Rio Tinto’s board faces a critical test of its commitment to sustainability this year when responding to claims that its Panguna copper and gold mine in Bougainville caused environmental and human damage.

    As one of the top five players in the global extractive industry, Rio Tinto is at the forefront of delivering the minerals essential for the energy transition. It must do this while managing complex engineering, logistical, social and cultural issues.

    Rio’s Panguna mine was closed in 1989, a casualty of the 10-year Bougainville civil war that claimed an estimated 20,000 lives and displaced many more. The mine has been derelict for decades, but its legacy of environmental damage continues to trouble the mining giant.

    A comprehensive report was compiled by the Human Rights Law Centre (HRLC) and released in 2020. It found environmental and human damage. “The Jaba-Kawerong river valley downstream of the mine resembles a moonscape, with vast mounds of grey tailings waste and rock stretching almost 40km downstream to the coast,” the report says. “An estimated 12–14,000 people live downstream of the mine...”

    Some of the creeks downstream from the mine are coloured blue from copper contamination. Locals searching for alluvial gold also risk their health by working the old mine and separating the gold with mercury, or panning for gold in polluted river waters.

    The HRLC lodged a human rights complaint against Rio Tinto on behalf of 156 Bougainville residents with the Australian OECD National Contact Point (AusNCP) in the Department of Treasury, which alleges environmental and human rights violations caused by the mine.

    It’s a sensitive time for Rio’s board to be facing claims concerning actions from a period well before their time concerning management of former subsidiary Bougainville Copper Ltd (BCL), given it has yet to achieve a lasting resolution to the 2020 Juukan Gorge destruction in the Pilbara. The manner in which this issue is handled by Rio chair Dominic Barton, sustainability committee chair Dean Dalla Valle and CEO Jakob Stausholm will send a clear signal about how Rio defines its “social licence to operate”.

    How it played out

    In 2016, Rio transferred, at no cost, its 53.83 per cent holding in BCL to the autonomous Bougainville government and the government of Papua New Guinea. However, Rio announced it rejected any corporate liability for environmental damage during its 1972–89 operations. “We believe BCL operated Panguna in compliance with applicable laws and standards until 1989 when it was required to leave the country... Given the lack of access since then, it has not been possible for Rio Tinto or BCL to confirm the nature, extent or cause of any alleged damage or pollution,” the company said in a 2017 statement.

    Robert Porter describes the situation in his book, Rio Tinto in Australia: The Origins and Formation of an International Resources Company 1954–1995. He says Rio was undeterred by its “technical inability” to design and build a tailings storage system necessary to cope with the level of waste generated from overburden removal and mine tailings. Porter also says there was no requirement for an environmental impact study and likely serious environmental degradation, with unknown long-term consequences, was considered justified in terms of the small area impacted in the pursuit of significant economic benefits.

    A 1989 PNG government report concluded the environmental impact of the mine was “extreme by any measure” with many of the adverse impacts lasting and in some cases permanent. But the report also noted that all BCL mining activities were undertaken legally.

    Porter says Rio operated the Panguna mine in a “planned, responsible and genuinely exemplary manner”. It had an “enlightened approach to the indigenisation of the workforce... and provided a range of health and other services”.

    But it’s impossible to ignore the fact that BCL dumped one billion tonnes of waste into the local river system while earning $1b in profits. During 20 years of operation, it delivered 3.1 million tonnes of copper, 306 tonnes of gold and 783 tonnes of silver. The production had a value of 5.1b kina — about 44 per cent of PNG exports over that period.

    Rio response

    Rio’s 2022 annual report sets out what happened next. “In 2021, as an outcome of the AusNCP engagement, a joint committee of stakeholders, the Panguna Mine Legacy Impact Assessment committee, was formed to oversee a detailed independent assessment of the Panguna mine to identify and better understand the environmental and human rights impacts.”

    Phase one of the assessment is being done by global consultancy Tetra Tech Coffey, which is expected to report in June. Bougainville should be cautious about its outcome. First, Rio has not committed to paying for remediation. It says the legacy assessment will “provide all parties with a clearer understanding of the impacts, so together we can consider the best way forward”.

    Second, Rio could argue it is not responsible for the impact of erosion that has occurred since it was forced to suspend mine operations.

    Third, the consultants may find that alluvial mining during the 35 years since the mine shut is a significant contributor to environmental damage.

    Rio has said in its official history that it is learning from its mistakes. A short foreword to its history says, “Along the way, we have made mistakes that do not live up to the values we hold today. We are learning from those moments in our history when we have fallen short, and we are focused on striving to do better.”

    There must also be an element of commercial pragmatism to the company’s thinking about remediation of the Panguna mine legacy damage.

    Financial institutions, particularly government- funded export credit and renewable energy financiers, must consider the adherence to human rights by companies they lend to.

    Board challenge

    Rio’s board, refreshed since the Juukan disaster, will be wary of the incrementalist approach to remediation adopted by BHP following the Samarco tailings dam catastrophe in 2015. Dalla Valle, who left BHP in 2017, led that company’s initial response, so brings a unique perspective to board deliberations on mine remediation.

    Other new board members since Juukan are former McKinsey managing partner Barton, former WA Treasurer Ben Wyatt GAICD, former oil and gas executive Kaisa Hietala, former Mirvac CEO Susan Lloyd-Hurwitz and former Mosaic Company CEO James O’Rourke. It is heartening so many intelligent people have joined the board of the world’s second largest mining company knowing they will have to establish a new paradigm in Rio’s approach to ESG issues.

    This article first appeared under the headline 'Mine Disposal’ in the March 2024 issue of Company Director magazine.

    Tony Boyd is an AFR contributing editor and former Chanticleer columnist.

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