Emerging Pacific Leaders’ ’ Dialogue Conference, Dialogue Conference, Emerging Pacific Leaders Brisbane Brisbane 28 June 2006 28 June 2006 PNG Sustainable Development Program Ltd : : PNG Sustainable Development Program Ltd “Promoting development Promoting development “ that meets the needs of the present generation and establishes the he that meets the needs of the present generation and establishes t foundation for continuing progress for future generations of foundation for continuing progress for future generations of Papua New Guineans” ” Papua New Guineans Robert Igara Robert Igara Chief Executive Officer Chief Executive Officer PNG Sustainable Development Program Ltd PNG Sustainable Development Program Ltd 1 1
Introduction Introduction • • Thank you for invitation and for opportunity to speak about PNGSDP DP Thank you for invitation and for opportunity to speak about PNGS Ltd and share experience. Ltd and share experience. • • The basic challenge facing PNGSDP – – How to promote sustainable How to promote sustainable The basic challenge facing PNGSDP development in Western Province based on the revenue streams development in Western Province based on the revenue streams derived from the operations of the Ok Tedi Mine. derived from the operations of the Ok Tedi Mine. • • Some EPLD participants will visit several major resource project Some EPLD participants will visit several major resource project sites including the Ok Tedi mine, the Lihir Gold mine, and Oil sites including the Ok Tedi mine, the Lihir Gold mine, and Oil Search’ ’s Oil and Gas field operations in PNG next week. These visits s Oil and Gas field operations in PNG next week. These visits Search will highlight the challenges of developing and managing resource will highlight the challenges of developing and managing resourc e projects and of promoting sustainable development within local projects and of promoting sustainable development within local communities, provinces and in nation- -building. building. communities, provinces and in nation • • The strategy adopted by PNGSDP highlights application of a The strategy adopted by PNGSDP highlights application of a business/capitalist model, raises questions about role of major business/capitalist model, raises questions about role of major resource enterprises in promoting development as well as questions resource enterprises in promoting development as well as questio ns about current international development aid delivery model. about current international development aid delivery model. 2 2
Ok Tedi Mine Lihir Gold Porgera Ramu Mine Gold Mine Nickel Mine Kainantu Gold Mine Oil & Gas Bougainville Fields Copper Mine* Tolokuma Gold Mine Misima Western Gold Mine* Province Port Moresby Major mining and petroleum project sites 3 3
Western Province Ok Tedi Mine � Largest province in land area. Land Area: 97,000 km 2, Landform: 0-3,000m, Fly River – 700 kms. � Population: 106,000 (2000 census), Population Density: 2 person per Sq Km. Kiunga Urban population – 35,000 � Per Capita Income: >70% less than US$ 20 p.a � Annual Rainfall: 1,500-8,000mm � Economy: copper, gold, timber, rubber, fish, and crocodile skin � Gross Forest Area: 7.8 mill. Ha with 4.9 m Ha production forest. � Borders Indonesia province of Papua and northern border of Australia. � Second largest beneficiary of national government resource transfers and very heavily dependent of Ok Tedi mine revenue � Very poor infrastructure, health and education services. Very weak provincial government. DARU � Immediate closure of mine would create a crisis in the province. Australia 4 4
Background Background • • In 1994 and 1995 legal action was taken against Ok Tedi Mining Ltd td In 1994 and 1995 legal action was taken against Ok Tedi Mining L and BHP in the Victorian Supreme Court and National Court of PNG and BHP in the Victorian Supreme Court and National Court of PNG seeking compensation for environmental damage. seeking compensation for environmental damage. • • In August 1999 OTML released a report acknowledging mining In August 1999 OTML released a report acknowledging mining activity had caused serious environmental damage to the Ok Tedi activity had caused serious environmental damage to the Ok Tedi and Fly River systems. and Fly River systems. • • In 1999 PM Morauta invited World Bank to provide independent In 1999 PM Morauta invited World Bank to provide independent advice. The WB stated: “ “From an environmental standpoint, the From an environmental standpoint, the advice. The WB stated: best option is to close the mine immediately. But from a social best option is to close the mine immediately. But from a social standpoint this would result in a potentially disastrous situation on standpoint this would result in a potentially disastrous situati because there was no preparedness for mine closure ” ”. . because there was no preparedness for mine closure • • BHPB decided to exit OTML. PNG Government, WP Government and BHPB decided to exit OTML. PNG Government, WP Government and Communities wanted mine to continue. Agreements signed in Communities wanted mine to continue. Agreements signed in December 2001 and came into effect early 2002 addressed BHPB’ December 2001 and came into effect early 2002 addressed BHPB ’s s exit, Ok Tedi Mine’ ’s continuing operation, provided for mine closure s continuing operation, provided for mine closure exit, Ok Tedi Mine from 2010, and created PNGSDP. from 2010, and created PNGSDP. • • Agreements required Community Consent under Community Mine Agreements required Community Consent under Community Mine Continuation Agreements (CMCAs). Continuation Agreements (CMCAs). • • BHPB “ “gifted gifted” ” its 52% interest to PNGSDP under certain conditions. its 52% interest to PNGSDP under certain conditions. BHPB 5 5
Ok Tedi Mining Ltd Ok Tedi Mining Ltd • • Now 82% owned by PNG interests with Inmet Mining Ltd of Canada Now 82% owned by PNG interests with Inmet Mining Ltd of Canada having 18% interest. State interest of 30% consists of: 15% having 18% interest. State interest of 30% consists of: 15% National Govt,10% Western Province (under control of National National Govt,10% Western Province (under control of National Govt), 2.5% Western Province Government, and 2.5% Mine Lease Govt), 2.5% Western Province Government, and 2.5% Mine Lease Landowners Landowners • • Contributes >10% of GDP and >18% of total PNG Exports Contributes >10% of GDP and >18% of total PNG Exports • • Total sales revenue from copper, gold and silver exports of US$ Total sales revenue from copper, gold and silver exports of US$ 1.077 billion in 2005 making it largest single contributor to PNG G 1.077 billion in 2005 making it largest single contributor to PN revenue. revenue. • • Production – Production – copper: 200,000 tonnes per annum; copper: 200,000 tonnes per annum; gold: 500,000 ounce per annum. gold: 500,000 ounce per annum. • • Comprehensive environment monitoring. New strategies to address Comprehensive environment monitoring. New strategies to address sedimentation and Acid Rock Drainage under consideration. sedimentation and Acid Rock Drainage under consideration. • • Ok Tedi Financial Assurance Fund for Mine rehabilitation and Ok Tedi Financial Assurance Fund for Mine rehabilitation and restoration liabilities at mine closure – – required to be US$ 100m. required to be US$ 100m. restoration liabilities at mine closure Balance of US$ 40 m as at 31 Dec05. Balance of US$ 40 m as at 31 Dec05. 6 6
Ok Tedi Mine… …2 2 Ok Tedi Mine • Economic benefits to PNG • Economic benefits to PNG – – about US$ 400 m about US$ 400 m consisting of - - Tax to Govt of $ 90.5 m, $ 11.8 m as Tax to Govt of $ 90.5 m, $ 11.8 m as consisting of payments to CMCAs and others, $ 246 m as dividends to payments to CMCAs and others, $ 246 m as dividends to PNG Shareholders (PNGSDP, PNG Govt, WP and PNG Shareholders (PNGSDP, PNG Govt, WP and Landowners), plus salaries and other goods & services. Landowners), plus salaries and other goods & services. 1,974 employees of which 1,856 (94%) are PNG 1,974 employees of which 1,856 (94%) are PNG Nationals. Nationals. • CMCA Payments • CMCA Payments - - From 2001 From 2001- -2005, total US$ 47 m 2005, total US$ 47 m paid to Community Trusts paid to Community Trusts • WP Government Revenue • WP Government Revenue - - Around 95% of revenue Around 95% of revenue for WP Government derived from OTML of about K 20 m for WP Government derived from OTML of about K 20 m per year since 2002 (excluding dividend income) per year since 2002 (excluding dividend income) • Mine life • Mine life - - now extended to 2012. Possible to 2016. now extended to 2012. Possible to 2016. Substantive extension would subject to addressing Substantive extension would subject to addressing environmental impact and stakeholders approval. environmental impact and stakeholders approval. 7 7
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