OK TEDI Mining - Developing Communities Generating Wealth

Developing Communities Generating Wealth

PROJECT DIRECTED BY

WRITTEN BY

Malvern Kandemwa

Jay Benmehidi

Ok Tedi Mining

Developing Communities Generating Wealth For over 30 years, Ok Tedi Mining Limited has contributed to the Papua New Guinea economy through mining copper, gold and silver at Mt. Fubilan in the Western Province. Business Enquirer investigates the impact.

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s the key pillar of Papua New Guinea’s economic growth, mining accounts for around 26% of the national GDP and almost 90% of all export revenue, the vast majority of which comes from gold and copper exports to the tune of over US$3billion annually. Alongside gold and copper, Papua New Guinea is also known for its extraction of silver, nickel and cobalt, and an increasing number of large-scale mining operations have spread around the country to tap PNGs mineral riches.

Of these, the largest and wealthiest of these operations is the Ok Tedi mine.

Located near the source of the Ok Tedi river in the Star Mountains of Papua New Guinea’s Western province, the Ok Tedi mine is a large-scale open pit operation focused on the extraction of both gold and copper. Under the astute ownership

Aerial view of Ok Tedi mining site

Mr Musje M Werror, Independent Non-Executive Director

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Ok Tedi Mining The mining operation at Ok Tedi

Resources Feature of Ok Tedi Mining Limited, (OTML) which has overseen operations and the continual development of the project since it was nationalised in 1981, the mine has become an engine of wealth creation for Papua New Guinea and a catalyst for social development for the thousands of people who live in neighbouring communities surrounding the site.

Much as is to be expected of an asset of such vast strategic national importance, Ok Tedi – which is majority owned by the PNG Sustainable Development Program Limited (PNGSDP) out of its headquarters in Tabubil, a town constructed in order to serve the mining operations in the area - remains a proudly 100% PNG-owned venture to this day.

Mine Details The Ok Tedi mine is located 18km from the border of the Indonesian province of Irian Jaya, adjacent to the southern tip of the heavily forested Star Mountains and Tabubil - a town of 10,000 founded to serve the mine, which has grown to become the largest town by population in Papua New Guinea’s Western province.

As a result of the construction of both the mine and Tabubil, the local population has benefitted greatly, owing to an increase in employment and education opportunities, significant falls in infant mortality, and improved access to medical care and medicines. The mine itself sits 2000m above sea level on the slopes of Mt Fubilan, with its associated processing plant (Folomian) less than 2km away. The vast majority of access to the mining operation is heavily reliant on river transport, with the port of Kiunga serving as a hub for the transport of supplies and key equipment to the mine. The only roads in the area came as a direct result of the mine’s construction, and serve as transport routes to areas inaccessible by river.

The foundation for the Ok Tedi Mine was laid in 1970 following extensive exploratory drilling

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Resources Feature into Mount Fubilan by Kennecott Copper Corporation, which resulted in the discovery of a gold rich cap sitting above a copper and gold deposit estimated at around 113 million tonnes and graded at 0.8% Cu and 1.1g/t Au. Following a US$2 billion, three step development programme, the mine commenced operations, using cyanide extraction procedures to mine only the copper poor, gold rich oxidised cap in 1984 while under the management of BHP, who entered into a partnership with the Papua New Guinea government, Amoco Corporation and Inmet Mining Corporation. Between its start date in 1984 and 1990 the mine was responsible for the production of approximately 50 tonnes of gold bullion.

OK Tedi Mining employee surveys the mine from above

Per annum, the mine extracts roughly 60 million tonnes of rock of which half is associated waste. The mineral concentrate output is close to 600,000 tonnes. The concentrate is piped the 137km to the Fly River port of Kiunga where it is dried in preparation for export to markets in Europe and Asia, where it is sold primarily to smelting operators in Germany, India, The Philippines and Japan.

Local Impact From the mines inception in 1970, local interests were regarded as the highest priority by all involved parties. In-line with this strategy to invest in local communities, the Kennecott mining company built schools and training facilities where aspiring talent could train through programs and scholarships to gain the skills needed to work at Ok Tedi. Following on from the change in mine ownership in 1976, the government of Papua New Guinea signed the ‘PNG Mining (Ok Tedi Agreement)’ which required preference of employment to be given to local people, and to provide development initiatives to local businesses involved in infrastructure construction, local services and supply of food to the area. In addition to the positive economic impacts, there have been many social benefits as a result of the mines construction. OTML established numerous medical centres where they treat over

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Ok Tedi Mining

Resources Feature

10,000 patients monthly and test for common respiratory diseases such as tuberculosis. This initiative has had a transformational effect on quality of life to the extent that life expectancy in the area has risen significantly whilst infant mortality rates have dropped from 33% to less than 3%.

This initiative has had a transformational effect on quality of life ... whilst infant mortality rates have dropped from 33% to less than 3%

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Despite these clear positive impacts, the mine faced many challenges in its initial phase of construction, not least of which saw the collapse of the US$70 million tailings dam due to heavy seismic activity in the area of operation. Extremely heavy rainfall of more than 10,000mm annually, making it one of the world’s wettest areas, combined with the threat of earthquakes makes it a difficult area in which to operate, and has meant that OTML have had to dedicate extensive time and resources into ensuring the safety of employees as well as mitigating the environmental impacts associated with open cut mining.

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The Future of Ok Tedi Whilst closure was initially scheduled to take place in 2010, further exploratory study of the area resulted in the discovery of vast deposits of additional mineral resource that has given Ok Tedi a new lease of life. With the support of a business-friendly government that is committed to improving prosperity in PNG, and of course their motivated and committed workforce, the company has the right people, the right skills and the right backing to respond to the challenges of today and continue building the future. www.oktedi.com

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Ok Tedi Mining Ltd www.oktedi.com

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