From OK Tedi’s lenses
THE OK Tedi gold and copper mine in Tabubil, Western, is one of Papua New Guinea’s largest mining operations. The National’s Business reporter DALE LUMA talked to the mine’s chief executive officer and managing director Peter Graham about the state of the mine and its outlook.
Q: Can you give an update on the mining sector and its progress throughout the year?
GRAHAM: The US-China trade war has had an impact on global economies. China consumes about 50 per cent of world copper production and economic growth in China has slowed to about six per cent. While in recent years the mid to long term outlook for copper was generally considered positive, the current market sentiment is less favourable. Copper price has declined during the year from about US$2.90 (K9.86) per barrel to around US$2.70 (K9) per a barrel. Gold has benefited from geopolitical uncertainty and the price has risen this year from around US$1300 (K4,421.8) per ounce to around US$1500 per ounce. Nickel price has also risen from a low of US$0.91 (K3.00) per barrel to a high of around US$8.45 (K28.7) per barrel. In PNG production from the larger mining operations (Lihir, Ramu Nickel, Porgera, Ok Tedi, and Hidden Valley) has generally been strong, without major disruptions. Porgera mining license expired in August and there is some uncertainty about the grant of a further license extension. Wafi-Golpu Project has been delayed by a legal challenge in Morobe and deferral of re-negotiation of a memorandum of understanding following the national government leadership change. Frieda River Project has also made application for a mining license. The Solwara 1 Subsea Mining Project, while still in the development phase, construction has failed to progress.
Q: How was Ok Tedi’s own progress throughout the year?
GRAHAM: It was strong and Ok Tedi expects to finish 2019 with production around 100,000 tonnes of copper and more than 300,000 ounces of gold.
Q: What were some of the challenges faced and how did the company address them moving forward?
GRAHAM: While Ok Tedi’s mining fleet of equipment is relatively new, much of the major equipment in the Processing Plant is original. Reliability issues impacted Mill throughput during the early part of 2019 but during the course of the year substantial progress has been made on upgrades in the plant. In addition, Ok Tedi is reliant on sufficient rain to allow movement of ships in and out of the Fly River and access was lost for several weeks early in the year, delaying delivery of supplies in and shipments of concentrate out.
Q: Were there any milestones reached by the mine throughout the year worth mentioning?
GRAHAM: The mine is performing strongly and recently achieved a record Total Material Moved of 9.8 million tonnes in a month. Ok Tedi is currently replacing the In Pit Crusher at a cost of some US$230 million (K782.3). This self-funded project, which currently employs more than 600 Papua New Guineans in construction, is progressing well towards completion in the second quarter of 2020.
Q: What was Ok Tedi’s production like this year compared to previous years?
GRAHAM: Production in 2018 was impacted by the earthquake in February which disrupted production for three weeks, and logistics (materials in and copper concentrate out) was impacted by two extended periods of dry weather totally about seven weeks. In 2018, 96,000 tonnes of copper and 280,000 ounces of gold were produced. Our 2019 forecast production is around 100,000 tonnes of copper and more than 300,000 ounces of gold.
Q:Can you elaborate on OTMLS Graduate Development Programme and Apprenticeship programme and the number of intakes trained over the years and what it plans to achieve in doing so?
GRAHAM: Ok Tedi runs a Graduate Development Scheme (GDS), an Apprentice Training Scheme and a Preferred Area Traineeship programme.
The GDS is a two – year programme during which graduates in technical and business disciplines are provided business training and structured work experiences and real-world projects to prepare them as professionals. Since 1982 some 600 graduates have completed this programme.
Our current intake level is about 12 graduates per year, with a target of 50 per cent females. The Apprenticeship Programme is a four year sandwich programme in a variety of trades.
Since 1982, 1,169 apprentices have achieved their trade certificate. The current intake is about 15 per annum, also with a target of 50 per cent females. The Preferred Area Traineeship programme offers an entry point for local people to acquire skills relevant to employment with Ok Tedi, such as heavy equipment operators, plant operators and Administrative Assistants. The programme has been in operation since 1998, and currently takes on about 15 trainees per year.
Q: How many employees does OTML currently have?
GRAHAM: The company has a workforce of some 1,700 employees, supplemented with up to 1,300 contractors.
Q: The lack of foreign exchange has been one of the major issues of 2019. Did that have an impact on OK Tedi and the industry in any way?
GRAHAM: Ok Tedi is one of the main contributors of US dollars into PNG’s economy. We receive payment in US dollars for our concentrate. We also pay dividends and taxes in US dollars.
Q: The Government says it will start concentrating on the agriculture sector in 2020. What is OTML’s view on that?
GRAHAM: PNG’s economy currently relies heavily on the resource industries. Agriculture has great potential with ready markets in Asia. Scale of farms, access to training and technical advice to select crops and build productivity, and access to infrastructure to get fresh products to markets are factors important for success. In Western Province, Ok Tedi Development Foundation with Innovative Agro Industries has developed an agriculture master plan which it is hoped will progress in 2020. A number of other provinces already have similar programmes underway.
Q: The Government is also trying to amend the Mining Act. What is your view on this move by the Government?
GRAHAM: Discussions have been underway between government and industry for many years without reaching alignment. Both government and the industry have expressed interest in contracting an independent expert for advice on different regulatory regimes to better inform debate. Ultimately PNG needs a Mining Act that finds the appropriate balance on sharing the benefits of mineral resource and that is internationally competitive. It needs to be understood that investors have options and if the legislation is too onerous, they will go elsewhere.
Q: PNG has dropped 12 places from 108 to 120 out of 190 countries in the ease of doing business, according to World Bank’s Doing Business 2020 study. What is your view from the mining sector and how does the country improve on this?
GRAHAM: Many factors influence the ease of doing business –a need for personal safety and security; government process and institutions which are stretched; ageing or absent infrastructure; complex landownership; corruption and many more reasons. It will take strong leadership, a clear vision, a realistic plan that is prioritised and resourced, and a determination to stay the course.
Q: What is the outlook like for the mine in 2020?
GRAHAM: Production in 2020 will be similar to 2019.