'A sad day for PNG'

THE Ok Tedi mine in Papua New Guinea is a step closer to being nationalised as its BHP Billiton-established majority owner caves into government pressure and calls for a constructive dialogue over a “fair exit” from the mine.
'A sad day for PNG' 'A sad day for PNG' 'A sad day for PNG' 'A sad day for PNG' 'A sad day for PNG'

The government campaign against PNG Sustainable Development Program, the BHP-created Singapore-based trust company which owns 63.4% of Ok Tedi, even forced the resignation of chairman Ross Garnaut last year after he was banned by Prime Minister Peter O'Neill from returning to PNG.

More recently O'Neill said his government would take full ownership of Ok Tedi once the mining lease expired on December 31.

While PNGSDP tried newspaper advertisements to counter government criticism of its role, its new chairman Sir Mekere Morauta signalled defeat in his speech for the 2012 annual results yesterday.

"When Professor Garnaut stood down from PNGSDP and Ok Tedi Mining Limited, he left both companies in an excellent position from which to meet the challenges of the future, especially those that may potentially result from the National government's decision to remove the company as a shareholder in Ok Tedi," Morauta said.

"The consequences of that decision will be very far reaching for PNGSDP and for the people of Western Province.

"Constructive dialogue to put in place a fair and transparent exit of PNGSDP from OTML is necessary.

"Until final decisions on the future are made, PNGSDP remains in a period of uncertainty.

"It is in the interest of the state, PNGSDP and OTML to come to final decisions on the future shape of both companies soon."

Worryingly, Morauta conceded that the government would not likely acquire PNGSDP's stake of OTML at the market value of $US1.1 billion.

It is not clear what PNGSDP will receive for handing over its stake in OTML, which has advanced plans to extend the mine life from 2015 to 2025.

Professor Stephen Howes, who co-authored a review of PNGSDP in 2011, has already commented on possible implications.

"The change in SDP's position is a major victory for PNG PM O'Neill but raises serious questions about government-business relations and the security of property rights in PNG," he wrote for the Australian National University-based development policy blog.

Howes said PNGSDP had essentially switched its $1.1 billion stake of OTML to the PNG government.

"While SDP has its own problems and limitations, the $1.1 billion would be better spent by SDP than by the PNG government, especially given the serious corruption and capacity challenges faced by the latter," he said.

"SDP's concession no doubt reflects the pressure it has been placed under.

"It is a sad day for PNG."

The national and western provincial governments jointly own the remaining 36.6% stake of OTML.

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