
Part IIIA — acquisition of State interests
Notwithstanding any provision of any other Part or the terms of any agreement made by the State, the State, MRDC and the Company shall each have the right to acquire and, as appropriate, transfer a Participating Interest in a Mining Project in accordance with the Option Agreement.
And the conditions of any exploration licence, of any special mining lease, mining lease, lease for mining purposes or mining easement granted in relation to a Mining Project, and the terms of any mining development contract or section 17 agreement, shall recognise and provide for the exercise of those rights.
Under section 16A(2) the State shall, in accordance with the Option Agreement, nominate MRDC or the Company to acquire its Participating Interest. See acquisition of State interests.
The opening words — notwithstanding… the terms of any agreement made by the State — make the participation right override the project agreements themselves.
What this means for landowners
- A mining development contract signals a large project, and therefore a special mining lease.
- That triggers the development forum under section 3(1) — which the Minister must convene before the grant, and to which landholders must be invited, conducted so as to afford a fair hearing to all participants.
- The contract does not override your rights. Section 19 makes the Act prevail.
- Compensation is still built from section 154, and there is still no entry until it is agreed or determined.
- Ask what the contract says about the matters in section 17(1) — how discretions will be exercised, how disputes are settled, and the State’s participating interest.
- Ask about the environment permit and the impact assessment; they are separate approvals under separate legislation.
- Get independent advice for the group, paid for by the group — the Public Solicitor, or a firm from the law firms directory.
The Mineral Resources Development Company Pty Limited (Privatisation) Act 1996, referred to in section 16A, is not carried in the PacLII Papua New Guinea legislation databases. It is named here rather than linked, so that no unverified link is given.
Sources
- Mining Act 1992 — ss 3, 16A, 17–19, 33–36, 38, 150, 154, 155; Parts IIIA and IV
- Environment Act 2000
- Mining (Safety) Act (Chapter 195A)
Before relying on anything here, read the current text of the Mining Act 1992 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.