Tag Archives: Ok Tedi

Ok Tedi Mining Ltd damaged by O’Neill

O’Neill may have turned the Ok Tedi mine into a corporate disaster, as Morauta claims below, but Morauta can hardly claim that under his leadership the outcomes for the poor people of Western Province were any better…  

Mekere Morauta | 14 June 2017

At a rally in Kiunga today, the former Prime Minister and current chairman of PNG Sustainable Development Program Ltd, Sir Mekere Morauta, told Western Province people the sad story of the Ok Tedi mine since Prime Minister Peter O’Neill took it in 2013.

He told them that the latest annual financial results are a disgrace, and confirm his worst fears about Mr O’Neill’s expropriation without compensation in 2013.

“They show that a well-managed and very profitable company under PNGSDP’s majority ownership has been turned into a corporate disaster under Mr O’Neill, as I predicted,” Sir Mekere said.

“OTML made a loss of K350 million in 2015, by far the largest in its history and far outstripping the K15 million loss caused by the very severe drought in 1997. The company never made a loss under PNGSDP majority ownership.

“This is Mr O’Neill’s dirty little secret. He and the OTML Board micro-managed by Dr Jacob Weiss have tried to hide the loss by not publishing OTML’s 2015 Annual Review, or its 2015 and 2016 quarterly financial results.

There is no explanation anywhere in the latest 2016 Annual Review to account for a loss of this magnitude.

“The only explanation can be the waste and mismanagement we have come to expect of the O’Neill Government.”

Mr O’Neill has decimated OTML profits. Under PNGSDP, average annual profits were almost K1.2 billion a year; under Mr O’Neill they are just K100 million.

OTML used to be the biggest taxpayer in PNG, which helped the national Government pay for education, health and infrastructure maintenance.

Under PNGSDP average annual taxes were K640 million; under Mr O’Neill they are just K100 million. OTML paid practically NO company tax at all in 2015 and 2016.

PNGSDP’s profitable and well run mine delivered large dividends: K288 million a year was paid on average to the State and the people of Western Province. A further K426 million a year went to PNGSDP.

After administration costs (which are capped), two-thirds was saved in the Long Term Fund and one-third went to the Development Fund to support programs for the people of Western Province and PNG.

Under Mr O’Neill total dividends have fallen to just K68 million a year on average, and no dividends at all were paid in 2013 and 2015. Only K150 million was paid in 2016 compared to K723 million in 2012, PNGSDP’s last full year of ownership.

PNGSDP received K5.5 billion in dividends from OTML between 2002 and 2012. Two-thirds of these dividends were invested in the Long Term Fund to be used after the mine closes. The balance of the LTF at the end of March 2017 had grown to K4.3 billion ($US1.36 billion).

Moreover, the LTF remains safe and well protected from the tentacles of the octopus.

One-third of these dividends (about K1.8 billion) were used for development programs in PNG and especially Western Province.

In total Western Province received more than K4.7 billion in direct benefits from OTML and PNGSDP: K2.0 billion in royalties, CMCA and other payments, K1.7 billion in dividends from OTML, K400 million for Kiunga-Tabubil road maintenance and more than K600 million in development projects from PNGSDP.

In October 2013, shortly after the expropriation of PNGSDP’s shares in OTML, Sir Mekere warned that OTML faced the same fate as the Tolukuma gold mine under state ownership:

State ownership “would spell disaster for Ok Tedi. Tolukuma has been ruined since it was turned into a State-Owned Enterprise, and instead of an asset it has become a huge liability. Ok Tedi will suffer the same fate. It will die a long and painful death. There will be risks to jobs and wages. There will be a lower standard of operations, including in workplace health and safety. The quality of environmental management will fall. Transparency and accountability will be compromised, especially in the area of contracts.”

Sir Mekere said his predictions had come true. “Mr O’Neill has killed Western Province’s Golden Goose.”

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TOO LITTLE LAND, TOO MUCH CONFLICT

Mining communities continue to disagree over the use of sparse land


Mining activity, for years now, has been an issue of serious environmental dispute to the communities it affects – particularly in developing countries. Once land is used for mining activity, it becomes unusable for many other large industries in resource rich developing countries, such as farming and forestry. Particularly Impacting communities in developing countries, largely due to a lack of governmental regulation and structure in the face of such projects. Although conflict resolution strategies have been attempted to address this long standing issue, it seems as though, community consultation; coordination of governments; compensation packages and working partnerships between large and small scale miners, is what’s required, but hardly done successfully. 

Shelina Assomull | PNG Blogs | June 2, 2017

Despite the gloom and doom, there is a lot to be said about mining creating economic growth within communities. In Canada, mining accounts for approximately 15% of national exports and 4-5% GDP, with 340,000 Canadians gained high paying employment due to the works. Similarly, is the case in Zambia, with 20% accounting for GDP, 90% of export earnings, and 15% of the country’s workforce in mining.

With figures like these it is hard to see what is so troublesome about land use for mining activity, however, the issue lies in the way that the implementation of large scale mining projects often causes an unwilling relocation or resettlement of the present communities. This can impair the freedom of movement they are accustomed to, and consequently force them to alter things that are customary to their cultures and traditions. As well as this it can cause environmental damage to their homeland, in the form of removing large tracks of forest, and contamination, chemical spillage collapses of tailing dams and heavy metals leaching. Alongside this is the further threat of foreign disease entering their communities, through foreign persons entering. Castro & Nielson have commented the situation can be, “severe and debilitating, resulting in violence, resource degradation, the undermining of livelihoods and the uprooting of communities.”

Alongside the conflicting wishes of the people and the projects, are the projects and other industries. Land is scarce, and whilst miners are fighting for it, farmers and ranchers want a piece of the pie too. This is highly fuelled by these operations continual conduct outside of the law, making it harder to assess and regulate. As well as this are the clashes between small scale and large scale miners themselves as both parties tend to fight for land in the regions, fuelling conflicts between communities at all levels in the region. Small scale miners are unwilling to let go of the land due to unwillingness to relocate as well as strong cultural ties to the areas, rooted in their ancestry. Although licensing systems have been implemented for small scale miners, it is not organised enough and often results in a ‘double booking’ of land for small scale miners on large scale mining projects’ land. This has resulted in a multitude of violent clashes between the two parties, only serving to destroy the land further. This is exemplified in the case of Ghana where disputes have caused productive land to disappear, with 1.05% of cropland and 1.26% of forest cover lost to desertification, industrialization and urbanisation, every year.

A recurrent theme though out the issue of land use in mining communities is the social implications versus the financial gains. A clear example of this, is the negative cultural impact that new projects can have on aboriginal and indigenous communities, and the monetary compensation they may be offered to subdue this. Land being using for mining in indigenous areas, impairs self-determination to the land, their right to peacefully maintain their culture (the land being a historical part of this), as well as threats to their traditional knowledge of the area. This is often tackled monetarily, by offering compensation. As in Goldfields’, Ghana’s Tarkwa mine where compensation for those affected included housing, improved sanitation facilities, compensation for crops, efficient storm water drainage and an allowance of US$1000. However, sometimes this economic boost does not rectify the cultural losses these people experience.

BHP’s activity in Ok Tadi Mine in Papua New Guinea is an example that encompasses many of the problems discussed. Although outputs from the mine account for at least 16% of annual export earnings and 10% of national GDP, it has also destroyed 1000km2 of virgin natural rainforest as well as water pollution due to chemical residue decreasing fish populations. This highly affected the Wopkaimin communities in the region, and left many of them displaced. Although the community chose to surrender small areas of land for money, much lobbying had to be done to ensure they received adequate treatment in this situation. BHP settled in a US$6.6 million compensation fee, however a package of US$56 million was initially promised. Promises being unfulfilled are the key reason for unresolved land use mining conflicts.

The only resolution to this highly neglected issue is to ensure that residents in the communities are kept informed of mining on goings through visits to mines, surveys, partnerships in industries, liaising with the community and provided public communities, so that there is a stronger interaction between the community, and the company. Finally, compensation needs to go beyond monetary measures, because it cannot make up for cultural losses, this can be done by providing natural resources to replace those lost, improving communities’ skills and employment prospects and encouraging local hire to ensure economic prosperity centres around the community the land mine affects. This will require increased communication, consultation and cooperation, on behalf of the government, the companies and the communities.

However, for as long as these issues remain in developing countries, the desperation to enjoy potential economic contributions from these mining projects, will always force these communities to have to consider a loss of their culture and land for a gain in their wallets.

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Filed under Environmental impact, Human rights, Papua New Guinea