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Date Posted: 19:02:26 03/12/00 Sun
Author: Anonymous
Subject: Shut down Ok Tedi - Australian Financial Review article by Rowan Callick

Shut Ok Tedi Immediately, World Bank Report Says
By Rowan Callick

The World Bank says BHP's giant Ok Tedi copper mine in Papua New Guinea should, on environmental grounds, be closed immediately.
In a report eagerly awaited by both BHP and the PNG Government, the bank urges the Government to consult the Ok Tedi community and to draft a closure plan for the mine "without delay".
The World Bank says that even if the mine is not closed immediately, a shutdown plan to mitigate Ok Tedi's ecological and economic impacts must be drawn up urgently.
The bank which is spearheading international attempts to retrieve PNG from economic and social collapse is concerned that both the Government and BHP have failed to act quickly enough to tackle the issues at Ok Tedi.
But a decision on Ok Tedi's future still appears to be months away.
Despite the mine's environmental damage, the PNG Government is reluctant to close it because of its budgetary dependence on the revenue.
About 10 per cent of PNG's GDP is produced by Ok Tedi, which is also the sole significant industrial employer in the Western Province.
In a document obtained by The Australian Financial Review from PNG sources, the World Bank's country director, Mr Klaus Rohland, told Prime Minister Sir Mekere Morauta it was critical that the community in the mine area be consulted as soon as possible.
The bank was asked by the PNG Government six months ago to interpret a "voluminous" report drafted by Ok Tedi Mining Ltd on risk assessment.
While praising the report's technical quality, the bank said it was "not comprehensive enough for the Government to decide on next steps".
The World Bank said OTML's risk assessment "confirms what one would expect on a purely intuitive basis". It said: "From an environmental standpoint, the best option is to close the mine immediately. But from a social standpoint, this would result in a potentially disastrous situation because there is no preparedness for mine closure.
"Little or no attention in the risk assessment was given to the impact of the various options of mine closure to the economy of the country and province."
Instead, the bank said, the OTML assessment "reviews a limited set of technical options ... that minimises overall risk to shareholders".
It believes that even if the Government opts to keep the mine open, a closure program still needs to be agreed now.
And OTML is finalising a draft closure plan, which it said it would present to the PNG Government later this month.
BHP's managing director, Mr Paul Anderson, said last week the company, which owns 52 per cent of Ok Tedi, was "not comfortable" about continuing to operate the mine.
It sold its PNG oil and gas interests to PNG Government-controlled Orogen Minerals for $200 million in December.
The Government is the biggest minority shareholder in the mine, with 30 per cent. The other shareholder, with 18 per cent, is Canadian miner Inmet.
BHP's Mr Anderson said: "We've pretty well canvassed everybody who has an opinion on Ok Tedi, and that's a lot of people."
Of the World Bank study, which has yet to be released, he said he was "not confident there'll be any great new insight ... that will say what to do".
Mr Anderson said the consensus was that the mine should continue to operate.
Over 15 years operating at Ok Tedi, BHP has produced a return of just $84 million on an investment of $530 million (in dollars of the day).
The World Bank and International Monetary Fund, while applauding the shifts in direction in PNG since Sir Mekere became Prime Minister seven months ago, are waiting for further initiatives to be implemented before beginning to negotiate a requested structural adjustment program.
Mr Anderson said BHP would review with its partner, the Government, and other people "where we might go forward in the future under the assumption that the mine does continue to operate".
The bank - which has stressed it has had no previous role at Ok Tedi and is only canvassing options, not making recommendations - notes the BHP report "indicates OTML is expected to be very profitable from 2000-2010".

From the Australian Financial Review
7 March 2000

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