What Risks Remain After PNG’s Sovereign Endorsement of Pacific Lime and Cement Deal?

A Decade in the Making

After more than ten years of collaboration, Pacific Lime and Cement Limited (ASX, PLA) has reached a landmark milestone with the Papua New Guinea government by initialling a comprehensive Project Development Agreement (PDA) for its flagship Central Lime and Cement Project. This agreement, publicly announced by the Minister for International Trade and Investment, Hon. Richard Maru, formalises the partnership and sets a clear legal and fiscal framework for the project's advancement.

The PDA is now awaiting ratification by the National Executive Council and formal signing by the Governor General, Sir Bob Dadae, which will cement the sovereign endorsement of this critical industrial initiative.

Equity and Economic Incentives

A key feature of the agreement is the PNG government's right to acquire a 13% equity stake in each of the project's two Special Purpose Vehicles (SPVs), Quicklime and Cement, with an option to increase this to 18%. The valuation for the Quicklime SPV reflects a significant discount, acknowledging the government's strategic contributions, including fiscal concessions and regulatory facilitation.

Moreover, the government will allocate up to 8% of its equity stake to local landowners and the Central Provincial Government, funded by the state, while Pacific Lime and Cement will provide an additional 2% free-carried equity to landowners. This structure ensures meaningful local participation and aligns community interests with project success.

Special Economic Zone and Market Protections

The project benefits from Special Economic Zone (SEZ) status, granting it corporate tax concessions, import duty relief, and contractual protections for at least the next decade. This status applies to processing and infrastructure facilities, while quarry operations remain outside the SEZ footprint.

To support domestic industry, the PNG government has committed to promoting the use of locally produced quicklime, clinker, and cement in government projects, with provisions to consider trade measures such as tariffs if unfair international competition arises. This protective stance underscores the project's importance to national economic development.

Governance, Transparency, and Future Growth

The PDA includes robust governance provisions, with open-book audits and transparent reporting to the state. Notably, any future initial public offering (IPO) of the Cement SPV will reserve at least 10% of shares for PNG citizens, fostering local ownership and providing liquidity options while mitigating dilution risks for existing shareholders.

Managing Director Paul Mulder highlighted the comprehensive alignment achieved between the company, government, and landowners, emphasizing the project's readiness to deliver long-term value and its role in supporting PNG’s infrastructure and industrial ambitions.

National Significance and Sustainable Development

Designated a project of National Significance, the Central Lime and Cement Project is positioned as a cornerstone of Papua New Guinea’s industrial future. Beyond economic benefits, Pacific Lime and Cement is committed to sustainable practices, including decarbonisation efforts and community engagement, aligning with broader environmental and social governance standards.