While the future of the massive Ok Tedi mine hangs in the balance, Ok Tedi Mining Limited looks set to continue its major contribution to Western Province.

The massive Ok Tedi copper mine, which opened in 1984, is not only the largest contributor to the economy of Western Province but also to the entire economy of Papua New Guinea. It is one of the world’s largest copper mines.

To give some idea of the mine’s importance to the country, in 2010 it accounted for 18% of Papua New Guinea’s gross domestic product, while a temporary closure of its slurry pipeline in 2011 deprived PNG’s various levels of government of almost 130 million kina (US$59 million) in tax revenue.

Situated in the Star Mountains region in the north of Western Province, the mine is run by what is now a 100% Papua New Guinea-owned company, Ok Tedi Mining Limited (OTML). OTML itself has two owners: Papua New Guinea Sustainable Development Program Limited (PNGSDP, which owns 63.4%) and the State of Papua New Guinea (36.6%).

One of OTML’s major preoccupations is the environmental impact of the mine, the waste and tailings deposition to the riverine system having had a major impact on the Ok Tedi and Fly Rivers and their associated eco-systems. Under an environmental regime put in place in 2001, as part of the mine continuation agreement, the company now employs teams of scientists to monitor and manage the impact of mining activity past and present.

Strong community role

Operating the Ok Tedi mine makes OTML the most important company in Western Province. It employs a lot of people— some 2000 directly, and another 1500 indirectly through its partners. It also pays a lot of tax (K1.22 billion—US$553 million—in 2010), plus royalties and other payments to provincial government, landowners and other stakeholders inside the Western Province totalling K398 million—US$180 million—in 2010.

Given the mine’s remote location, OTML’s activities inevitably extend beyond just the mining activity. The entire support infrastructure for the mine had to be created and is now maintained by the company. This includes the company town of Tabubil adjacent to the mine (which has its own airport and hospital); the 157 km road and parallel slurry pipelines which connect Tabubil to Kiunga on the Fly River, from where the copper concentrate is barged down to the sea some 800 river kilometres away; power plants; and the river port at Kiunga. It also funds a K20 million per annum training and development scheme for apprentices and university graduates.

Community benefits

A large portion of OTML’s dividend goes directly to its major shareholder, PNGSDP, for community development projects in Western Province and PNG more generally (see the profile of PNGSDP here). In addition, OTML’s Tax Credit Scheme, worth K91 million (US$41 million) in 2010, funds the building and maintenance of vital community infrastructure across Western Province and the Telefomin District in the Sandaun Province, such as schools, government housing, sewerage systems, hospitals, airstrips and police stations. Health and education are a particular focus of the scheme. Under the Restated Eighth Supplemental Agreement, 20% of the Special Support Grant is also required to be spent in the Tabubil District by the Ok Tedi Development Foundation to maintain Government infrastructure.

‘A large portion of OTML’s dividend goes directly to its major shareholder, PNGSDP, and is therefore channelled into a wide range of community development projects.’

Finally, OTML currently owns 75% of Ok Tedi Development Foundation Limited, established in 2001 to manage the trust funds set up for the 152 mine-affected villages along the Ok Tedi and Fly rivers under the Community Mine Continuation Agreements. The Foundation, which delivers the K680 million (US$308 million) Ok Tedi Fly River Development Program, was launched in 2008. The Foundation’s enabling legislation requires OTML to relinquish its Foundation shares before or at mine closure to four reputable development organisations.

The future of OTML

The Ok Tedi mine, like all mines, will eventually run out of ore. In Ok Tedi’s case, that will happen sooner rather than later: it is scheduled to close at the end of 2015 unless significant mine extension works are given the go-ahead soon. This has been known for some time, and much of OTML’s focus now is on identifying additional ore deposits both within the Ok Tedi region and in other parts of Papua New Guinea. (Click here for more on OTML’s mine extension and exploration activity). Development of new deposits should ensure that OTML continues to have an important economic role in Western Province and Papua New Guinea beyond the Ok Tedi mine closure, whenever that occurs.

Ok Tedi in numbers

Pit size 2.6 sq km

Open date 1984

Due closure date 2015 or 2024

Annual production 159,821 tonnes of contained copper

486,000 oz of contained gold

1.47 million oz of contained silver

Export revenues 4.74 billion kina (US$2.15 billion)

Profit before tax 1.01 billion kina (US$457 million)

(2011 forecast)

Taxes paid 1.22 billion kina (US$553 million)

Employees 2000 directly (plus 1500 indirectly)

NB: 2010 figures quoted unless otherwise stated.

This article first published in PNG’s Western Province 2012