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SEMINAR ON POPULATION AND SUSTAINABLE DEVELOPMENT

SEMINAR ON POPULATION AND SUSTAINABLE DEVELOPMENT. MINERALS EXTRACTION AND SUSTAINABLE DEVELOPMENT IN PAPUA NEW GUINEA 14 th October 2010 Kaepae K Ail and Jim P Lem Mining Engineering Department, Papua New Guinea University of Technology. Presentation Outline.

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SEMINAR ON POPULATION AND SUSTAINABLE DEVELOPMENT

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  1. SEMINAR ON POPULATION AND SUSTAINABLE DEVELOPMENT MINERALS EXTRACTION AND SUSTAINABLE DEVELOPMENT IN PAPUA NEW GUINEA 14th October 2010 Kaepae K Ail and Jim P Lem Mining Engineering Department, Papua New Guinea University of Technology

  2. Presentation Outline 1. Minerals development and production 2 Comparative analysis of mineral-led economies 3. Regional growth and sustainability 4. Artisanal and small scale mining 5. Prospects for future growth and sustainable development

  3. Minerals Development & Production

  4. 1972 – 2008 Production • 3 large mines in operation (Lihir, Ok Tedi, P) • 1 large scale mine commissioned – H Valley • 1 under construction – Ramu Nickel • 3 medium scale mines in operation • 6.58 million tonnes copper concentrate • 46.45 million ounce gold • 65.81 million ounce silver • Total market value at historical prices is US$40 billion

  5. Future Prospects • 13 copper, gold, silver, nickel-cobalt prospects under exploration • Ramu Nickel under construction • Large scale prospects under feasibility stage - Yandera, Frieda River & Wapi Golfu • Others have significant ore reserves discovered

  6. Future Mineral Resource • Measured, indicated and inferred total reserves • 1.67 Bt copper ore @0.5% - 1% Cu av. grade • 114.54 Mt gold @ 5.16g/t equiv (av. grade • 443Mt Nickel/cobalt @1.10% (av. Grade • Total in situ value at average historical prices US$90 billion (ground value) • By 2050, PNG could have produced total mineral value of US$130 billion (1972-2050)

  7. Minerals Investments

  8. 2. Comparative analysis of mineral-led economies Country Mineral(s) GDP/CAPITA HDI • PNG Cu, Au US$2,300 …. • Botswana Diamond US$14,100 8.7 • Chile Copper US$14,700 3.2 • Peru Cu,Au US$8,600 2.5 • Angolia Oil US$8,800 2.4 • Zambia Copper US$1,500 2.0 Sources: World Factbook and World Bank

  9. Key Measure of National Wealth • Too much concentration on GDP growth – fail to translate GDP growth into human development • Has PNG hit the target on HDI, HPI & income per capita? – you know it all • Chile & Botswana – good performances and PNG can imitate and learn from them • Botswana mono-economy: Its policy? • Simple: Substitute mineral endowment into endowment of physical and endowment of human capital, reflected by its high HDI and income per capita

  10. 3. Regional Growth and Sustainability • Regionalization Concept is to promote sustainable mining development • Support continuation of mining activities • Economic, social and institutional infrastructures could benefit many people instead of few people in the host area • PG & LLG not capable of maintaining after closure • Multiplier effects more sustainable at regional level after mine closure • Post-mine urban drift is highly predictable

  11. Export Base Model – The Porgera FIFO Case • Export base model is applied to analyse host region wealth leakage by FIFO mine operation • Model has three components: • Total employment (2) Employment in exportable sector (3) Employ’ in non-tradable/domestic sector Two Scenarios analysed: (1) non-FIFO & (2) FIFO mine operation

  12. Non-FIFO Model (Scenario I) .

  13. FIFO Model (Scenario II) .

  14. Export Base Model: Results • Scenario I multiplier index > Scenario II • Shows FIFO does cause wealth leakage, but its effect are less • LO spending outside of the region is the major cause of wealth leakage compared to FIFO

  15. 4. Artisanal and small scale mining

  16. Use Mercury

  17. 4. Mining techniques & fatalities

  18. Social & Economic Indicators

  19. 5. Prospects for Future Growth and Sustainable Development • Has PNG translated the US$40 billion mineral value mined from 1972 – 2008 into the Botswana model? – wealth substitution into endowment of physical and human capitals? • If so and so…, is PNG able to make use of the existing and known mineral resource valued at US$90 billion by 2050? • Added to this value is the crude oil sector & US$15 billion LNG project

  20. MTDS & VISION 2050 WAY FORWARD? • MTDS (1997), MTDS (2005-2010), (MTDS 2011-2015) • MTDS ObjectivesIndicators • SAP NIL • Expenditure controls Failed • Promote good governance Failed • Public investment Programs Achieved • Human Development Indicators Poor

  21. VISION 2050 • MTDS short term plan (5 years) • Vision 2050 – long term projection • No underlying policies to anchor Vision 2050 • MTDS is a plan, not a policy paper • MTDS a plan guides a wishful list - Vision 2050 • Big bang approach: Vision 2050 is charismatic projection at the back of current minerals boom

  22. Problems of Minerals Economies • Boom & burst cycles • Booming sector induce RER to appreciate • Crowd-out traditional agriculture • Shift of scarce labour from non-minerals exporting sector to booming minerals sector • Skills redundancy • Commodity Price drops – so does Vision 2050 • High wage disparity gap: corruption level increases • Large capital inflows spark hyper inflation; induce social insecurity and rise criminal activities

  23. Population and Sustainable Development WAY FORWARD? • SKILLS-DRIVEN GROWTH - SUSTAINABLE • EXPORT DRIVEN-GROWTH –NOT SUSTAINABLE IN THE LONG RUN • Ladies and gentle men “In 1984, George Orwell predicted the world would be ruled by a technological monster called “Big Brother” – he got it wrong – technology beat him

  24. THANK YOU ALL Mining Engineering Department, Papua New Guinea University of Technology thanks NRI for hosting this very important seminar.

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