Rio Tinto and the legacy of the Panguna mine
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Rio Tinto and the legacy of the Panguna mine

By Zachary Skidmore 06 Sep 2021 (Last Updated September 29th, 2021 11:19)

A recent joint statement from Rio Tinto and 156 Bougainville community residents, represented by the Human Rights Law Centre, announced an agreement to identify and assess the legacy impacts of the Panguna mine on Bougainville, Papua New Guinea. We find out more.

Rio Tinto and the legacy of the Panguna mine
Credit: Oleksii Liskonihi/Stock/Getty Images Plus via Getty Images

In a joint statement on 21 July, Rio Tinto and Bougainville, Papua New Guinea community members, represented by the Human Rights Law Centre (HRLC), announced an agreement to identify and assess the legacy impacts of the former Panguna copper mine in Bougainville. 

Rio Tinto chief executive Jakob Stausholm said the agreement was an “important first step towards engaging with those impacted by the legacy of the Panguna mine”. 

The assessment resulted from sustained civil societal and investor pressure upon the miner, culminating in a formal complaint lodged to the Australian OECD National Contact Point by the HRLC. The complaint alleged that Rio Tinto is accountable for remediating these ongoing impacts, notwithstanding its divestment, as it has a continuing obligation to provide for or cooperate in remediation where it identifies it has caused or contributed to the harm.

In 2016, RioTinto was accused of sidestepping responsibility after divesting its interests in the mine to national and local governments. The miner’s U-turn begs the question as to whether Rio Tinto will be steadfast in a more sustainable, community-driven approach to its past and future projects and whether this move will engender a greater inclination within the industry to place environmental, social, and governance (ESG) concerns and community consultations centrally within their planning and operations. 

A destructive legacy

The direct impacts of mining upon the environment can often be disastrous. Occasionally these take the form of sudden disasters but more often, mining impacts are felt over a more extended period, where leakage and waste dumping lead to a suffocation of the local ecosystem. 

The Panguna copper-gold mine in Bougainville falls into the latter category. Run by an earlier iteration of Rio Tinto, the mine operated from 1972-1989. During that period, the mine was the largest single source of income for the government, generating a total of PGK1.7bn (approximately $2bn) in revenue. However, for the local populace, the mining had major environmental, social, and cultural effects. 

Land seizures, loss of agricultural land, and mass environmental degradation caused by tailings discharge led to those forcibly displaced due to the mine to cope with squalid living conditions. Additionally, of the income generated, only 1.4% went to local landowners. These factors stoked significant anger, culminating in a war for independence from Papua New Guinea in 1989, where estimates of the dead range between 15,000 and 20,000.

During the conflict, Rio Tinto retained its majority stake in the mine but ceased operations. From 2013-2014, it began to hold discussions with the Autonomous Bougainville Government and Papua New Guinea Government and local landowners about potentially reopening the mine. It was made clear to the company that unless Rio Tinto addressed the environmental legacy of the mine, reopening would not go ahead. 

Rio Tinto’s divestment

Rio Tinto decided to divest, on 30 June 2016, transferring its 53.8% shares to a trust company for distribution to the government. The official reason given was that ‘market conditions and competing demands within the company for its limited capital resources’ meant that Rio Tinto was not in a position to participate in future mining activity there.

After divesting, Rio-Tinto made it clear that the company does not consider itself under any obligation to address the mine’s environmental legacy. Stating that it believed that “Bougainville Copper Limited, [in which Rio Tinto was the majority shareholder], was fully compliant with all regulatory requirements and applicable standards at the time”—in effect, leaving the government and local stakeholders out to dry in dealing with the environmental impacts of the mine. 

In the immediate aftermath of its divestment, Rio Tinto also passed on or sold its shares in several other controversial projects, including the Pebble Mine in Alaska (2016), the Grasberg mine in Papua, Indonesia (2018), and the Rossing Uranium mine in Namibia (2019). 

What next for Rio Tinto?

The recent announcement represents a significant U-turn for Rio Tinto. The company is still reeling in the aftermath of the highly controversial decision to blow up two 46,000-year-old Aboriginal rock shelters in Western Australia’s Juukan Gorge in May last year, which triggered a federal inquiry and the eventual resignation of former CEO Jean-Sebastien Jacques and two other senior executives.

The miner’s new chief executive, Jakob Stausholm, in turn, placed the lifting of Rio’s ESG credentials and improving relations with community stakeholders globally across its operations as a top priority. Dubbed Rio Tinto’s man for a crisis by The Financial Times, his elevation may usher in a new era for the company, where restoring trust with traditional landowners and other stakeholders is a priority.

However, in commenting on the announcement, Keren Adams, legal director at HRLC, says: “This assessment is a critical first step towards addressing that legacy. However, we stress that it is only the first step. The assessment will need to be followed up by swift action to address these problems so that communities can live in safety.”

This trepidation is supported by the fact Rio Tinto has yet to commit to funding clean-up and remediation of the mine. 

Dr Volker Boege, director at the Peace & Conflict Studies Institute Australia, states: “Despite accepting their role in the human and environmental damage, Rio Tinto have insisted on the involvement of the Bougainville Government, the PNG Government and Bougainville Copper and their stakeholders, as a means to divide the responsibility.”

This apparent desire to deflect and divide blame is supported in the lack of action on similar projects, most notably the Grasberg mine in West Papua, compared unfavorably to Panguna in the extent of degradation seen, indicating that Rio is unlikely to act unless significant political and social pressure is placed on them do so.

When Rio Tinto sold its stake in the Grasbery mine in 2018, it claimed that its responsibility to address the problems for the local environment and communities that the mine has created ended as well. Eerily similar to statements made after the divestment of the Panguna mine, Rio Tinto’s attempt to wash its hands of the controversial project saw them disregard their responsibility and sell the interests. 

Only time will tell whether Rio Tinto will follow a similar framework in dealing with the legacies of its past projects, but as ESG becomes more centralised in miners’ strategies, the pressure to deal with these destructive legacies will only increase.

An opportunity for community driven strategies

Rio Tinto’s decision to fund the assessment and clean up could prove influential towards more miners with dubious records doing the same. By prioritising community engagement at the planning stage, miners will be more adept at avoiding these legacy issues by making sure the community has buy-in to their projects. 

PWC, in their 2021 examination of the sector, argued that ESG represents one of the mining industry’s most significant opportunities for long-term value creation, building trust, and sustainable growth. Companies with outstanding ESG ratings delivered 34% average total shareholder return over the past three years—10 percentage points higher than the general market index, according to an analysis published by investment research firm MSCI. Clearly, ESG and community trust will play a vital role in the future of mining.