The Government of Papua New Guinea and Sandline International are pleased to announce that terms have been agreed for the settlement of the company's claim arising out of its contract with the State entered into by the previous Administration in January 1997.

Following intensive talks held this week, the parties have effected a binding agreement to settle Sandline's claim of USD 18million plus legal and other costs and interest (equating to a total of USD 25million) by the payment of USD 13.3million and the retention of various items of equipment.

The cash payment will be made in four instalments over the next 12 months. In addition to this sum, all equipment undelivered to Papua New Guinea at the time of the suspension of the contract, primarily being that stored at RAAF Tindal in Australia, remains the property of Sandline.

In order to clear the way for this arrangement, both parties have agreed to discontinue all commercial litigation and refrain from initiating any fresh actions relating to the contract, both in Papua New Guinea and abroad.

The contract underpinning the agreement, which has been drafted jointly by lawyers representing the two parties, has been approved by Cabinet and was signed on Friday, 30 April.

Commenting on the conclusion to this affair, Prime Minister Bill Skate said, "We can finally put this matter to rest. Despite my well-known views on the enforceability of the contract, it is in Papua New Guinea's best interest to end the economic disruption posed by the threat and cost of protracted worldwide litigation initiated by both sides."

Michael Grunberg, Sandline's commercial adviser, said, "I am pleased that we have been able to agree a settlement with Papua New Guinea which is acceptable to both parties. We sincerely hope that this draws a line underneath the affair and brings to an end a saga which has absorbed considerable time and expense for each of us over the last two years."

Neither party intends to comment further on this matter.