By Douveri Henao
A mining project has 3 basic arrangements. First a
management team raises investments to implement their venture. The second is
the mining operations team. They would survey, forecast, drill, blast and haul
the ore. The last part is a processing team. They are responsible for providing
large amounts of energy to power up the crushers, grinding and milling the ore
to its final state, a precious metal. A typical project will interact through
the management team setting out targets to feed its purchasers. They would
supply resources for the mining team to extract the ore while the processing
team uses the instruments to optimize levels of output for its targets.
While all three teams need to work collectively, the most
intensive part of the business is the processing team. Our best and brightest
are employed every year to manage hundreds of millions kina worth of assets.
The first asset is the large power stations that have either
hybrid (geothermal and diesel at Lihir) or combination systems of gas or hydro
with a diesel interface (Porgera and Misima). These powers up the second
arrangement which is the large crushing and grinding systems as well as the
demanding milling systems. Depending on the state of the ore, a mine may have
up to 3 crushers and 1 grinder.
A Jaw crusher are two giant metallic fists that smashes
large ore while the gyratory crusher collects standard size ores for crushing.
Both of these materials then get fed into the secondary crusher that further
smashes it to nominal size for grinding.
When they eventually move to grinding, bearings further
smash the ore into a slurry substance.
They are then piped into the mill where the concentrator
uses flotation tanks to do the 1st stripping of the slurry and the precious
metal. The 2nd stripping is through the intervention of chemicals, this is
known as leaching. 3rd stripping is through super‐heated temperatures in a
massive oven. By this time the slurry is ready for its last strip, where
electro plates attract the precious metal which will be above 90% grade. These
metals are then melted and converted into gold bars. The last stage is for its
transportation to the Central Bank for checks before it is exported.
To ensure this 24 hour operation is at optimum level, the
processing team is further divided into 3 sub teams. A instrumentation team
that monitors and calibrates all sensors related to levels, speeds, flow,
chemical inputs and environmental standards. The other is the power team that
ensures power generation for high and medium voltages are operational. While
the last is a communications team that provides for the eyes and ears of all
assets to a central processing room. It is in this room, the processing team
inputs codes, formulas and upload designs based on the instructions from the
management teams targets. Utmost professionalism, high safety standards and
demanding hours are all part of the job.
Don, Charles and James are the processing team of the
National Budget. Their 24 hour operation to optimize PNG as a pacific tiger is
not only ambitious but is putting tremendous stress on Papua New
Guinea. None more so, then the sacred machines that have
guarded us since our nation’s creation.
PNG’s Power Station ‐
National Budget
Fueling up a power station is a magnificent display of Man’s
ingenuity. Shifting large volumes of water, heat or gas to drive massive
turbines that generate electricity is a marvel. The budget is the energy source
that may drive development in our country. When formulating it, executive
government looks at revenue collections from all corners of the country. And
they estimate raising 4 billion from our resources while sourcing almost 3
billion from borrowings. This in turn puts the expenditure levels at 7.5
billion. Apart from shaky gas other commodity projections, the borrowing and
debt levels are worrisome. For the 3 billion borrowings need to be paid back
and that would mean relying on future returns and in this case, almost
exclusively on the gas.
Undermining Surge Protectors ‐ Medium Term Fiscal Strategy,
Fiscal Responsibility Act and the Sovereign Wealth Fund.
These arrangements identify stable macroeconomic standards
to be applied in the budget and resource windfalls. Both the MTFS and its
implementing legislation, FRA were established 7 years ago to guide our
Treasurers to maintain prudent levels of debt, revenue and expenditure so that
budgets are balanced. This is an important undertaking in ensuring we are
living with our means.
The SWF which reappears in Waigani soon, also has systems of
ensuring prudential fiscal management. Key are the stabilization account (for
the rainy day) and investment and development account (budget and other
expenditure support such as the Infrastructure Development Authority).
What is a grave concern however is that Don has shifted away
from the balance budget levels and opted for deficit budgets. The effects of
these changes are a rise in debt levels that will trigger rise in inflation.
Although he has insisted prudential management of levels at 35% is sound,
volatility in the global economy and domestic economic challenges all suggest
major challenges ahead for our people.
Sam Basil, Deputy Opposition Leader, has made warnings of
large debt fallouts triggering similar observations. Similar caution was made
by Loi Bakani, Central Bank Governor, on the need for fiscal discipline to
maintain a stable monetary policy. If these warnings are not heeded to, a black
out is eminent.
Peter, Don, Charles
and James Dream Requires Further Crushing and Grinding
In recent times, two critical policy instruments to
implement the dreams of the government: 2010 –
2015 Medium Term Development Plan (MTDP) and its fiscal
cousin, 2012 – 2017 Medium Term Fiscal strategy. As mentioned above the MTFS
has been tweaked to accommodate the deficit budget mantra. When considering the
MTDP, it is the 1st out of 4, 5 year plans aimed at implementing the objectives
of the 2030 Development Strategy Plan and 2050 Vision.
The principle modality applied is by committing to driving
and resourcing 15 priority areas, cross cutting and economic issues will be
addressed. As we saw in Part 1, most of the MTDP “Key Enablers” are financed
are infrastructure in nature. And it would appear that the dream is buy pumping
money into roads, ports, hospitals, schools, communication lines, power, police
barracks, sub national governments and free education, growth will occur.
Matrices and targets aside, this dream is a chunky ore that
requires further jaw and gyratory crushing thinkers to smash and separate the
deadweight political baggage to the probable development gains.
Free education is a classical example. While free tuition
fees have brought record numbers of our children in the education system, it is
at the expense of quality education. To optimize learning, the
UN ratio for a productive class is 15 children to one
teacher. The average class is 55 to one teacher.
Many are indeed not having the quality experience.
Another concern is the mad rush to construct new classrooms
and deck them up with facilities but in all, no resources to produce more
teachers. So not only are our children not receiving quality education, they
are further denied of additional teachers. The problem exacerbates when a
semi‐literate population is expected to propel the country forward by fully
utilizing subsidized SME loans to grow, manufacture and provide services. At
the same time, the government will provide protectionist policies as well as
infrastructure investment intended to maximize their growth and contribution to
the economy. This is not practical for the literally skills they possess will
not comprehend the complicated commercial fiber. As such, billions of kina
spent on ambitious projections will not eventuate.
This in turn puts pressure for more rent seeking extractive
projects which are myopic and a bulging population not fully contributing to
the economy.
Stripping In the
Mills: Balance the Budget and Drive Education and Non Extractive Economy
I am willing to make Peter, Don, Charles and James dream my
dream if they have the faith and confidence to strip the anxiety of doing
everything in their current term. Even James remarked at the budget lock up,
Rome wasn’t built over night and PNG certainly won’t be built in 5 years.
Therefore, they should maintain the multi-year budget but
run it as a balance budget.
This would mean using its resources to provide cap ex
projects that will be the enablers to drive growth. Therefore, not all the
roads need to be fixed, those that are critical to drive growth. Case in point,
forget the NCD upgrades that are worth hundreds of millions of kina. Divert it
to the feeder roads of the coffee, cocoa and copra belts. Increase power supply
in these areas so that productivity will increase.
Equal attention is also required to improve the literacy
levels of the bulging population, in particular, the workforce population (18 –
65) where dangerous levels of over 60% are not productive. A dynamic education
system to produce high levels of school leavers proficient in reading, writing
and mathematics. Those that can continue the journey to high education must
progress but for the masses that can’t, build a vibrant vocational and
technical trades. We need to move away from glorifying universities as the
ultimate indicator of productivity for our young people.
The other is investing in the Non Extractive Industry.
Mining operations and others in the extractives are rent seeking and therefore
are enclave in nature. So while providing resources to a few and having large
environmental impacts, the wider return on the population is limited.
Conversely, investments in agriculture, manufacturing, services provide wider
catchment of the populace to participate in.
When the Processing Team and their boss realize the
development clock for Papua New Guinea is not a stop watch that has a 5 year
timeline, our progress will be achieved sensibly.
Tune in next week for
Part 3 – Growing the Pacific Tiger. Sub national governments are where the bulk
of where our resources are and it’s not god copper, or timber. But our people.
They will drive the growth of our nation but the challenge is to make them
participants of development and not spectators. That is a dream worth pursuing.
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