UPDATE 3-'The revolution is ongoing': Bougainville to revive radical mining proposal

Bougainville Vice President Raymond Masono said he will revive a plan to overhaul the region's mining laws after its ongoing independence referendum, which could strip the former operator of the Panguna gold and copper project of its interests.

The proposed changes, which have been criticised by Panguna landowners, would also erase an interest in the project held by the Papua New Guinea government, potentially complicating negotiations between the two governments after the referendum. Under the proposed mining law amendments, Bougainville would take a 60% share in all projects and retain all mining licences, leaving a 40% share that investors can bid for.

"Panguna is the most likely project that can bankroll Bougainville's independence from Papua New Guinea," Masono, who is also Bougainville's mining minister, told Reuters by telephone from the town of Buka. "They don't own the licence and the mine, we own it - they come on our terms. The revolution is ongoing."

He said companies like former Panguna operator Bougainville Copper Ltd (BCL), which counts the PNG government as a major shareholder and claims exploration rights at Panguna, would not get "special treatment". "They can only come in through the new framework. If they have money they can invest as will other investors."

BCL declined to comment. The PNG government did not immediately respond to a request for comment. Masono said he would push for the plan to go through Bougainville's parliament in December, after it was shelved in the lead-up to the referendum amid a backlash from some landowners and government members.

Once the economic engine room of PNG, Bougainville has fallen to the bottom of almost every financial indicator, despite boasting mineral riches, fertile volcanic soil and stunning geography. The autonomous region is now grappling over how best to re-establish a mining industry while maintaining peace, 20 years after the last shots were fired in a bloody conflict between Bougainville rebel fighters and PNG forces, killing 20,000 people.

As part of the peace agreement, Bougainville is holding a non-binding vote on independence that ends on Dec. 7, with the results to go before the PNG parliament and be subject to negotiation. COPPER RICHES

BCL is one of at least two companies, alongside a group including explorer RTG Mining Inc , that claims the rights to develop Panguna, with the dispute currently being tested in the PNG courts. BCL shares had been on a bull run since the start of last week, rising almost five-fold to hit A$0.49 on Nov. 26, underpinned by positive sentiment flowing out of the independence vote.

BCL shares have since retreated to trade just under A$0.30 on Thursday. Another Australian company, Kalia Ltd, is exploring for gold and copper on land located northwest of Panguna.

Analysts at J.P. Morgan believe copper has the most price potential among the base metals next year due to a "tighter supply dynamic", according to a Nov. 22 research note. There is unrest in several copper-producing countries, such as Chile, which could disrupt global supplies at the same time as appetite for the metal used in everything from cookware to robotics is forecast to increase.

The mining law amendments, which have previously been backed by Bougainville President John Momis, were put on hold before the referendum amid concerns that landowner rights would be eroded, with control over assets being handed to the Bougainville government. "It is totally unacceptable to be trying to steal Panguna from the customary owners," Panguna landowner, Lawrence Daveona, said in a statement in June.

A Bougainville parliamentary committee was also heavily critical of the proposed changes, and noted that there had been a lack of consultation. There is also a question over whether Bougainville can attract miners to invest in the region, if the mining laws limit their stake to 40%, and without control over the mining licence.

In March, the then PNG Prime Minister Peter O'Neill told his counterpart in Bougainville that he was concerned violence could break out if radical changes were made to the mining regime without adequate consultation, according to a letter obtained by Reuters. "I think we would both agree that this is something that should be avoided at all costs, and that it is important that a wider consultation process take place before any final decisions are made," O'Neill said in a letter to Momis, dated March 14.

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