Minerals, Wealth and Progress - Mining and the Environment: From Ore to Metal - page 14

understandable that any doubt relating to security of tenure would be enough to discour-
age mineral exploration, let alone development. Accordingly, those countries where security
of tenure is legally guaranteed are the focus of most exploration. Similarly, any attempt by
governments to apply significant retrospective changes after development expenditures have
been committed will cause many companies to re-direct their efforts. There is a tendency
during periods of high commodity prices for countries to seek higher returns. This has led
to various forms of windfall taxes or royalty increases, based purely on the perception that
the company can afford to pay the additional impost. Where applied retrospectively, these
imposts will certainly curtail future exploration, not only because of the effect on profits, but
because they signal that the Government involved does not honour its agreements.
In contrast, social interactions at the community level, including commercial and trad-
ing relationships, are often based on un-coded legal traditions, which may be difficult for
outsiders to access and understand. Mining companies tend to ignore these local traditions,
which are often more important to rural communities than imposed national legal codes.
Tension between local communities and mining companies may rise as a direct conse-
quence. The Bougainville Copper and Ok Tedi mines in Papua New Guinea are good
examples of what can go wrong as a result of mutual misunderstanding ( Case 1.3 ).

Those countries where
security of tenure is legally
guaranteed are the focus of
most exploration.

The Key Provisions of Mining Codes
There are two apparently conflicting interests in a host country's stance towards mining
investment: the need to promote foreign direct investment in order to foster economic
growth, and the need to control investment to protect national sovereignty, as well as the
interests of national elites. These two interests find expression in country-specific invest-
ment laws. Laws that apply to foreign investments govern a wide range of aspects including

CASE 1.3
The Bougainville Copper Mine in Papua New
Guinea

The indefi nite closure of the Bougainville
Copper Mine on Bougainville Island, PNG, in
1989 is probably the most dramatic event
illustrating the complex forces that infl uence
mine development in developing countries.
Exploration commenced in 1963; the mine
started operation in 1972. Even in hind-
sight it is diffi cult to single out any single
mistake or misunderstanding that eventually
led to the loss of lives and the loss of
hundreds of millions of investment dollars
and even higher foregone revenue for the
host country. The most important issues
relate to the unexpected pace of the inde-
pendence process within PGN, the complex
matters of national identity, the confl ict
between national and provincial govern-
ment authority, the various view points of
ownership of minerals, the at least initially
colonial approach to mine development, and

the failure to negotiate and to recognize
the problems early and to respond appro-
priately. It is also apparent that the local
community had very little conception of the
scale of the project and its effects on the
landscape and local lifestyles. Over the 25
years mine life (from exploration to closure)
intergenerational changes did occur which
remained unrecognized. The initial scheme
of benefi t sharing proved inadequate with
an increase in population, together with
an increase in education and expectation.
It should be noted that the Bougainville
Copper Project was implemented prior to
the application of environmental impact
assessment, and that many of the lessons
of Bougainville have been recognized in
subsequent project planning.

Source: Clark and Clark 1996