Lihir gold mine, located in the New Ireland Province of Papua New Guinea (PNG), is one of the world’s largest gold deposits. Production commenced in 1997 and it is estimated that there is another 31 years of gold reserves remaining at the site. Synergies was engaged by Newcrest, the mine’s owner and operator, to assess how the mine is contributing to the regional and national economies of Lihir and PNG. Both economic and social impacts were examined.
The Lihir gold mine provides a range of beneficial impacts for the local Lihirian economy and to PNG more broadly.
In addition to job creation, wages and mining royalties, Newcrest has also made direct investments into community development initiatives.
The purpose of this study was to quantify the extent to which Newcrest’s mining operations in Lihir, and its community investments, are improving the overall socio-economic wellbeing of the local population. The study sought to develop a robust evidence base to demonstrate how conditions have improved over time, and the mine’s contribution to these positive outcomes.
The desktop study comprised three main elements:
An economic impact was undertaken, which modelled the inter-sectoral linkages and trade flows in the PNG economy and quantified the direct and indirect economic contributions of the mine;
We collated a suite of economic and social indicators from published reports that demonstrated how the mining operator was lifting living standards over time and contributing to human development in PNG and Lihir.
We then assessed how the mine operator was contributing to strategic goals set out in PNG’s Vision 2050 strategic plan.
A number of sources of published statistics were used to provide a measure of how PNG is performing in human development terms relative to other developing countries. The key social indicators examined were GDP per capita, the Human Development Index (HDI), health, education, and income per capita.
Synergies examined the contributions of the mining company to the local Province through health facilities and programs, new school facilities, improved community infrastructure, and training and skills development programs.
We also evaluated work being done by the company in partnership with the Local Level Government and community to improve people’s living standards.
The study found that Lihir Gold Mine is making a very significant economic contribution to PNG:
the mine produces a gross output (turnover) of PGK 6,696 million per year (Papua New Guinean Kina);
adds PGK 4,468 million to PNG’s gross regional product (or equivalent to about 6.6% of the PNG economy and about 31% of the value added from PNG’s Mining and Quarrying sector);
boosts regional wages, rent and profits by PGK 2,895 million;
contributes PGK 1,282-1,442 million to national taxation (direct and indirect); and
supports 4,055 direct jobs (FTEs) and generating employment for an additional 12,992 indirect jobs throughout the PNG economy.
To put the above findings into context, the modelling results indicate that if the Newcrest mine were to shut, the PNG economy would shrink by 9% to 10% in the short term.
The report also found that the mining operations were making positive social contributions to the local and regional communities. The evidence demonstrates that mine is supporting many of the strategic goals set out in PNG Vision 2050.
The Lihir Gold Mine has been primarily responsible for lifting per capita GDP for people in Lihir, which is currently estimated to be PGK 53,568. This is significantly higher than the nation average for PNG, which is reported by World Bank to be PGK 6,993 per capita.
The economic modelling conducted by Synergies indicates that, without Newcrest’s Lihir mine, gross national income per capita would have been about 6 per cent lower. This, in turn, means that the mine is responsible for about 0.65 per cent of PNG’s Human Development Index (HDI).
The mine is also contributing to improved life expectancy, adult literacy rate and basic education by providing a range of community infrastructure, health and education programs.
While we found many examples of positive contributions being made by Newcrest in partnership with the Local Level Government and Lihir community. However, information and data are not readily available for measuring outcomes using metrics developed by the UNDP and others.
Our report made recommendations on several areas where further monitoring and investigation could yield better information to assist in evaluating Newcrest’s social impacts. We concluded that addressing these gaps would make for a more robust evaluation of how the mine is lifting living standards and contributing to community wellbeing.