Resource-related education investment in PNG: lessons from Porgera and Lihir

The mining and extractive industries generate large economic rents which, if managed and invested prudently, can deliver long-term socio-economic prosperity for mining communities and the country beyond the life of resource projects. Many communities associated with minerals projects in Papua New Guinea (PNG) understand the importance of education in securing long-term economic prosperity and have invested part of the proceeds from resource extraction in it.

In this article, we analyse education investments by Special Mining Lease (SML) landowners of Porgera (in Enga province) and Lihir (in New Ireland province), associated with the Porgera and Lihir goldmines. Both areas have roughly the same number of SML beneficiaries: six to seven SML clans and populations of between 14,000 and 16,000. We focus on the effectiveness of the investment models and governance arrangements used to manage these investments, and draw lessons for current and future resource-related education investment in PNG.

Porgera SML landowners established the Children Trust Fund (CTF) in 1992 for the benefit of their children. The CTF is funded by 10% of the total mine royalties paid to SML landowners. Between December 2023 and mid-2026, this would be more than K20 million. The CTF is overseen by a board of six trustees: three representing SML landowners, one the mining company, one the national department of Finance and one the Porgera Development Authority. It fully sponsors SML children from pre-school to college or university. Students were originally able to choose to attend either Porgera International School (established in the mid-1990s and funded by the CTF to educate SML children) or any school outside Porgera, including overseas. Students must have at least one SML parent to be eligible for a CTF scholarship. Beyond that, there are no stringent eligibility criteria, such as a minimum academic performance requirement, to give students an incentive to apply themselves at school.

While the fund started well, it lacked a strong governance and management framework, including a proper beneficiary verification system, database and reporting requirements. It soon ran into difficulties with the payment and accountability of scholarship funds. These problems came to the fore in the last decade, after custody of the CTF was transferred from the mining company to landowner trustees. Its operation was significantly disrupted, causing lengthy delays in the disbursement of school fees, forcing many students to miss classes and some to drop out. The mining company has recently taken over management of the CTF again to address some of these issues, but concerns about its long-term sustainability remain.

The once-thriving Porgera International School closed in 2020 and remains shut today, amid poor governance of the CTF, the temporary closure of the mine in 2020 (which halted mining royalties) and tribal warfare in surrounding communities.

Combined with limited parental guidance and community support, these issues have produced underwhelming education outcomes for Porgera SML children. According to the Porgera District Education board, 95% of SML students drop out of high school, despite the large sums invested by the CTF since the early 1990s.

Lihir SML landowners established Mineral Resources Lihir (MRL) in 1995 as a subsidiary of Mineral Resources Development Company (MRDC). MRL was appointed trustee of the Lihir Equity Trust (LET) in 1997 to manage the Lihir landowners’ 6% stake in the goldmine. After parting ways with MRDC, MRL was re-established as MRL Capital Limited in 2009 using the proceeds from the sale of the 6% equity. It is a thriving trustee company managed by a reputable board and management, which has grown the company’s total assets from K80 million to over K700 million by the end of 2024. The company allocates 25% of its profits to Community Services Obligation (CSO) projects, distributes 25% in cash to SML landowners and retains 50% to grow the LET.

The Lihir Cadetship Program, a scholarship scheme for tertiary students (to study in PNG and Australia) and secondary students (to study in Australia), was established in 2010 and is fully funded and managed by MRL Capital Limited as part of its portfolio of CSO projects.

From the outset, the scheme has clearly set out its application and assessment processes, code of ethics for successful applicants, eligible institutions and the benefits that scholarship holders receive. It is merit-based, and eligible tertiary students must meet stringent criteria, including a minimum Grade Point Average of 3.0.

Transparency and accountability are integral to the scheme. Information about recipients, including their degree programs and academic progress, is collected and published by MRL Capital Limited on its website in its annual reports.

MRL Capital Limited also funds infrastructure projects at public primary and secondary schools on Lihir, rather than establishing and running private schools, which would not be sustainable in the long run. These investments, along with other CSO programs such as health and small grants projects, contribute to building a non-mining economy on the islands, in line with the long-term Lihir Destiny vision.

There is a stark contrast between Porgera and Lihir in the models used to invest and govern the education funds. One is operated through a trust fund under lax management and is highly likely to cease when the mine shuts down and royalties stop; the other functions through a well-managed trustee company with strong management and stringent accountability requirements, and is most likely to continue funding scholarships beyond the life of the goldmine.

Clearly, choices about how to manage resource revenues are not made in a vacuum. Lihir’s contained island geography, cohesive landowner group, continuous mine operations since 1997 and one-off equity endowment made disciplined institution-building easier. Porgera, by contrast, has contended with Enga’s clan-based politics, chronic law-and-order problems, a mine shutdown from April 2020 to late 2023, successive changes of operator and a weaker baseline in public services. So, to some extent, the Porgera-Lihir gap reflects these deeper structural conditions.

That said, what lessons can the rest of the country, and other SML landowners in particular, draw from education investments in Porgera and Lihir?

First, unity among SML landowners and good governance are fundamental prerequisites for children’s education and for broader development outcomes in resource-project communities. Unity is itself shaped by geography and social structure, but SML landowners must nonetheless work towards an overarching vision and plan for life beyond the resource project, and prudently invest some of the proceeds to realise that vision.

Second, strong management and accountability in scholarship schemes are crucial. This includes effective verification and traceability of recipients, and stringent transparency and accountability requirements.

Third, scholarships to SML students should be awarded only on merit, with a minimum academic requirement to encourage students to apply themselves at school.

Fourth, scholarship funds should not be used to establish or run private schools, which are expensive and complex to operate. Investment in public schools in the locality should be encouraged instead, as this also supports the broader community and is more sustainable.

Fifth, a long-term revenue strategy should be established, either through a trustee company like MRL Capital Limited or a standalone long-term fund such as the PNG Sustainable Development Program, using proceeds from resource extraction to fund community development, including scholarships, beyond the life of the resource project.

Finally, SML trust companies and long-term funds must have strong governance structures, be run by a reputable and independent board and management, and be properly ring-fenced to prevent looting by unscrupulous individuals, including SML landowners and politicians.