The ownership structure of the Ok Tedi mine ‘had stood the test of time’ and there was ‘no good reason to change it,’ according to Chairman of Papua New Guinea Sustainable Development Program Limited (PNGSDP), Sir Mekere Morauta.

PNGSDP Chairman, Sir Mekere Morauta

In an eight-page ‘report’ issued late last week in defence of PNGSDP, Morauta claimed his organisation was a ‘model owner’ of the mine:

‘The Ok Tedi mine has been managed well in the past 11 years with PNGSDP, on behalf of the people of Western Province, as the major shareholder. There has been no incremental environmental damage under PNGSDP majority ownership. PNGSDP has also been successful as a mini sovereign wealth fund and as a development agency. These are demonstrable facts.’

The report was released in response to recent statements by PNG’s Prime Minister Peter O’Neill, who has stated his Government will legislate to sever the connection between PNGSDP and OK Tedi Mining Limited (OTML), operator of PNG’s largest mine. (PNGSDP is currently the 63.4% majority owner of OTML, with the State of PNG owning the remaining share.)

Some of Sir Mekere’s points in brief

• There were sound reasons for the original deal (struck when Morauta was Prime Minister) with BHP (now BHP Billiton), which saw the Australian mining company depart PNG and hand over its 52% share of the Ok Tedi mine, following massive environmental damage: ‘Closing the mine would have had truly disastrous consequences for the country and the people of Western Province.’

The Ok Tedi mine. Credit: PNGSDP

• The original deal was driven by the then-Government, not BHP: ‘The decision to proceed was wholly in the hands of the Government and was not influenced by any outside party, including BHP Billiton.’
• The existence of PNGSDP, which became the holding company for BHP’s share in Ok Tedi, is an inextricable part of the legislation enacted to cement the arrangement: ‘The creation of PNGSDP is at the heart of the Ninth Supplemental Agreement Act’s intention that the OTML [Ok Tedi Mining Limited] dividends be used wisely, independently, transparently and accountably.’
• The trust structure of PNGSDP is an appropriate structure for controlling the Ok Tedi asset: ‘for example, it is the structure within which the Red Cross operates in Australia.’
• Given the indemnity granted to BHP after the environmental damage was also extended to the State of PNG, the original agreement was in the State’s best interests too: ‘It is not true to say that an indemnity has been granted only to BHP Billiton and that the shares and other assets are mortgaged only in favor of BHP Billiton.’
• Morauta also categorically denied BHP still had any influence over the management of PNGSDP or the Ok Tedi mine, as Prime Minister O’Neill has asserted: ‘BHP Billiton has never, ever had a majority on the PNGSDP board … BHP Billiton has no involvement whatsoever in PNGSDP or OTML. Its sole relationship with PNGSDP has been to nominate three directors to the board – a practice now ended – and a report it receives once a year along with the State of PNG. Nor does it have any beneficial or financial or operational or managerial interest whatsoever in either the mine or PNGSDP. BHP Billiton had no involvement in the original decision to keep the Ok Tedi mine operating, and it will not have any say in the decision on the current Mine Life Extension application.’
• The  planned extension of the Ok Tedi mine will deliver US$4.3 billion in benefits.

Morauta’s statement follows a meeting of PNGSDP’s board that took place last week in Singapore, where the not-for-profit company is registered.

It is not yet clear how the separation of PNGSDP from its major asset might be achieved through legislation.