By Rhiannon Hoyle 
 

SYDNEY--Rio Tinto PLC (RIO.AU) said it is walking away from a closed copper mine on the South Pacific island of Bougainville that was at the center of a decadelong civil war, transferring its controlling stake to an independent trustee.

The Panguna copper operation in an autonomous region of Papua New Guinea has been shuttered since 1989, when militants, frustrated the local community wasn't benefiting from revenues and angry about environmental damage, forced the mine to shut down. A secessionist rebellion that led to thousands of deaths ended with a cease-fire in 1998 but the mine has remained closed.

Rio Tinto announced in 2014 it was reviewing options for its controlling stake in the company that controls the deposit, as the Bougainville government passed interim mining laws that replaced its mining lease with an exploration license.

On Thursday, the Anglo-Australian miner said it has transferred its almost-54% holding in Bougainville Copper Ltd. (BOC.AU) to Melbourne-based Equity Trustees Ltd., which will distribute the shares between Papua New Guinea and Bougainville. Rio Tinto said the deed entitles Bougainville to 68% of its stake in Bougainville Copper and Papua New Guinea to the rest.

Following the transfer, the governments of Bougainville and Papua New Guinea--which already holds 19% of the company--will each own 36%, said Rio Tinto. Public shareholders own the remaining holdings.

"The ultimate distribution of our shares provides a platform for the autonomous Bougainville government and Papua New Guinea government to work together on future options for the resource," Rio Tinto copper and coal chief executive Chris Salisbury said in a statement.

A 2012 study forecast that it could costs US$5.2 billion to get the site back into operation. The study estimated there was at least another five million metric tons of copper and 19 million troy ounces of gold to be mined at the site, which was producing around 166,000 metric tons of copper and 450,000 troy ounces of gold a year before it closed.

Some landowners oppose reopening the mine, however, and had demanded more compensation for past environmental damage along the nearby Jaba River.

In a statement earlier this month, Bougainville Copper said it had reached an agreement to settle some long-standing claims and that it was committed to "return to active exploration and profitable, sustainable mining" at the site.

 

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

June 29, 2016 22:04 ET (02:04 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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