Ok Tedi extension in jeopardy

PAPUA New Guinean Prime Minister Peter O’Neill’s campaign against the management of the Ok Tedi copper-gold mine could threaten its mine life extension project which aims to continue operations to 2025.
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O'Neill has spent months criticising the influence of former mine operator BHP Billiton on the board of PNG Sustainable Development Program Limited, which owns a 63.4% stake of Ok Tedi, with the rest split between the national and Western provincial governments.

Former PNGSDP chairman Ross Garnaut was successfully pressured into quitting his position in November.

O'Neill responded to subsequent comments the economist made to Australian press by banning Garnaut from returning to PNG - and he was restricted enough by this to resign as Ok Tedi Mining Limited chairman four weeks ago.

Another element of the story, which has been referred to as Garnaut-gate in social media circles, was a leaked Department of Foreign Affairs and Trade document covered by the Australian Financial Review.

The document revealed that BHP blamed O'Neill for blocking its lease applications and it was made clear "they would only be granted if we [BHP] transferred our rights [PNGSDP] to the government".

In April of last year, PNGIndustryNews.net broke the story that BHP abandoned plans to re-enter PNG by trying to gain 40,000sq.km of exploration leases.

What it did not publish at the time was the industry rumour that a government minister asked for BHP to hand over control of PNGSDP's Singapore trust funds as part of a deal to win the exploration licences, with BHP refusing to do so.

Nevertheless, O'Neill has denied the DFAT claims as false and misleading and is focusing on OTML's MLE project.

According to The Australian the PM recently told members of the Port Moresby Chamber of Commerce and Industry he was not in a hurry to grant this extension.

Some aggrieved groups claiming to be genuine and under-compensated landowners have since issued supportive statements picked up by PNG's press.

While BHP has denied any association with OTML or PNGSDP to The Australian, it did set up the companies as part its exit from PNG in 2002 due to environmental damage caused by the mine.

BHP also gave up its right to appoint board members of the companies but prominent PNG blogger Deni ToKuNai (also known as Tavurvur) recently provided his take.

"BHP 'surrendered' that right to existing directors it put on PNGSDP," ToKuNai tweeted.

"Corporatised wantok system."

O'Neill previously said BHP was given provisions which allowed it to effectively control the appointments of PNGSDP's board and therefore to continue its influence over Ok Tedi.

"There can be no justification for their continuation," he said.

PNGSDP has an estimated $US1.4 billion of assets - including a lot of money firmly held in Singapore-based trust funds.

While most of the community approvals are in, without government approval for the MLE project the Ok Tedi mine will be stuck on its existing schedule to shutdown in 2015.

Under the MLE plans, about 25 million tonnes per annum of ore will be milled until 2016 when production will fall off to around 17Mtpa.

The feasibility study for the proposed underground operations is yet to be unveiled but last year it was targeting 14Mt at an exceptional grade of 1.26% copper and 1.42 grams per tonne of gold as against a mine average of 0.78% and 0.91gpt in 2011.

OTML is the single largest contributor to PNG's tax coffers in recent years, although the $19 billion ExxonMobil-led PNG LNG project is expected to start exports in 2014, with some analysts forecasting it will begin in the December quarter of the year.

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