It was reported in 2002 that the Internal Revenue Commission (IRC) was conducting a tax review of Bougainville Copper Limited (BCL). The IRC has since issued BCL with a demand for additional tax of K13.24 million, which together with penalties totals K32.98 million. This represents approximately 21% of BCL's non-mining assets.

BCL has been following normal practice in depreciating its assets on Bougainville and charging depreciation against revenue. The IRC has decided to amend tax assessments it has previously made which allowed depreciation beyond 1997. Any tax losses arising from the cessation of mining operations expired in 1997, however depreciation carries forward.

BCL has received expert advice on the matter, including that of senior Australian legal counsel. The company has lodged formal objections and will strenuously defend the claim. The IRC and the PNG Attorney General have been given notice that the company seeks arbitration pursuant to the Bougainville Copper Agreement . Lengthy and expensive legal proceedings for both parties are expected.

Annual Report

Tax Dispute Update - 13th January 2006