The life of the key Ok Tedi mine is to be extended for another 11 years, but with falling ore prices, lower head grades and production issues, its miner faces critical challenges ahead. In this exclusive interview with Business Advantage PNG, Musje Werror, the man chosen to lead Ok Tedi Mining, outlines his strategy.

Ok Tedi Mining’s Musje Werror

Business Advantage PNG (BAPNG): How has the last year been for Ok Tedi Mining?

Musje Werror (MW): It has been a tough year. We have experienced similar production issues to those that we had in 2013 such as the flooding of the mine pit caused by record rainfall events preventing access to our main ore body, and issues with our aging plant and concentrator infrastructure resulting in unplanned downtime. These issues along with falling metal prices and lower head grades have contributed to below-budget performance, particularly in the second half of the year.

BAPNG: Parliament passed legislation on Wednesday, 26 November, extending the life of the Mine by 11 years until 2025, what are the plans for the coming years?

MW: We have been preparing for the mine life continuation since 2009 when we commenced the consultation process with the mine associated communities in the Western Province. During the consultation, we informed the communities that the mine will be smaller, generating less revenue and profits and because of this, the company will be implementing a number of initiatives to ensure the business remains viable.

‘We are also preparing for the future beyond 2025 and will continue to fund our exploration programmes on our near-mine exploration leases.’

Some of the initiatives include reviewing our workforce plan, introducing new rosters, implementing a new business operating system—SAP, significantly reducing our costs, and reviewing how we train and develop our people, to name a few.

Over the coming years, we will continue to review and validate the changes that have been implemented to ensure that we fully realise the benefits and savings from these initiatives.

We are also preparing for the future beyond 2025 and will continue to fund our exploration programmes on our near-mine exploration leases.

BAPNG: How much of the mine life extension is going to be drawn from the existing resources you currently have in pit, and how important is it to actually find new deposits?

MW:  The current life of mine plan is based on the current ore body. The next four-to-five years are going to be very lean times for the company and therefore we are conducting enhanced drilling programmes within the current operating mine lease, in addition to accelerated exploration programmes at our near-mine exploration leases, to provide additional ore.

BAPNG: It’s a very rich deposit the Ok Tedi Mine’s been sitting on for quite some time. What are your hopes for finding more resources?

MW: There is huge potential for this mine to continue well beyond 2025 given the high mineral prospects in the area. However, this is dependent on us finding acceptable waste solutions.

BAPNG: Western Province relies heavily on the mine for its economic wellbeing. There are some exciting developments in gas occurring, which might mean that Ok Tedi doesn’t have to bear the heavy load quite so much. How do you help the communities around the mine get used to less income?

MW: There are a number of benefits that the communities have received from the mine since production commenced in 1984 and over the last 34 years we have continued to work our communities to ensure that they put the benefits they receive from the mine to good use.

‘With the tough times ahead and our strong focus on containing our costs, it is going to affect our contractors and suppliers’

It is an on-going challenge since there is still a high dependency on the mine but the last 5 years, I would say, has been the most productive with the excellent work being done by the Ok Tedi Development Foundation (OTDF) to introduce initiatives to encourage our communities to become self-sufficient. More needs to be done, but we are certainly on the right track.

BAPNG: Regarding your exploration programme specifically, where are you looking at the moment, and will it be in partnership, or will it be as a sole developer of those exploration tenements?

MW: We are actively drilling a number of exploration leases owned 100% by OTML around our current Special Mining Lease and will undertake prefeasibility studies to determine if they are economically viable before we advance to the next stage.

BAPNG: What are going to be the commercial opportunities for contractors or for companies looking to supply goods and services to the mine? Is that going to dry up, or will there still be opportunities?

MW: The mine needs to keep operating and there will still be opportunities; however with the tough times ahead and our strong focus on containing our costs, it is going to affect our contractors and suppliers—we expect them to reduce their prices and rates if they want to retain their business with Ok Tedi.

BAPNG: What copper price do you need to have in the market place for Ok Tedi to make money as a mine?

MW: Our profitability depends on our copper and gold production. With all things being equal, at current metal prices, we need to produce 94,000 tonnes of copper per year and 8,890 kg of gold to break even.

BAPNG: The other major event that’s happened in the last year is that the mine is now nationally-owned. Putting aside the controversy of that, how has that changed the way the mine is run or the goals set for the mine, and how is that going to affect your job into the future?

MW: It hasn’t affected operations. As stated earlier, our performance has been affected by production issues, declining metal prices and lower head grades.

We now have a full board of directors in place who are focused on ensuring the company continues to operate efficiently and continues to generate benefits for the people of PNG, the Western Province and in particular the mine associated communities.

BAPNG: Finally, Musje: your appointment. You’re a Papua New Guinean about to start running a PNG-owned mine. This is a first in Ok Tedi’s history. How significant do you feel this is?

MW:  I think it’s very significant, in the sense that Ok Tedi has been the leader in a number of leading edge initiatives and my appointment is one such example. It paves the way for other PNG resource companies to follow the same path in the near future.

My appointment however would not have been possible without the support and the encouragement of Nigel Parker [outgoing CEO], who is passionate about OTML and its future, has a heart for Papua New Guinea, and who believes in Papua New Guineans determining their own destiny.