Declining prices prompt Ok Tedi profit plunge

OK TEDI Mining Limited’s profit after tax plummeted by 80% to $US17 million ($A18.7 million) in 2013 from previous year's figure of $472 million.
Declining prices prompt Ok Tedi profit plunge Declining prices prompt Ok Tedi profit plunge Declining prices prompt Ok Tedi profit plunge Declining prices prompt Ok Tedi profit plunge Declining prices prompt Ok Tedi profit plunge

The company blamed falling metal prices and lower concentrate shipments, which resulted in a 34% drop in gross revenue against budget.

Lower production and a build-up of inventories towards the end of the year due to low river levels and high fluorine content in the copper concentrate resulted in concentrate shipments being down 18% on budget.

Additionally, copper and gold prices were 8% and 16% below budget respectively and operating costs were over budget by 2% due to employee redundancy payments of $80 million in December.

Ok Tedi said operating costs were $70 million below budget, which reflected an increased company-wide focus on cost management in the changing economic environment.

Key issues impacting on 2013 operating performance included a decline in the world metal prices for copper, gold and silver, which had a significant impact on revenue.

But the company also experienced a major failure of the semi-autogenous grinding mill shell in the processing plant - which impacted the production of copper concentrate - and a major flooding of pit as a result of an unusually high rainfall event that impacted on mine production.

Ok Tedi said sporadic dry weather events and low river levels impacted on shipping movements but failure of the in-pit crusher, high fluorine levels in the copper concentrate other significant repairs to the ageing process plant and support facilities also impacted on operating performance.

Shipment of concentrate to OTML's largest customer, Pasar, in the Philippines was also affected due to the typhoon in November 2013 causing extensive damage to its facilities, which are still under repair.

"The combination of these events severely impacted OTML's copper concentrate volume sales," the company said in a statement.

"As a result of the decline in income and resulting cash flow, the company was not in a position to declare a dividend for the financial year of 2013.

"In 2013, OTML launched the OT2025 project that was focused on transitioning the business to a smaller operation in preparation for mine life extension.

"The project involved a rationalisation of the whole workforce, upgrade of the camp accommodation, new shift rosters and a review of company-wide operating cost structures.

"Since the project commencement, a total of 713 employees have ceased employment, both voluntary and involuntary, with OTML as of 31 December 2013.

"Although this number is large the resulting reduction in the permanent workforce was 239.

"OTML looks forward to a viable future under MLE and beyond with pride and optimism, with the aim of becoming a truly commercial state-owned enterprise that will continue to generate benefits for its stakeholders and develop the human capital of Papua New Guinea."

Despite the challenges faced last year, Ok Tedi said it was able to record a significant improvement in its safety performance.

Total recordable injury frequency rate was 1.49, a 47% reduction from 2012 and lost time injury frequency rate was 0.26, a 69% reduction compared to 2012.

The company also completed all the recommended actions identified in the International Mining Industry Underwriters independent risk assessment report for the first time.


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