The Mining Act (1992) and the
Petroleum Act (1980) provide for the
Government of Papua New Guinea (PNG) to
take up equity holdings in mining and
petroleum projects. The price the
Government pays for its share is based
on the historical cost of exploration
and development on the project to the
date of government equity acquisition.
The equity level to be acquired is not
fixed and ranges up to 30o for mining
and up to 22.5s for petroleum at the
discretion of the Government of the
time.
The objective of this paper is to
examine the pros and cons of State
equity holdings in PNG from the point
of view of both the State and the
developer. Using an economic model of
the PNG mining taxation system an
assessment is made of the effective
return on investment received by the
State from such equity holdings. The
results are compared with government
revenues from other taxation measures.