a new dawn€¦ · restructuring of its workforce and change in company ownership to the state as...
TRANSCRIPT
OK TEDI MINING LIMITED ANNUAL REVIEW 2013
A NEW DAWN SECURING OUR FUTURE
REGIONAL MAPLEGENDCMCA TRUST AREAS Mine Area Nupmo Tutuwe Wai-Tri and Alice River Middle Fry Suki Fly Gogo Dudi - South Bank Manawete - North Bank Kiwaba
LLG BOUNDARY AND LAND FEATURES LLG Boundary River Proposed Road Provincial Road Main Highway (Tabubil to Mill) Major OTML Environmental
Monitoring Stations Mine Project Site Sub-District
PORT MORESBY
TABUBIL
KIUNGA
OK TEDI MINING LIMITED ANNUAL REVIEW 2013
Highlights 2
Company Profile 4
Vision and Mission 6
Managing Director/Chief Executive Officer’s Report 8
Chairman’s Report 12
Governance 16
Performance for 2013 and Targets for 2014 22
Business 26
Materiality 28
Mine Continuation Studies 30
Geology 32
Future Improvement Projects 42
People 44
Occupational Health, Safety and Wellness 50
Environment 56
Social Responsibility 68
Finance 86
Financial Statements 90
Audited Financial Statements 94
Global Reporting Initiative 125
Abbreviations 130
Contact 132
TO LEARN MORE ABOUT OTML AND THIS ANNUAL REVIEW,
GO TO: WWW.OKTEDI.COM OR CONTACT:
SECURING OUR FUTURE 1
OUR COMMUNITY
OUR COMPANY
PGK 181 M (USD 17m) after tax profit. No dividend declared in 2013.
47% DECREASE in the Total Recordable Injury Frequency Rate compared to 2012.
24% INCREASE in material mined from 50.6Mt in 2012 to 62.8Mt in 2013.
68% INCREASE in expenditure on training to PGK 23.3 million (USD 10.3 million) compared to 2012.
OK TEDI MINING LIMITED BECAME A
STATE OWNED ENTERPRISE.
4.4 COPPERGOLDSILVER
13.628.3
MILLIONTONNES
MILLIONOUNCES
MILLIONOUNCES
PGK 2,670 M (USD 1,176m) gross revenue.
394,622 TONNES COPPER CONCENTRATE SHIPPED.
SINCE THE START OF OPERATIONS IN 1981 OTML HAS PRODUCED
HIGHLIGHTS 2013
2 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OUR COMMUNITY
PAPUA NEW G
UIN
EA
OUR COMPANY
PGK 29.8 M
95%
7%
84%
PGK 1,540 M
PGK 890 M
>10,000 IMMUNISED
MEN, WOMEN AND CHILDREN
against infection in clinics provided by OTML and health partners.
(USD 664 million) total contribution to local community and PNG economy.
(USD 364 million) cumulative net royalties paid since 1982. (PGK 49 million (USD 22 million).
(USD 13.1 million) provided for community development through the Ok Tedi Development Foundation.
of the workforce are Papua New Guinean citizens.
of PNG’s GDP is attributable to OTML’s contribution.
of contracts for goods and services
used were issued to PNG businesses
representing PGK 735 MILLION (USD 324 million) total value.
SECURING OUR FUTURE 3
4 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OK TEDI MINING LIMITED (OTML OR THE COMPANY) IS A PRIVATELY HELD COMPANY THAT OPERATES AN OPEN-PIT COPPER, GOLD AND SILVER MINE LOCATED IN THE STAR MOUNTAINS OF THE WESTERN PROVINCE, PAPUA NEW GUINEA (PNG). THE COMPANY HOLDS A LARGE PORTFOLIO OF EXPLORATION LEASES IN THE VICINITY OF ITS MT FUBILAN MINING OPERATIONS AND IS ACTIVELY UNDERTAKING NEAR MINE EXPLORATION. THE COMPANY’S REGISTERED OFFICE IS LOCATED IN TABUBIL, WESTERN PROVINCE, PNG. IT ALSO HAS A REPRESENTATIVE OFFICE IN PORT MORESBY, PNG AND A MARKETING AND LOGISTICS FACILITY IN BRISBANE, AUSTRALIA.
The Company’s senior management team
is located at Tabubil. This team provides
day-to-day management of the Mt Fubilan
mining, processing and associated
infrastructure and support operations.
In September 2013, The State of Papua
New Guinea (the State) increased its direct
ownership in the Company to 87.8% and all
of the financial benefits from the mine are
directed (as dividend streams) to Western
Province, Community Mine Continuation
Agreement (CMCA) communities, Mine Area
Villages, the Fly River Provincial Government
(FRPG) and the State.
Mineral exploitation has environmental
and social impacts. As OTML has been
operating in the region for 32 years it is
acknowledged that its operations have
contributed to sediment aggradation in the
Ok Tedi and Fly River systems. This impact
has been well documented and is part of
ongoing monitoring, research and reporting
programmes mandated in OTML’s Licence
to Operate. In fact, the Mine’s continued
operation is dependent upon consent by
the CMCA communities and the State. In
summary, OTML’s success is measured
on its economic performance, human
resources development, social development
programmes, zero harm safety performance,
and the management and mitigation of its
environmental impacts.
This 2013 Annual Review presents the
integrated financial and non-financial
results of the OTML mining operation at
Mt Fubilan. This report, the Company’s first
in adopting the Global Reporting Initiative
(GRI) G4 reporting guidelines for disclosure
of non-financial material information, follows,
the Mining and Metals Sector Supplement
and specific standard disclosures based
on the material aspects of the Company.
Although the non-financial GRI reporting
has not been externally verified, the financial
statements were prepared in accordance with
the Papua New Guinea Companies Act of
1997 and comply with International Financial
Reporting Standards (IFRS) and other generally
accepted accounting practises in PNG.
The Company’s financial statements were
externally verified by PricewaterhouseCoopers
PNG, whose verification statements are
included in this Annual Review.
COMPANY PROFILE
SECURING OUR FUTURE 5
AMENDMENTS FROM 2012 ANNUAL REVIEWIn the 2012 Annual Review, some
data presented in the table:
“OTML’s CONTRIBUTIONS TO
LOCAL COMMUNITIES AND
THE PNG ECONOMY IN 2012”
(page 59) were incorrect. The
revised numbers are below:
• Total contribution in 2009
PGK 2,800.3 million (USD
1,022.4 million);
• Total contribution in 2010
PGK 3,800.1 million (USD
1,390.2 million);
• Goods purchased in PNG
in 2011 PGK 286.8 million
(USD 121.1 million);
• Total contribution in 2011
PGK 3,078.9 million
(USD 1,324.4 million);
• Goods purchased in PNG
in 2012 PGK 313.3 million
(USD 150.9 million); and
• Total contribution in 2012
PGK 2,251.2 million
(USD 1,086.5 million).
REPORT PARAMETERSThis Annual Review relates to the material
activities of the Ok Tedi Mining operations
comprising the mining and processing
of ore from the Mt Fubilan deposit, the
transportation of slurry concentrate to Kiunga
and shipment to the silo/transfer vessel in
Port Moresby. Included within the boundaries
of this report are the transportation of
sulphide concentrate slurry from the
processing plant to Bige for placement
in engineered containment cells and the
dredging of sands and sediment at Bige
from the Ok Tedi River. These materials are
contained in engineered landforms that are
currently in the process of being rehabilitated.
This report does not cover the concentrate
after transfer from the Company’s silo vessel
onto export vessels, nor does it cover the
activities of the Company’s representative
office in Port Moresby or its marketing and
logistics facility in Brisbane.
This Annual Review is for the 2013
calendar year. Where available, comparable
five-year data, covering the periods 2009 to
2013 is included. The Annual Review also
includes commentary and forward looking
information for 2014.
OTML remits an Annual Environmental
Report (AER) to the PNG Department of
Environment and Conservation (DEC) and the
Mineral Resources Authority (MRA). The AER
presents the results of compliance monitoring
and research from the period 1 July 2012 to
30 June 2013. To maintain consistency with
data presented to the State in the AER and in
this Annual Review, environmental monitoring
data reported covers the one-year period
ending 30 June 2013.
OTML’s performance data is presented in the
metric system. Unless otherwise stated, all
monetary amounts are in PGK (Papua New
Guinea Kina) and USD (United States Dollar).
Mr Teatutai Sione, Senior Geologist field mapping mineralisation in the Mt Fubilan pit.
6 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
THE COMPANY’S VISION IS TO OPERATE THE BUSINESS IN A SAFE AND SUSTAINABLE MANNER WHILST MAXIMISING THE BENEFITS TO THE STAKEHOLDERS AND SHAREHOLDERS. DURING 2013, OTML WENT THROUGH SIGNIFICANT CHANGE TO PREPARE FOR FUTURE OPERATIONS, WITH RESTRUCTURING OF ITS WORKFORCE AND CHANGE IN COMPANY OWNERSHIP TO THE STATE AS THE MAJOR SHAREHOLDER. BY APPLYING THE COMPANY CORE VALUES AND PRINCIPLES, OTML WORKED THROUGH THESE CHALLENGES AND POSITIONED THE COMPANY FOR THE FUTURE.
In 2012, the Company submitted to the
State an application to continue operations
until 2025 rather than closing in 2015. After
2016 production is planned to reduce from
23Mtpa to 15Mtpa in order to achieve
an acceptable environmental outcome.
Associated with this lower processing
production, mining and removal of waste
rock will be increased, averaging 50Mtpa,
which will increase costs. In order to
maintain profitability under these conditions,
base costs need to decrease by 30%.
In 2013, work commenced on reducing
these costs, through restructuring,
reviewing of all contracts and contractors
and adopting the productivity initiatives
recommended in the mine continuation
studies. Looking to the future, OTML will be
a leaner business. The Company will need
to adopt modern technology and systems
through a replacement programme to
improve productivity.
Planning for the future has included the
management team redefining what the new
business should strive to be through a series
of workshops. Output from the workshops
has defined a new Vision and Mission for
OTML and also five strategic goals to meet
the Vision and Mission objectives.
The new OTML Vision is:
“ WE ARE A SUSTAINABLE, EFFICIENT, AND WELL REGARDED OPERATING COMPANY THAT DELIVERS VALUE TO ALL OUR STAKEHOLDERS”.
The new Mission is:
“ WE MINE GOLD, SILVER, AND COPPER FROM PNG RESERVES”.
The five major strategic goals to deliver
against the Vision are:
ZERO HARM;
ZERO WASTE;
ONE BUSINESS;
FOCUS ON CORE OPERATIONAL ACTIVITIES; AND
BE A PNG MODEL MINING AND EXPLORATION COMPANY (MIMEX).
Against each strategic goal, the business has
mapped the people and business processes
that must be implemented to achieve each
goal. This important planning will enable
the Company to focus on core business,
productivity, and costs.
To support the business processes, OTML
will invest in new integrated enterprise
business software from SAP. Current software
applications are at the end of their useable
life, with limited external support and
generally operating independently. SAP will
provide a seamless integrated solution that
will cover all of the major business processes
that OTML will require into the future. The
philosophy is to change OTML business
processes to fit the SAP proven operating
environment, ensuring a fast transition to the
new system. First phase implementation is
due for completion by Q1-2015.
VISION AND MISSION
MISSION
VISION
WE MINE AND EXTRACT GOLD, SILVER AND COPPER FROM PNG RESERVES
WE ARE A SUSTAINABLE, EFFICIENT AND WELL REGARDED OPERATING COMPANY THAT DELIVERS VALUE TO ALL OUR STAKEHOLDERS
ZERO HARM
ZERO WASTE
ONE BUSINESS
FOCUS ON CORE OPERATIONAL ACTIVITIES
PNG MODEL MINING AND EXPLORATION COMPANY
Embedded in everything we do and how we think
Efficient and transparent operations, accuracy in meeting specifications, conformance
No ‘work-arounds’, own the outcome, ‘engineering to purpose’
Integrated thinking, planning, communication and management end-to-end, Keep it Simple, no silos, ‘do your own job’
Sustainable use of SAP and key systems
Outsource non-core but report and have governance on selected business critical data, seed future service providers
Best Practice Reporting
Mining and exploration in a box, take systems to new businesses, business flexibility, operator of choice
SECURING OUR FUTURE 7
8 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML’S PURPOSE IS TO FULLY EXPLORE THE MINERAL RESOURCE POTENTIAL OF MT FUBILAN AND NEARBY EXPLORATION TARGETS; TO MANAGE ITS BUSINESS, COMMUNITY AND ENVIRONMENTAL RESPONSIBILITIES AND TO BE THE BEST EMPLOYER IN PNG BY ENHANCING THE SKILLS AND DEVELOPMENT OF ITS EMPLOYEE’S CAREERS WHILST PROVIDING HIGH QUALITY WORKING CONDITIONS, FACILITIES AND SERVICES TO ITS STAKEHOLDERS.
In this Annual Review transparent and
thorough information about the safety,
economic, environmental and social
performance of the Company is presented.
It has been a challenging year, with confronting
operational issues, shareholder re-alignment
and world market dynamics that have
negatively impacted financial performance.
The health, safety and wellness of the
workforce, their families, CMCA communities
and the general community at large, have
remained core to the business. Strong
health, safety and wellness policies and
procedures implemented across the
operations with daily safety talks and on-
going training programmes, have contributed
to improved outcomes toward the Company’s
commitment to achieve Zero Harm.
This commitment is communicated to
all operational stakeholders, through the
following documents:
• OTML’s Health & Safety Policy;
• the Leaders’ Vision Statement; and
• the Employee and Contractors’
Vision Statement.
These documents articulate the organisation’s
commitment to legislative compliance and the
pursuit of continuous improvement in injury
prevention, a healthy work environment and
employee wellness.
In 2013 the Company achieved a Total
Recordable Injury Frequency Rate (TRIFR)
of 1.49, which is a 47% improvement
on the 2012 performance. This result
is commendable given the variety and
complexity of the associated risks in 2013.
OTML maintains its position as a premier
safety leader, not only in PNG, but also
within the global mining industry.
2013 was a year of operational challenges
through a combination of environmental and
aging plant and equipment factors. In May,
a failure of the SAG Mill No. 2 shell occurred
after 30 years of continuous operation.
During the months of June and July the
mine pit was flooded following a series
of extreme rain events. The in-pit primary
crusher failed and required a major rebuild
during November and power services were
also impacted by the failure of aging power
generating and distribution infrastructure.
The Company’s logistical operations were
also impacted by landslides, which blocked
main arterial roads, caused bridge instability
and produced variability in the navigable
water levels of the Fly River.
Financial performance was impacted by
volatility in world metals prices, instability in
major international economies, production
issues, and variability in exchange rates.
Notwithstanding these issues, OTML
remained profitable and generated positive
operating cash flows. Specifically, sales
revenue amounted to PGK 2,670 million
(USD 1,176 million), and while no dividends
were declared, total taxes paid to the PNG
Government were in the order of PGK 261.5
million (USD 114.6 million).
MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER’S REPORT
Copper concentrate sales were 394,622
tonnes (t), which was 14% lower than 2012.
Metal contained in concentrates totalled
100,212t copper, 352,050 ounces (oz) of
gold and 929,380oz of silver. Despite the
challenges the Company reported a net
profit after tax of PGK 180.7 million
(USD 16.8 million), which was down 80%
on the result reported in 2012. OTML’s cash
operating costs in 2013 were PGK 1,526
million (USD 772 million) an increase of 4%
or PGK 58 million (USD 25.4) over 2012. A
major contributor to increased cost included
the impact of a strong Australian Dollar to
the PNG Kina for most of the year. When
normalised to take such external factors into
account costs decreased by PGK 15 million
(USD 7 million).
World market dynamics have not only
impacted OTML but also global mining
operations in general. Although the year
ending 2013 did not present the same level
of impact experienced in 2012, it reinforced
the need for sustainable cost reduction
initiatives. A significant challenge to emerge
was that costs remained high despite
fluctuating metal prices that seemingly had
no traditional empirical basis. As could be
expected, this led to further uncertainty
around commodity pricing driving fear,
increasing perceived risk and making
forecasting and planning difficult. Given
the situation, OTML focussed on cash
management and sustainable cost reduction
initiatives which were also driven by the
move to continue mining to 2025 with a
reduced copper concentrate output.
SECURING OUR FUTURE 9
10 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
The Company’s balance sheet with no debt
or leasing liabilities was well positioned to
weather the downturn in the mining sector.
However, as a mature business there were
still opportunities to re-dress cost structures.
Two years ago, the decision was made to
purchase and run an OTML shipping fleet
and mining equipment that have and will
generate operational cost improvements that
will be fully realised in 2014 and beyond.
In 2013, major cost initiatives revolved
around optimising “Project Ok Tedi – 2025”
to ensure the Company’s cost structures
adapted to lower projected metal output
to both preserve operating margins and
provide resilience to further fluctuations
in metal prices. These initiatives included
a restructuring of the workforce and
engagement with contractor partners and
CMCA communities.
The global mining industry is very competitive
and in previous years there has been a skills
shortage due to growth in existing mines
and the development of new ventures.
Whilst 2013 saw a change to this situation
the business continued to lose some key
professional and trades employees to other
mining companies with operations in PNG,
Australia, Asia and Africa. The training of the
workforce driven by the Company’s social
responsibility and the necessity to attract
and retain a competent, highly skilled work
force remains a priority. Training programmes
are an ongoing strategic initiative to develop
the technical skills among all employees to
ensure that they are qualified to international
standards. In 2013, the business invested
PGK 23.3 million (USD 10.3 million) towards
employee training programmes.
One of OTML’s major continuing concerns is
the environmental effects of our operations.
The waste and tailings deposition into the
riverine system has had a major impact
on the Ok Tedi and Fly River systems and
associated eco-systems, which in turn has
impacted the livelihood of the communities
who live along the river corridor. The
Company continues to employ a team of
scientists to monitor and manage the effects
of our mining activity, past and present, over
the total mining footprint. During the year,
management approved a detailed review
of the possibility of constructing a tailings
storage facility and the OTML Board has
agreed that a formal study be undertaken to
assess the technical feasibility of the options
identified in the review. In addition, work in
relation to controlling waste rock discharges
to the river system has been advanced as
part of the mine continuation activities.
During 2013 saw the Company transition into
a fully owned State Owned Enterprise (SOE)
with the departure of the PNG Sustainable
Development Program Limited (PNGSDP) a
63.4% shareholder from the share register
via a government legislative process. The
resulting shareholder structure is now such
that the Company is a 100% SOE, with the
State directly holding 87.8% and the people
of the Western Province holding a beneficial
12.2% interest. The wealth generated by
the Company therefore benefits the people
of PNG, especially those from the Western
Province. The State has also commenced
discussions with the CMCA communities
for an equitable redistribution of the 100%
shareholding targeted to be effected by
30 June 2014.
SECURING OUR FUTURE 11
The Company recognises its social
responsibility as a core requirement to
success in contemporary mining practice.
It has also recognised that a marker of
success is how the benefits generated from
mining activities are used for the benefit of
the mine associated communities and the
rest of the Western Province, both directly
by the Company through the Ok Tedi
Development Foundation Limited (OTDF)
and the backflow of benefits from the State
through the transparent use of taxation and
other revenues.
In regards to the State benefits, the Company
recognises its importance to PNG and has
actively engaged with the State for many
years in delivering projects worth up to
PGK 287.7 million (USD 126.6 million) to
the Western Province and the Telefomin
District in the Sandaun Province, through the
government funded Tax Credit Scheme (TCS).
This contribution has largely gone unnoticed
and recognising this, the Company is for the
first time, reporting on its TCS activities.
OTML has continued to work with our
communities to effectively mobilise their
compensation benefits in the form of cash
payments and funding for sustainable
development projects. In 2013, the
communities received compensation
payments of PGK 72.8 million (USD 32.0
million) directly from OTML, with a further
PGK 54.8 million (USD 24.1 million) as CMCA
trust fund payments. Project delivery to
remote parts of the Western Province remains
an ongoing logistical challenge, however
during 2013, many Trust and TCS projects
were completed including the PGK 36 million
(USD 16 million) Balimo Hospital project.
The principal emerging enabler for mobilising
community funds is the OTDF, where
OTML currently retains 75% of the equity
and the PNGSDP, the remaining 25%. The
OTDF was established in 2001 as part of
the BHP Billiton Limited (BHP Billiton) exit,
to manage the trust funds set-up for the
156 CMCA villages under the CMCA. The
OTDF mobilised PGK680 million (USD 308
million) of community trust funds for projects
during 2013. Of particular importance was
the securing of a passenger vessel for the
Fly River, a cargo and a research vessel
and two Twin Otter aeroplanes that came
into operation in 2013. OTDF’s enabling
legislation requires OTML to relinquish its
OTDF shares before or at mine closure to
four reputable development organisations.
The role of women in the partnership
between the Company and the CMCA
communities has been a unique and
pioneering experience, particularly in
negotiating benefit streams for their
communities. This draws lessons for
development policy making, planning and
programme implementation that have
become an important component of the
Company’s method of operation. These
lessons are relevant, both for PNG and
for other countries attempting to make
policy decisions about translating mineral
wealth into inclusive and sustainable
development for local communities. Over
the past twelve years there have been
world-leading developments in the inter-
relationships between OTML, the male
dominated communities, and the women
leaders from those communities. This inter-
relationship was the subject of an intense
World Bank study held during the 2006/2007
CMCA review and the 2009/2012 mine
continuation consultations providing a better
understanding of the need to engage women
when negotiating benefits and what they
consider important for themselves and their
children. The World Bank report’s
overall conclusion stated that significant
strides have been made in securing
women’s access to voice, representation
and rights of participation.
Moving forward, faced with
the volatility of metal prices,
international economic instability,
and the challenge of operating
an ageing plant there will be
an ongoing need to focus
on maximising productivity,
minimising costs, realigning our
procurement strategy and strict
management of contracts against
terms and deliverables, to ensure
that OTML can continue to deliver
benefits for the North Fly region,
the Western Province, and PNG.
2014 will test and challenge
OTML’s management, employees,
business partners and our
communities through the transition
to a smaller operation. However
with the available resources and
a stable, creative and well trained
workforce, we stand ready to
deliver on our commitments.
NIGEL PARKERManaging Director and
Chief Executive Officer
12 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
CHAIRMAN’S REPORT Despite the huge challenges presented by
its remoteness and environmental legacies,
the Mine is well managed and has been a
very profitable operation since BHP Billiton’s
exit. Profitability is the foundation for its
significant contributions to the development
of the Western Province and PNG, as well as
for management of the mine’s environmental
legacy. Ok Tedi’s unique history and
ownership structure requires it to focus on its
wider Corporate Social Responsibility (CSR),
its contributions to development and the
usual issues a large mining company has to
manage in a broader society.
OTML became 100% PNG owned for the
benefit of PNG in 2011, from a share buyback
of the then Canadian shareholder Inmet
Mining Incorporated (18% equity holder).
The buyback increased proportionately the
ownership by PNGSDP, the State and the
beneficial interests of the Western Province.
During September 2013 the PNG Government
took the additional step of legislating
to directly assume the shareholding of
PNGSDP. Full equity of OTML as a SOE
now allows OTML to concentrate its efforts
unambiguously on increasing its contribution
to the development of the Country and
particularly the Western Province. The new
Company focus is to adopt a long-term
development strategy to keep the mine
operating for as long as possible to ensure
the communities of the Western Province
have a sustainable future.
2013 has presented further significant
challenges; not only with the change in
shareholding, the decrease in world metal
prices and operational issues, but also in
the transition towards mine continuation
as a smaller company. Most notable in the
transition was the notional closure of the
Mine (as BHP Billiton left it), on 31 December
2013 and the resulting re-alignment of the
workforce. This included the termination of
all employment contracts on that date and
the issue of new employment contracts with
revised terms and conditions to a reduced
workforce, commencing 1 January 2014.
To those employees who left the Company,
heartfelt thanks are extended to them for their
contributions. To the continuing employees,
the challenges are extended to them to take
the Company to new levels of success.
In 2011, the Company made a conscious
decision to commence reporting its annual
activities in line with the principles of
Corporate Social Responsibility (CSR), with
a plan to be auditable within the terms of
the International Finance Corporation (IFC)
guidelines for the 2014 year of review.
The Company elected to join the Extractive
Industries Transparency Initiative (EITI) as a
supporting company in 2012, however, with
the Company now being a SOE, the OTML
Board of Directors (the Board) has decided it
is inappropriate to be an independent mining
company member and the Company has not
renewed its Company membership.
The EITI mining industry representatives
made significant contributions to the
development of the EITI Standard, launched
at EITI’s Global Conference held in May
2013 in Sydney. The Company will continue
to support this Initiative as a demonstration
of its corporate leadership in disclosure
practices in a contemporary global context.
THE COMPANY WAS FORMED 32 YEARS AGO BY THREE FOREIGN MINING COMPANIES AS FOUNDATION SHAREHOLDERS, WITH THE AIM TO BUILD A COPPER AND GOLD MINE, ALBEIT IN ONE OF THE WORLD’S MOST CHALLENGING AND REMOTE LOCATIONS. IN FEBRUARY 2014 IT WILL BE 12 YEARS SINCE THE FORMER OPERATOR AND MAJORITY SHAREHOLDER, BHP BILLITON, VESTED ITS SHARES IN THE MINE TO THE SPECIAL PURPOSE COMPANY, PNGSDP. THE OVERRIDING CONDITION OF THAT VESTING WAS THAT ALL DIVIDENDS FROM THE BHP BILLITON VESTED EQUITY WERE TO BE APPLIED TO THE BENEFIT OF PNG. THE MAJORITY OF THE DIVIDENDS WERE TO BE PLACED INTO A LONG-TERM FUND TO BE ACCESSED FOLLOWING MINE CLOSURE TO SUPPORT THE CMCA COMMUNITIES, THE REST OF WESTERN PROVINCE AND PNG.
The format of this Annual Review continues
to be prepared in accordance with the
International Finance Corporation principles
and the Company has used the Global
Reporting Initiative G4 format that, in this form
is believed, to be a first for a PNG Company.
The operations of the Company and the
Mine, the management of its environmental
impact, its contributions to National,
Provincial and North Fly District development
and work that is underway to maintain the
Company’s contributions to development,
while responsibly managing its environmental
legacy, are reported on in this Annual Review.
The Company and the structure of the Board
changed with the departure of PNGSDP
from the share register in September 2013.
Following this change, the National Executive
Council made the following appointments:
• Mr. Dairi Vele was appointed as ex-officio
Director representing Treasury and as
interim Chairman;
• Mr. Nigel Parker was appointed as
ex-officio Managing Director (MD) and
Chief Executive Officer (CEO);
• Dr. Modowa Gumoi was appointed as
ex-officio Director representing the
Western Province; and
• Dr. Jakob Weiss was appointed
representing Financial and
Risk Management.
It is anticipated there will be three other
independent directors, one to be an
Independent Chairman and the remaining
two having operational experience specific
to mining and processing. These positions
will be progressively filled with appropriately
qualified professionals.
SECURING OUR FUTURE 13
14 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
The Safety and Technical Advisory Committee
(STAC) continues to report regularly to the
Board on issues with an array of technical
dimensions. Members of the Committee bring
a wide range of technical experience and
expertise. The MD and CEO chairs the STAC
with the committee consisting of Mr. Robert
Burns, Mr. Martin Whitham and Ms. Pamela
Ruppin. The STAC has contributed towards
presenting valuable perspectives to senior
management and Board deliberations.
The management team has continued to
perform well under the MD and CEO’s
leadership throughout 2013. Complex
issues related to shareholding, engineering,
environmental and community decisions on
the future of the mine have been managed
with skill and sensitivity while the Mine’s
profitability has remained positive throughout
a difficult year.
The Board continues to place high priority on
the implementation of safety standards and
despite an improved overall performance,
the Company remains focused on
strengthening its safety management and
associated programmes.
Ok Tedi retains an environmental legacy.
The Mine disposes of waste and tailings into
nearby creeks, eventually flowing into the
Ok Tedi and then the Fly River. The result is
a rising Fly River bed, causing flooding over
the river’s levee banks and dieback to trees
adjacent to parts of the river. Even when
mining ceases, the legacy of accumulated
material will continue to cause flooding and
dieback in the Middle Fly region for many
decades into the future. In addition, the iron
sulphide (pyrite) in the tailings introduces
a risk of acid formation that could, if not
managed, lead to the formation of increased
levels of chemical pollutants.
Over the past decade, important initiatives,
at a total cost in excess of PGK 3,000 million
(USD 1,000 million) have been taken to
mitigate these effects.
In 1998, under BHP Billiton management,
dredging from the Ok Tedi River at Bige
commenced. The dredging has removed a
high proportion of sand and sediment, which
has been stored in engineered stockpiles
adjacent to the river. This activity has been
effective in some areas by easing the risk of
flooding and forest dieback and stopping the
situation from getting worse in other areas.
However, these activities will not remove
the historical legacy of the flooding that will
gradually extend into the lower reaches of
the Middle Fly River system.
The second significant environmental issue
is the acid rock drainage risk, which has
been addressed in several ways. Acid-
neutralising limestone continues to be
added to the materials going into the river.
More importantly, a secondary flotation plant
PGK 1,220 million (USD 466 million) has
been installed to remove acid-forming pyrite
materials from the tailing, with the pyrite
material then being transported by pipeline
to Bige where it is stored in engineered
structures safely under water and a non-acid
forming sediment cover system.
The reduction in the quantity of pyrite
materials flowing down the river has reduced
the environmental risk related to previous
mining activities.
The environmental impacts of the Mine
are monitored by an exemplary team of
environmental scientists who provide
dedicated commitment to their professional
roles in the scientific and environmental
management work undertaken to secure the
objective of minimising damage from the
mining legacy whilst continuing mining and
processing operations.
The Company makes significant contributions
to services and infrastructure development in
areas affected by the Mine through its social
responsibility programme.
CHAIRMAN’S REPORT CONTINUED
SECURING OUR FUTURE 15
The Tabubil Hospital is the major referral
hospital in the North Fly District with the
majority of patients coming from the
surrounding communities. During the year, the
Company provided a number of community
and employee medical evacuations and
assisted with 41 patient referrals by the
Company’s charter flights for specialist
medical care in Port Moresby, Lae, Cairns,
Townsville, Singapore, and the Philippines.
The Company’s Public Health team has
contributed to a marked reduction in malaria
cases since 2006 and together with the
treatment of life-style related diseases, is now
a central focus of the Company’s health and
wellness programmes.
OTML introduced the North Fly Health Service
Development Programme (NFHSDP) in 2009
under the management of health consultants,
Abt JTA. The programme has improved levels
of immunisation, delivery of medical supplies
and skills of health workers. The Tabubil
Urban Clinic was opened in 2010 to provide
clinical services to North Fly communities
and the NFHSDP continues to assist the
Provincial Government to improve the Kiunga
District Hospital’s standards by upgrading the
facilities, engaging specialist Medical Officers
and providing essential equipment. A similar
five year project was approved for the Middle
and South Fly districts and the initial baseline
review of 65 villages is complete. This
initiative will see improved medical service
delivery to these communities.
An important step towards an independent
future for the town of Tabubil was taken
during 2011 with the execution of an
agreement with the Madang based,
Divine Word University (DWU), to assume
management control of the Tabubil Hospital
from 1 January 2014. In addition to managing
hospital services to a high standard, DWU
will be establishing a Rural Health Science
Programme in Tabubil, using the hospital
as a teaching facility. This will be only the
second programme for educating doctors
in PNG, but the first with a primary focus
on rural health. The necessary teaching
facilities and staff/student accommodation
are currently under construction within the
hospital precinct supported by the PNG
Government through the TCS.
OTML continues to support OTDF as a stand-
alone entity directed by the mine-associated
communities as a vehicle for delivering
projects and services funded by contributions
made to the CMCA Trusts by OTML and other
sources. It has become increasingly effective
in service delivery in recent times. Transport
infrastructure, income-generating village
activities, housing, and community services
were delivered in 2013.
The OTML Board of Directors tasked
management to define a mine continuation
opportunity that would yield economic
value for the shareholders, maintain and
extend the Company’s contribution to
local, provincial and national development,
while having a socially and environmentally
acceptable risk profile. Assessing the
options from the feasibility study has been
a major focus of the Board of Directors
through 2012 and 2013. A promising mine
continuation opportunity emerged that
identified a cutback on one wall of the
existing pit and it has been proposed that
waste generated by the opportunity can
be safely stored in a geotechnically stable
waste dump near the Mine. The Company is
engaged in additional scientific testing and
in the process facilitated an independent
expert review of the environmental impact
of the preferred mine continuation proposal
for the Department of Environment and
Conservation. The resulting information
will form the basis for a final government
approval expected in 2014.
Every year brings its challenges
at OTML and 2013 was no
exception. The Company has
managed the challenges of 2013
effectively and has emerged
from a year of transition as a
sustainable, productive and
focused company. The Board
thank the professional and
committed management team for
their continued high performance
under great pressure throughout
a difficult year. It looks forward
to working with the management
team through the year ahead,
in which large transitioning
programmes affecting the
future of the Company and its
stakeholders will come to fruition.
DAIRI VELEChairman
16 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML IS A LEGAL ENTITY INCORPORATED UNDER THE PNG COMPANIES ACT 1997 AND IS COMMITTED TO MAINTAINING ROBUST CORPORATE GOVERNANCE PRACTISES.
OK TEDI BOARD OF DIRECTORSOTML is a legal entity incorporated under the
PNG Companies Act 1997 and is committed
to maintaining robust corporate governance
practises. This includes monitoring and
adopting as appropriate, contemporary
international practices such as the guidance
principles of the Australian Stock Exchange
Corporate Governance Council as follows:
• majority of the Directors are independent;
• the Chairman is independent;
• the positions of Chairman and MD are
held by different persons;
• the Board has a number of standing
committees, for example, Nomination and
Remuneration Committee and a Safety
and Technical Advisory Committee; and
• Non-executive Directors do not receive
any short or long-term incentives, equity
based remuneration or retirement/
termination benefits.
The OTML Board holds the highest level of
responsibility for the Company. However, as
a SOE, certain other governance provisions
come into effect by application of provisions
of the Independent Public Business
Corporation Act (IPBC Act) and the powers
of the National Executive Council (NEC),
particularly in the appointment of members
of the Board. With the effected change in
ownership of OTML, whereby the State
now holds, directly to its own account, a
shareholding of 87.8%, there has been a
restructuring of the Board, Chairman and
Director’s positions in the latter part of 2013,
as sanctioned by the NEC and duly gazetted.
It is anticipated the profile of the Board will
be as follows:
• Chairman: to be independent;
• Director ex-officio representing the State
– Secretary of Treasury;
• Director ex-officio representing the
Fly River Provincial Government –
Provincial Administrator;
• Managing Director ex-officio being
the CEO;
• Director representing Audit and Risk:
to be independent;
• Director representing Mining: to be
independent; and
• Director representing Processing:
to be independent.
Three independent Board positions were
vacant as at 31 December 2013, with
discussions currently in progress for suitable
candidates. Finalisation of these positions
will bring the Board to full operating capacity
in 2014 with the Chairman and six Directors.
The Board regularly reviews its composition
to ensure Directors provide the relevant
expertise required by the Company. OTML
has recently updated the Board Charter and
an introduction package which is used to
familiarise new Directors with their expected
roles and responsibilities. In accordance
with good governance and the requirements
of the PNG Companies Act 1997, Directors
are required to declare any interests that
may result in a conflict of interest. Should a
conflict of interest arise at a Board meeting,
the relevant Director must be absent from the
discussion of interest and abstain from voting.
GOVERNANCE
SECURING OUR FUTURE 17
During 2013, the OTML Board met three
times (February, October and November) in
Tabubil and held three phone conference
calls. In addition there were three circulating
resolutions. As is contemporary corporate
practice, the Directors receive board
papers, standing committee papers and
meeting minutes, with sufficient time before
Board meetings to allow the information
to be properly reviewed and appropriate
interrogation of management to occur.
Profiles of each Director, the Charter of the
Board and standing committees are available
on the Company’s website: www.oktedi.com.
THE NOMINATION AND REMUNERATION COMMITTEEThe Nomination and Remuneration
Committee comprises two Non-Executive
Directors and is responsible for evaluating
and reviewing remuneration packages
and bonuses and nomination of Executive
and Non-Executive positions. OTML’s
remuneration for Directors and senior
executive personnel reflect the complexity
of the business and this structure is in
line with similar global mining operations.
OTML continues to attract, motivate and
retain highly experienced professionals as
Directors or senior executives.
Ok Tedi Board of Directors as at 31 December 2013
BOARD MEMBER POSITION STATUS DATE APPOINTED COMMITTEE FUNCTION
Mr Dairi Vele Chairman Ex-Officio 23 September 2013 Chairman - Remuneration
Mr Nigel Parker CEO and MD Ex-Officio 1 January 2011Chairman Safety and Technical
Dr Modowa Gumoi Director Ex-Officio 23 September 2013
Dr Jakob Weiss Director Independent 23 September 2013 Remuneration
Supporting the Board are two standing committees, the Nomination and Remuneration
Committee and the Safety and Technical Advisory Committee.
Ok Tedi Board of Directors, from left to right: Dr Jakob Weiss, Dr Modowa Gumoi, Mr Nigel Parker, Mr Dairi Vele.
THE SAFETY AND TECHNICAL ADVISORY COMMITTEEThe Safety and Technical Advisory
Committee comprises three Non-
Executive Independent members,
a Chairperson, and an Executive
Board member. This Committee
comprises members who have
extensive mining industry
experience across operations
in risk, safety and health. The
Committee is responsible for
reviewing major projects and
commitments and making
recommendations for OTML
management to submit to the
Board. The Committee receives
regular briefings on OTML major
risks, material operational issues
and safety initiatives that may have
strategic implications for OTML or
its shareholders. The Committee
played a major role in guiding
the Company through the mine
continuation feasibility project over
the past three years. The current
Safety and Technical Advisory
Committee members are:
• Mr Nigel Parker – Chairman;
• Mr Martin Whitham – Member;
• Mr Robert Burns – Member; and
• Ms Pamela Ruppin – Member.
OK TEDI MINING LIMITED(TOTAL SHARES = 192,700,000)
MROT NO.2 LTD 12.2%(23,500,000 SHARES)
Dividends by DirectionNEC decision 29/11/06
Memo - MD of MRA 2/08/07
6.1% Western Province
CMCA Region Peoples
Dividend Account (WPPDTA-CMCA)
6.1% Western Province Non CMCA
Region Peoples Dividends Trust Account
(WPPDTA-Non CMCA)
STATE OF PNG 87.8%(169,200,000 SHARES)
Dividends by DirectionMOA - 9/01/91 State of PNG
& Fly River Prov Government
3.05% MROT No.2 Ltd
(Fly River Provincial Government)
3.05% MRSM Ltd
(Mine Village Landowners)
18 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
COMPANY CHANGESThe Mine has been operating for 32 years and in late 2012, applied to the State for a mine
continuation from 2015 to 2025. As a SOE, 100% of the benefits from its operations are
distributed to the people of Western Province and to the State. OTML operates within its
own statutory framework and is governed by the Mining (Ok Tedi Agreement) Act 1976 (as
amended and supplemented from time to time). In September 2013, with the passing of the
Mining (Ok Tedi Tenth Supplemental Agreement) Act 2013 by Parliament, the PNGSDP’s
shares were cancelled and new shares issued to the State.
On 19 Sept 2013, PNGSDP shares were cancelled and new 122,200,000 shares were issued
to The State
GOVERNANCE CONTINUED
BOARD MAIN ISSUESDuring 2013, the Board and
Standing Committees addressed a
number of major issues including:
1. Occupational Health,
Safety and Wellness;
2. Tailing Storage Facility
pre-feasibility study;
3. Mine continuation capital
equipment expenditures;
4. Mine Information System
upgrade to SAP business
software;
5. Tolukuma Mine, peer review;
6. Staff redundancy
and restructuring;
7. Changes in Directors;
8. Changes in Nomination and
Remuneration Standing
Committee members; and
9. Composition of the Safety and
Technical Advisory Standing
Committee members.
SECURING OUR FUTURE 19
Australian Standard (AS) 8001
– 2008 Fraud and Corruption
Control and AS 8004 – 2003
Whistle Blower Protection provide
comprehensive and relevant
guidelines for the construction
of policy and procedures which
are assisting OTML in identifying
the risks described above and
achieving positive outcomes to
its commitment.
INTERNAL POLICY AND STANDARDSIn 2013, the Occupational Health & Safety
(OHS) and Environment Policies were
reviewed, updated and endorsed by the
executive leadership team. Other supporting
documents updated included the Ok Tedi
Charter, the Ok Tedi Standards of Business
Conduct and the Ok Tedi Management
Standards of Conduct.
CODE OF CONDUCTIn October 2013, OTML revised the Code
of Corporate Conduct and Business Ethics
(the Code). The Code provides guidance for
Directors, employees and stakeholders on
adhering to the highest standards of business
conduct and compliance with the law and
best practise. It recognises that as a leading
PNG company, OTML must apply the highest
ethical standards to its operations, the
business community at large, its employees
and their families. In so doing OTML will:
• ensure the Company maintains its
reputation for fair and responsible
dealings with all stakeholders;
• clearly define the high standards
of behaviour expected throughout
the organisation;
• transparently provide all employees with a
clear idea of what the Company goals are
and how it will achieve them;
• hold all persons covered by the Code to
full account for the performance of their
duties; and
• take all steps to ensure staff can
be proud of their association with
the Company.
The Code clearly provides information on
personal accountabilities and outlines the
process for dealing with employee concerns.
The Code covers use of company resources
and information, fraud, confidentiality and
proprietary information, conflict of interest,
privacy, diversity, health, safety and the
environment, human resources, financial
inducements, gifts and entertainment and
political contributions.
OTML is committed to preventing incidences
of corrupt and illegal practices and all
behaviour that is contrary to the Code, by
people at all levels within the organisation.
In order to fulfil this commitment the MD and
CEO has directed management to address
the following potential risks:
• identify all areas in the business most
prone to potential bribery and to
implement systems or plans to address
bribery risks;
• implement systematic procedures to
ensure business relationships are being
entered into only with reputable and
qualified third parties and to monitor
third-party relationships;
• establish education programmes to
ensure people are fully aware of bribery
risks, how to address them and how such
programmes are being tailored to the
specific risks faced and the obligations of
different employees;
• implement systematic procedures for
the human resources team and line
departments to take bribery risks into
account when hiring and monitoring
employees in high risk roles;
• establish communication channels for
employees or others to report concerns
and to formulate methods for protecting
whistle-blowers; and
• implement robust, fair and reasonable
disciplinary procedures to address
violations or suspected violations.
20 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
EXTERNAL STANDARDS, INITIATIVES AND GUIDELINESOTML measures its performance
against national and international
standards, initiatives and
guidelines. In 2013, independent
audits were completed against
OTML’s progress towards
ISO14001 and OHSAS 18001
systems development. OTML
uses the following standards and
guidelines in continual improvement
of its operating systems:
• ISO14001:2004, the
International Standard
for Environmental
Management Systems;
• OHSAS 18001:2007,
the International Safety
Management Standard;
• AS/NZS ISO31000:2009,
Risk Management, Principles
and Guidelines;
• The International Finance
Corporation Performance
Standards on Social and
Environmental Sustainability for
operating projects. www.ifc.org;
• The Global Reporting Initiative
sustainability reporting
framework and guidelines.
www.globalreporting.org;
• Papua New Guinea
Companies Act, 1997; and
• International Financial
Reporting Standards (IFRS).
The Company was in compliance
with its various licences and
permits during 2013 and no fines
or sanctions were issued to OTML
by the regulatory authorities.
BUSINESS COALITION AGAINST HIV/AIDS (BAHA)OTML is a proud foundation platinum
member of the PNG BAHA, which was setup
to spearhead the awareness of HIV/AIDS
in the business community. The Company
contributes PGK 100,000 (USD 43,900) per
annum and since 2007, total contributions
have exceeded PGK 1.3 million (USD 570,000).
OTML is proactively promoting the awareness
of HIV/AIDS through employee and
contractor Health and Safety and Wellness
programmes. OTML’s partners in the
Hospital and Rural Health programmes also
provide education and support throughout
the North Fly District and Western Province.
The programme meets one of the Millennium
Development Goals’ requirements.
THE EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI)In 2012, OTML became a supporter of the
EITI, which aims to strengthen governance
by improving private sector transparency
and accountability in the extractive sector.
In late 2013, OTML was invited to renew its
annual membership with EITI, however due
to changes in the Company’s structure with
87.8% being majority owned by the State,
the Board felt it was a potential conflict
of interest and withdrew its membership.
However, OTML will continue to publish its
payments to all stakeholders in line with EITI
and GRI reporting requirements, through the
Annual Review process.
UNITED NATIONS MILLENNIUM DEVELOPMENT GOALSThe PNG Government is a signatory to the
United Nations Millennium Development
Goals (MDGs). The MDGs range from halving
extreme poverty rates to halting the spread
of HIV/AIDS and providing universal primary
education by the target date of 2015, from a
blueprint agreed to by all member countries
and leading development institutions. The
MDGs have galvanised unprecedented
efforts to meet the needs of the world’s
poorest. The MDGs eight key goals are to:
1. Eradicate extreme poverty and hunger;
2. Achieve universal primary education;
3. Promote gender equality and
empowerment of women;
4. Reduce child mortality;
5. Improve maternal health;
6. Combat HIV/AIDS, malaria and
other diseases;
7. Ensure environmental sustainability; and
8. Promote global partnerships
for development.
Through private sector and public institution
partnerships, improvement against each goal
can be measured and reported. In the Western
Province, OTML is a significant contributor
to programmes that have made an impact
against each of the MDGs. Progress on the
MDGs is reported in this Annual Review.
PRECAUTIONARY PRINCIPLEOTML uses a risk-based approach to guide
the Company through its decision-making
processes. Enterprise Risk Management
is used when evaluating economic,
environmental, or social aspects of mining
projects and major changes to the business.
The potential impacts and proposed
management plans to mitigate any major
risk are presented to the OTML Board
for approval. The precautionary principle
GOVERNANCE CONTINUED
SECURING OUR FUTURE 21
is applied where there may be a lack of
evidence to assist in the development of the
management plans. For major expansions
such as the mine continuation project,
the Company has undertaken extensive
environmental studies and applied sound
risk based methodology using PNG and
international consultants and advisers.
OTML has also taken a precautionary
approach to future management of health
services in the region. As a non-core
business, but an essential community
service, OTML has outsourced the operation
of the Tabubil Hospital to health care
specialists, Diwai Pharmaceuticals Limited
(DPhL), a subsidiary of the Divine World
University. Likewise, the regional health care
programmes in the North, Middle, and South
Fly districts have been outsourced to Abt JTA
specialist health consultants.
REPORTINGThis Annual Review provides a
comprehensive overview of the Company’s
activities and financial outcomes. The
financial statutory accounts of the report
are audited by PricewaterhouseCoopers
PNG against the IFRS and other generally
accepted accounting practices in PNG.
This Annual Review has been developed
using the GRI G4 guidelines and includes
the Mining and Metals Supplement
requirements so that it follows GRI reporting
requirements. The specific Disclosure on
Management Approach (DMA) and indicator
summary is listed in the appendices of this
Review. Note, however, the Annual Review
has not been externally audited against the
GRI G4 requirements.
RISK MANAGEMENTThe Company is focused on identification
of major hazards and risks in the workplace
and any external sources that could impact
the business. OTML’s risk management
system is based on AS/NZS 31000:2009.
OTML continues to focus on integrating
risk management into each operating
department’s processes and projects. Each
department has a comprehensive risk register
and control action plan. Significant or material
business risks are regularly reviewed by the
Safety and Technical Advisory Committee,
and the top 10 risks are reviewed by the
Board. Major risk areas are addressed
by management through the annual
strategic and tactical planning process at a
departmental level. Each General Manager
has responsibility for departmental or project
risk registers and action plans.
In 2014 the process of consolidating
departmental risk registers into a single
system using the SAP Enterprise Software
risk module will commence.
AUDITINGInsurance AuditInternational Mining Industry Underwriters
(IMIU) conducted OTML’s operational
risk audit during February 2013. The
audit identified that OTML risk exposure
continued to be rated in the low range and is
considered to be better than the average for
the mining industry globally.
IMIU has determined a Risk Exposure rating
of 32 for OTML, which is better than the IMIU
global average of 49. Therefore OTML has
a better than average level of attractiveness
for insurers. The report recommended a
number of areas for improvement which were
completed in 2013.
FinancialThe financial statements
of the Company for the
year ending 31 December
2013 have been audited by
PricewaterhouseCoopers PNG
and the Independent Auditor’s
Report is included in this Annual
Review. The auditors found the
Company financial statements:
1. comply with International
Financial Reporting Standards
and other generally accepted
accounting practices in Papua
New Guinea; and
2. give a true and fair view of
the financial position of the
Company and the Group as at
31 December 2013 and their
financial performance and
cash flows for the period.
Health, Safety and EnvironmentIntegrated Environmental
Systems Pty Ltd externally
audited the Company’s
Occupational Health & Safety
and Environmental management
systems in June 2013. The audit
was undertaken against the
requirements of all elements
of the international OHSAS
18001:2007 Standard and
ISO14001:2004 Standard.
This audit was the third annual
Occupational Health and Safety
(OHS) and fourth Environmental
Management System (EMS)
annual audit. The findings
indicate an 8.0% improvement
in OHS, a 4.4% improvement in
EMS and a 16.5 % improvement
in geology and exploration in
Health, Safety and Environment
(HSE) management systems
compared to 2012.
22 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
CSR AREAS KEY FOCUS AREAS WHAT WE SAID WE WILL DO OUR PROGRESS IN 2013 OBJECTIVES FOR 2014
GOVERNANCE
Demonstrating strong and transparent Governance
Update Business Code of Conduct.
Revitalise Board and Board Committee Charters.
Completed in October.
Final Board Charter drafts to be approved.
Appoint remaining Board members, finalise Board committees and implement revised Board Charter.
Finalise the Mission, Values and the 2014 to 2018 strategic and implementation plan.
Implement auditing and continue seeking year-on-year improvements in performance and transparency reporting.
Auditing of financial, OHS, environment and insurance outcomes completed in 2013.
Complete external financial and insurance audits.
External audited GRI G4 Annual Review.
Continued implementation of risk assessments and audits. Move to align with ISO14001:2004; the International Standard for Environmental Management Systems, OHSAS 18001:2007; the International Safety Management Standard, ISO31000:2009; the International Risk Management Standard through development of an Enterprise Risk Management System.
Specific targets were established in 2011 for 2015, providing the Company with time to adjust and improve practices and behaviours. In 2013, a third external audit will be completed to review environmental and OHS systems.
OHS and EMS audits completed. Improvement of 8% in OHS, 4.4% EMS and 16.5% for geology and exploration HSE systems.
(Note OHS and EMS to move to SAP structure in 2014, which will assist with the integration and compliance with ISO).
Risk registers held at each department and reviewed quarterly and annually. SAP module will enable a true ERM system to be implemented in 2014
ISO14001 and OHSAS 180001 Audits.
Complete Safety, Health and Environmental Action Plan (SHEAP) activity implementation and external reviews.
Implement SAP risk module as company ERM tool.
Embed CSR into operating practises.
Integrate OTML CSR Principles into planning processes to further support safe work practices and healthy communities; continue managing environmental effects; continue contributing to sustainable social and economic development. Measure and report progress in OTML Annual Review
Yes to all the criteria, as OTML maintained social licence to operate. Progressed mine continuation with community consent. Best year ever OHS performance based on lag indicators. Ok Tedi Development Foundation (OTDF) project delivery.
Vision and Mission implementation planning as lead in to SAP implementation.
Continue to deliver social development programmes in region.
BUSINESS
Prudent management of business transition programme to mitigate the effects of a projected decline in tonnes mined and milled during transition to the mine continuation.
Complete business transition plan to carry the Company forward into 2014 in preparation for execution of the proposed mine continuation to 2025.
Planning sessions initiated for new Mission/Vision strategic planning.
Move to new Integrated Business operating system with SAP.
Meet or exceed 2014 budgeted production and cost metrics.
Complete mine continuation transition.
Implement SAP, as the standardised data management operating system by Q1 – 2015.
Commission the final haul truck and mining shovel fleet and assume 100% owner operator of pit operations by June 2014.
Renegotiate a revised Eleventh Supplementary Agreement with the State and other stakeholders and include mine continuation conditions and any further environmental monitoring requirements.
Complete the pre-feasibility studies on a potential second cutback on the East Wall of the open pit.
Complete pre-feasibility studies on Tailings Storage Facility options.
Positioning OTML to realise growth opportunities beyond the Mt. Fubilan Mine thereby generating continued value for OTML shareholders and CMCA communities.
In-pit and near-mine exploration and drilling programme to progress.
Delineate two new resources in the coming three calendar months.
Exploration at Mt Fubilan completed and commencement of mine continuation-2 (East wall and Gold Coast resource pre-feasibility studies).
Townsville deposit in-fill drilling success.
Drill 35,000m at Mt Fubilan Pit extension and nearby zones and convert 50% of Inferred Resources to Indicated or Measured status according to JORC Code guidelines.
Drill 7,500m at Townsville prospect and delineate and define a new Mineral Resource to Inferred and Indicated level according to JORC Code guidelines.
PERFORMANCE FOR 2013 AND TARGETS FOR 2014
SECURING OUR FUTURE 23
CSR AREAS KEY FOCUS AREAS WHAT WE SAID WE WILL DO OUR PROGRESS IN 2013 OBJECTIVES FOR 2014
GOVERNANCE
Demonstrating strong and transparent Governance
Update Business Code of Conduct.
Revitalise Board and Board Committee Charters.
Completed in October.
Final Board Charter drafts to be approved.
Appoint remaining Board members, finalise Board committees and implement revised Board Charter.
Finalise the Mission, Values and the 2014 to 2018 strategic and implementation plan.
Implement auditing and continue seeking year-on-year improvements in performance and transparency reporting.
Auditing of financial, OHS, environment and insurance outcomes completed in 2013.
Complete external financial and insurance audits.
External audited GRI G4 Annual Review.
Continued implementation of risk assessments and audits. Move to align with ISO14001:2004; the International Standard for Environmental Management Systems, OHSAS 18001:2007; the International Safety Management Standard, ISO31000:2009; the International Risk Management Standard through development of an Enterprise Risk Management System.
Specific targets were established in 2011 for 2015, providing the Company with time to adjust and improve practices and behaviours. In 2013, a third external audit will be completed to review environmental and OHS systems.
OHS and EMS audits completed. Improvement of 8% in OHS, 4.4% EMS and 16.5% for geology and exploration HSE systems.
(Note OHS and EMS to move to SAP structure in 2014, which will assist with the integration and compliance with ISO).
Risk registers held at each department and reviewed quarterly and annually. SAP module will enable a true ERM system to be implemented in 2014
ISO14001 and OHSAS 180001 Audits.
Complete Safety, Health and Environmental Action Plan (SHEAP) activity implementation and external reviews.
Implement SAP risk module as company ERM tool.
Embed CSR into operating practises.
Integrate OTML CSR Principles into planning processes to further support safe work practices and healthy communities; continue managing environmental effects; continue contributing to sustainable social and economic development. Measure and report progress in OTML Annual Review
Yes to all the criteria, as OTML maintained social licence to operate. Progressed mine continuation with community consent. Best year ever OHS performance based on lag indicators. Ok Tedi Development Foundation (OTDF) project delivery.
Vision and Mission implementation planning as lead in to SAP implementation.
Continue to deliver social development programmes in region.
BUSINESS
Prudent management of business transition programme to mitigate the effects of a projected decline in tonnes mined and milled during transition to the mine continuation.
Complete business transition plan to carry the Company forward into 2014 in preparation for execution of the proposed mine continuation to 2025.
Planning sessions initiated for new Mission/Vision strategic planning.
Move to new Integrated Business operating system with SAP.
Meet or exceed 2014 budgeted production and cost metrics.
Complete mine continuation transition.
Implement SAP, as the standardised data management operating system by Q1 – 2015.
Commission the final haul truck and mining shovel fleet and assume 100% owner operator of pit operations by June 2014.
Renegotiate a revised Eleventh Supplementary Agreement with the State and other stakeholders and include mine continuation conditions and any further environmental monitoring requirements.
Complete the pre-feasibility studies on a potential second cutback on the East Wall of the open pit.
Complete pre-feasibility studies on Tailings Storage Facility options.
Positioning OTML to realise growth opportunities beyond the Mt. Fubilan Mine thereby generating continued value for OTML shareholders and CMCA communities.
In-pit and near-mine exploration and drilling programme to progress.
Delineate two new resources in the coming three calendar months.
Exploration at Mt Fubilan completed and commencement of mine continuation-2 (East wall and Gold Coast resource pre-feasibility studies).
Townsville deposit in-fill drilling success.
Drill 35,000m at Mt Fubilan Pit extension and nearby zones and convert 50% of Inferred Resources to Indicated or Measured status according to JORC Code guidelines.
Drill 7,500m at Townsville prospect and delineate and define a new Mineral Resource to Inferred and Indicated level according to JORC Code guidelines.
24 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
CSR AREAS KEY FOCUS AREAS WHAT WE SAID WE WILL DO OUR PROGRESS IN 2013 OBJECTIVES FOR 2014
PEOPLE
Conduct open, timely and transparent discussions with stakeholders.
Road test the OTML Grievance Mechanism and reorganise the Community Relations department such that systems and processes are aligned with best practices for stakeholder consultation, social management planning, and community development.
Implemented and migration of data underway. New grievances being put into the database.
Complete annual CMCA village consultation tours.
Continue to use the Grievance System, follow-up and resolve grievances in a timely manner.
Engage and develop OTML’s employees.
Review skill-sets required and possible roster changes to meet human resources needs for the mine’s continued operations.
Recruit and train Papua New Guineans. Support development of current employees to take on more responsibilities and ever-challenging roles.
Launch PNG nationwide and global recruitment campaign to fill specialised roles required for the mine’s continued operation.
Restructuring of OTML workforce. Release of 745 employees through voluntary redundancy.
Recruitment of new employees with required skills for continued mine operations commenced.
Specialised roles recruitment underway.
PNG and international recruitment programme to attract experienced PNG staff to OTML.
Implement a new roster and employment agreements for all employees and fill vacant positions with high quality candidates.
Identify training needs for employees in new positions with new position descriptions and develop training programmes to meet the “right person, right job” vision.
Support community development projects that foster economic empowerment and sustainability.
OTML will mature and implement a development strategy that transitions services currently provided by the Company to local agencies and service providers.
Engagement with multi-sectoral stakeholders to roll out health programmes similar to those undertaken by the NFHSDP, in the Middle and South Fly.
DWU engaged to run Tabubil hospital.
DWU draft MOU to operate International School.
Abt JTA to manage North/Middle/South FLY districts rural health programmes.
Complete the MOU with DWU for the Tabubil International School operational transfer to DWU.
Health – North Fly, Middle Fly and South Fly Regions with Abt JTA deployment.
Accelerate the Ok Tedi Development Foundation programme delivery.
Advance the public private partnership business model to divest OTML of town infrastructure to Government or private infrastructure providers as part of the Tabubil Futures programme.
OCCUPATIONAL HEALTH, SAFETY
& WELLNESS
Maintaining a safe workplace – Zero Harm is the goal
Implement a comprehensive OHS plan concentrating on training, supervision, behaviour and competencies.
Implement an occupational health programme.
Work on plan continued. Focus on “felt leadership” through the 2013 employee transitions.
Completed with a focus on dust, noise and, fatigue in 2013.
Lagging indicator performance outstanding:
TRIFR – 45% improvement
LTIFR – 69% improvement
SIFR- 45% improvement
Visible leadership programme rolled out including JSO, task observation and layered audits.
80% of the actions from investigations, audits and inspections are closed out by target date.
90% of workplace inspections and JSO’s completed as planned. Task observations and layered audits on high risk tasks and projects.
High and Significant risks reviewed by HSELT at least quarterly.
Complete 6 monthly contractor audits against contractor’s 12 top risks and their OHS systems.
Improve lag indicators by 10% compared to 2013 results.
10% reduction in light vehicle incidents compared to 2013.
Fatigue management programme implemented.
Align OHS practices and systems with OHSAS 18001:2007 by 2015.
OTML has set a site-wide improvement of 10% per annum, year-on-year to achieve compliance with OHSAS 18001:2007 by 2015.
8% improvement in the OHS system compared to 2012.
OHS information management system migrated across to phase 1 SAP project in 2014. Progress development of OHS systems towards meeting certification requirements of OHSAS 18001 by 2016.
Findings from annual external OHSAS 18001 audits to be compiled into SHEAP and 80% of actions closed out in 2014.
Continue to hold quarterly assessment meetings to adjust plans and ensure safeguards are in place and 100% effective.
Completed. OHS management review meetings conducted quarterly.
ENVIRONMENT
Align Environmental Management Systems with ISO14001:2004 by 2015.
Continue to improve the SHEAP audited score to reach the established target of 80%.
On track. Actions closed out 81% Progress development of environmental systems towards meeting certification requirements
of ISO 14001 by 2016.
Complete 80% of actions identified in SHEAP.
Continuously improve environmental performance at OTML.
Achieve compliance for all nine compliance monitoring stations. Continue to reduce waste and meet or exceed ANC/MPA target of 1.5:1 at Bige.
In compliance for 2013, average ANC/MPA ratio was 1.98:1.
Continue to remain in compliance with environmental conditions as per license conditions “Regime”.
ANC/MPA target of Bige cover material to exceed 1.5:1.
Commence waste rock management plan through development of stable waste dump.
PERFORMANCE FOR 2013 AND TARGETS FOR 2014 CONTINUED
SECURING OUR FUTURE 25
CSR AREAS KEY FOCUS AREAS WHAT WE SAID WE WILL DO OUR PROGRESS IN 2013 OBJECTIVES FOR 2014
PEOPLE
Conduct open, timely and transparent discussions with stakeholders.
Road test the OTML Grievance Mechanism and reorganise the Community Relations department such that systems and processes are aligned with best practices for stakeholder consultation, social management planning, and community development.
Implemented and migration of data underway. New grievances being put into the database.
Complete annual CMCA village consultation tours.
Continue to use the Grievance System, follow-up and resolve grievances in a timely manner.
Engage and develop OTML’s employees.
Review skill-sets required and possible roster changes to meet human resources needs for the mine’s continued operations.
Recruit and train Papua New Guineans. Support development of current employees to take on more responsibilities and ever-challenging roles.
Launch PNG nationwide and global recruitment campaign to fill specialised roles required for the mine’s continued operation.
Restructuring of OTML workforce. Release of 745 employees through voluntary redundancy.
Recruitment of new employees with required skills for continued mine operations commenced.
Specialised roles recruitment underway.
PNG and international recruitment programme to attract experienced PNG staff to OTML.
Implement a new roster and employment agreements for all employees and fill vacant positions with high quality candidates.
Identify training needs for employees in new positions with new position descriptions and develop training programmes to meet the “right person, right job” vision.
Support community development projects that foster economic empowerment and sustainability.
OTML will mature and implement a development strategy that transitions services currently provided by the Company to local agencies and service providers.
Engagement with multi-sectoral stakeholders to roll out health programmes similar to those undertaken by the NFHSDP, in the Middle and South Fly.
DWU engaged to run Tabubil hospital.
DWU draft MOU to operate International School.
Abt JTA to manage North/Middle/South FLY districts rural health programmes.
Complete the MOU with DWU for the Tabubil International School operational transfer to DWU.
Health – North Fly, Middle Fly and South Fly Regions with Abt JTA deployment.
Accelerate the Ok Tedi Development Foundation programme delivery.
Advance the public private partnership business model to divest OTML of town infrastructure to Government or private infrastructure providers as part of the Tabubil Futures programme.
OCCUPATIONAL HEALTH, SAFETY
& WELLNESS
Maintaining a safe workplace – Zero Harm is the goal
Implement a comprehensive OHS plan concentrating on training, supervision, behaviour and competencies.
Implement an occupational health programme.
Work on plan continued. Focus on “felt leadership” through the 2013 employee transitions.
Completed with a focus on dust, noise and, fatigue in 2013.
Lagging indicator performance outstanding:
TRIFR – 45% improvement
LTIFR – 69% improvement
SIFR- 45% improvement
Visible leadership programme rolled out including JSO, task observation and layered audits.
80% of the actions from investigations, audits and inspections are closed out by target date.
90% of workplace inspections and JSO’s completed as planned. Task observations and layered audits on high risk tasks and projects.
High and Significant risks reviewed by HSELT at least quarterly.
Complete 6 monthly contractor audits against contractor’s 12 top risks and their OHS systems.
Improve lag indicators by 10% compared to 2013 results.
10% reduction in light vehicle incidents compared to 2013.
Fatigue management programme implemented.
Align OHS practices and systems with OHSAS 18001:2007 by 2015.
OTML has set a site-wide improvement of 10% per annum, year-on-year to achieve compliance with OHSAS 18001:2007 by 2015.
8% improvement in the OHS system compared to 2012.
OHS information management system migrated across to phase 1 SAP project in 2014. Progress development of OHS systems towards meeting certification requirements of OHSAS 18001 by 2016.
Findings from annual external OHSAS 18001 audits to be compiled into SHEAP and 80% of actions closed out in 2014.
Continue to hold quarterly assessment meetings to adjust plans and ensure safeguards are in place and 100% effective.
Completed. OHS management review meetings conducted quarterly.
ENVIRONMENT
Align Environmental Management Systems with ISO14001:2004 by 2015.
Continue to improve the SHEAP audited score to reach the established target of 80%.
On track. Actions closed out 81% Progress development of environmental systems towards meeting certification requirements
of ISO 14001 by 2016.
Complete 80% of actions identified in SHEAP.
Continuously improve environmental performance at OTML.
Achieve compliance for all nine compliance monitoring stations. Continue to reduce waste and meet or exceed ANC/MPA target of 1.5:1 at Bige.
In compliance for 2013, average ANC/MPA ratio was 1.98:1.
Continue to remain in compliance with environmental conditions as per license conditions “Regime”.
ANC/MPA target of Bige cover material to exceed 1.5:1.
Commence waste rock management plan through development of stable waste dump.
26 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML OPERATES THE LONGEST RUNNING OPEN-PIT COPPER, GOLD AND SILVER MINE IN PNG. THE OPERATIONS INCLUDE THE MT FUBILAN DEPOSIT AND PROCESSING PLANT, THE BIGE RIVERINE DREDGING AND PYRITE CONCENTRATE STORAGE FACILITY (125 KILOMETRES FROM THE MINE ALONG THE PYRITE CONCENTRATE (PCON) PIPELINE), RIVER PORT, CONCENTRATE DRYING AND STORAGE FACILITIES AT KIUNGA (156 KILOMETRES BY ROAD SOUTH OF THE MINE) AND THE TABUBIL TOWNSHIP, APPROXIMATELY 20 KILOMETRES SOUTHEAST OF THE MINE. THE CONCENTRATE SILO AND TRANSFER VESSEL (MV KUMUL ARROW) IS LOCATED IN PORT MORESBY HARBOUR AND REPRESENTATIVE CORPORATE AND LOGISTIC OFFICES ARE ALSO LOCATED IN PORT MORESBY AND BRISBANE RESPECTIVELY.
In 2013, the OTML workforce comprised
2,310 employees and 5,147 contractors.
Over 95% of OTML’s employees are PNG
nationals. In 2013, the Company mined
62.8Mt of ore and waste rock. Over 19.6Mt
of ore was processed resulting in 415,713t of
concentrate containing 105,523t of copper,
364,782oz of gold and 960,502oz of silver.
The total sales of copper, gold and silver
concentrate totalled PGK 2.7 billion (USD
1.2 billion) and the Company contributed
PGK 1.9 billion (USD 0.9 billion) to the PNG
economy. The concentrate is shipped to
customers in Germany, India, Philippines,
Japan and South Korea where it is refined
into copper, gold and silver.
MININGMining of the Mt Fubilan deposit is carried
out with the majority of the ore sourced from
the base of a large conical shaped pit. The
deeper ore reserves are contained within
areas of significant sulphide mineralisation.
Other smaller sections containing ore
reserves are located within the pit resource
boundary and the ore is blended upon
delivery to the primary crusher. In 2013,
the mining focus was on developing the
West Wall pit cutback to expose future
ore reserves. This upper pit wall material
contains large quantities of limestone and
oxidised rock collectively classified as waste
material, which will be removed before
exposing the ore. In 2013, mine production
was 65.7Mt of combined ore and waste
material, with a total of 69.1Mt moved, which
included material rehandling. The overall strip
ratio of waste to ore was approximately 2:4.
BUSINESS
SECURING OUR FUTURE 27
in PNG. Supplies are generally
shipped to Kiunga and then
transported by road to the
mine or Tabubil, with some
items transported by air. Major
changes to the supply chain
included the following:
• a 75mm grinding steel ball
contract was awarded to
Vega, replacing Maggoteaux;
• the large tyre contract
for the Caterpillar 793F
trucks was awarded to
Coba tyres in China;
• two new Series 400 Twin Otter
aeroplanes were leased, the
existing two Bombardier Dash
8 aircraft were upgraded and
an additional Dash 8 was
added to the fleet;
• two new replacement ships
were added to the marine fleet
(“MV Fly Alliance” and “MV
Kumul Arrow”); and
• seven new Volvo Prime
Mover trucks were added
to the transport fleet as
part of a planned
replacement programme.
The Contracts and Procurement
department completes commercial
reference checks for potential
suppliers for financial solvency,
reliability of supply, and health
and safety performance. The
department is yet to implement
environmental and human rights
checks against suppliers.
Mining uses conventional drill and blast
techniques with excavator and shovels
loading a mixed fleet of Caterpillar haul
trucks. In 2013, mining fleet replacement
commenced and by mid-2014, it is expected
that 36 Caterpillar 793F trucks will be
operational. Six new Caterpillar 6030 loading
units were also commissioned, replacing
older contractor operated O&K RH200
shovels and excavators. The Mine uses the
Modular PTX Dispatch fleet management
system to optimise fleet movements.
PROCESSINGThe ore from the mine is crushed in a
primary crusher at a nominal 8,000tph
and conveyed to a primary ore stockpile.
The primary ore is ground in two SAG mill
circuits each with two associated five-metre
diameter ball mills. The final product is less
than 180 micron. The finely ground material
is treated in two mineral floatation circuits
to extract the copper, gold and silver as
a copper concentrate. The concentrate is
piped as slurry to Kiunga where it is dried
and the final product shipped to export
markets. The residue material following
metal product removal is retreated in a
separate floatation plant to extract pyrite
(iron disulphide). The pyrite slurry is piped
to Bige for burial in subaqueous storage
facilities and the residual sand is disposed
of as tailings to the river system.
SUPPLY CHAINOTML has an established, reliable supply
chain for the purchase of goods and services.
The Contracts and Procurement department
manages contracts for the supply of major
consumables like fuel, tyres, grinding media,
explosives, mining spare parts and short
term contracts or purchase orders for smaller
orders. In 2013, a total of 25,370 contracts
and purchase orders were raised with 1,128
suppliers or contractors. Wherever possible,
goods are sourced from within Western
Province or PNG. In 2013 goods worth PGK
294 million (USD 130 million) were purchased
Ok Tedi processing plant grinding circuit.
28 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML HAS BEEN GUIDED BY THE GRI G4 PROCESS FOR DETERMINING MATERIAL ISSUES WHICH ARE THOSE ASPECTS OF THE BUSINESS OR ITS OPERATING ENVIRONMENT THAT CAN SIGNIFICANTLY IMPACT THE COMPANY AND ITS STAKEHOLDERS IN A POSITIVE OR NEGATIVE WAY AND THUS AFFECT THE BUSINESS PERFORMANCE, REPUTATION AND INFLUENCE STAKEHOLDER DECISIONS. MATERIAL ASPECTS OFTEN HAVE A FINANCIAL IMPACT OR CREATE VALUE IN THE LONG OR SHORT TERM. THE COMPANY’S MATERIALITY PROCESS IS INCLUDED IN A SET OF STEPS AS OUTLINED.
Identification of key stakeholders was
completed through a review of who
is impacted or could be impacted by
the Company’s activities. OTML has a
comprehensive stakeholder database
that includes all levels of government,
CMCA communities, various institutions
representing broader societal interests,
supply and customer partners, employees,
community groups and individuals.
Consultation with key stakeholders is an
ongoing process. Each stakeholder was
ranked depending on the type of impact
they have on OTML using: responsibility,
influence, proximity, dependency and
representation as criteria.
Key issues of significance were collated
from discussions with key stakeholders,
the community grievance database,
OTML risk register and strategic business
plans. The extensive Mine continuation
community consultation process with the
156 CMCA villages assisted in confirming
key community issues. The process was
monitored by independent observers and the
World Bank to ensure Free Prior Informed
Consent (FPIC) processes were followed.
The issues were analysed to identify the
extent of the impact or opportunity within the
OTML boundary of influence or if the impact
extended beyond OTML’s boundary.
To identify the Company’s material issues,
the information was ranked on its level of
importance and influence on stakeholders
and impact on OTML’s ability to meet its
goals. Issues considered to be material were
ranked both high to external stakeholders and
to OTML. These issues were then discussed
in an internal forum to fully understand their
impacts and boundaries. This process has
enabled OTML to collate a list of primary
material issues and secondary issues.
This Annual Review focuses on the material
issues and others that are of importance
to OTML and its stakeholders. The GRI
Mining and Metals Supplement also require
reporting against issues of importance to
the mining industry and OTML has reported
against these. More information on the
progress towards dealing with these issues
is presented in the following report sections.
OTML’s primary material issues for 2013 and
beyond are in the materiality table.
MATERIALITY
SECURING OUR FUTURE 29
MATERIAL ISSUE DESCRIPTIONKEY STAKEHOLDERS
REPORT SECTION
GRI ASPECT
Delivery of the Mine continuation project as planned
The long-term profitability of the Company impacts on all stakeholders. With the consent of the community to continue mining to 2025, focus on controlling costs through the initial high cost years of overburden stripping and meeting or exceeding the mine plan will be critical to meet forecast revenue streams for direct and indirect economic returns.
OTML employees, government, CMCA communities, suppliers
Business, Financial
Economic Performance
Management of mining waste rock and tailings
Previous mine waste has impacted the riverine environment causing bed aggradation, elevated sediment loads, decreased water quality, overbank flooding in the Middle Fly River region and reduced aquatic biomass. Continued mining is dependent on OTML maintaining the existing suite of waste mitigation programmes implemented over the last 16 years.
Downstream CMCA communities, government, OTML
EnvironmentalEffluents and waste, water, biodiversity
Energy efficiency
Due to the remoteness, all goods and product has to be shipped and road transported to the mine and town. Use of diesel as a primary energy source is a significant operating cost. Mine continuation identified energy efficiency opportunities.
OTML, NGO’sEconomic; Environmental
Energy, emissions
Improving community health service delivery
High quality community health care is sought after by the community. The focus has been on delivery of improved regional infrastructure and recent partnerships are now targeting rural health delivery in the CMCA regions.
Community, employees and families, government
Social responsibility
Local communities
Improving education services
The community see education as way for future generations to engage in broader development of PNG and provide for their elders. There is a need for improved universal primary and secondary education facilities and resourcing.
Community, employees and families, government
Social responsibility
Local communities
Community development project delivery and funding
The community have seen OTML, PNGSDP, OTDF and the TCS as the financial providers for improved community development projects. Project planning, governance and timely project delivery is a material issue raised by all CMCA’s.
Community, employees and families, governments, OTML
Social responsibility
Local communities
Women and children’s’ participation
Recognition of women’s’ involvement in CMCA village committees has assisted in balancing gender representation. The commitment to create the Women and Children’s’ Trust Fund has generated opportunities for women to participate and manage start-up projects. This initiative has broad community support and interest from the World Bank.
Community, institutions, government
Social responsibility
Local communities
Transparent consultation and information sharing with communities
The community value the high level of consultation where OTML complete bi-annual patrols to all 156 villages. The process enables honest two-way exchange of information where communities can raise issues of concern and OTML can respond or facilitate action to address the issues. The dialogue around mine continuation commenced in June 2009 and finished after the fourth meeting in 2013, with the result that nine CMCA regions consented to the mine continuing operations.
Communities, institutions, government
Social responsibility
Local communities
Zero harm to employees and contractors
Achieving zero injury to employees and contractors is the key focus for OTML management. Whilst there was improvement in 2013 through the reduction of incidents by applying OHS systems, other contributing casual factors like fatigue have been identified.
Employees, MRA, OTML
OHS&WOccupational Health and Safety
Restructuring and new employment contractual arrangements
During 2013 major restructuring of the OTML workforce was completed with long-term employee retirements, voluntary redundancies, and a payout of all accrued benefits and selected re-employment under new workplace contracts, including rosters, point of hire and other benefits. The restructuring was required for mining to continue with reduced costs as production will decrease up to 30%.
Employees and community, OTML
PeopleEmployment, Labour
30 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
THE ORIGINAL OK TEDI MINE PLAN WAS TO COMPLETE MINING IN 2014 AND CLOSE OPERATIONS DURING 2015 LEAVING A REMNANT MINERAL RESOURCE OF 704MT GRADING AT 0.55% CU AND 0.65G/T AU. CONSULTATION WITH VARIOUS STAKEHOLDERS INCLUDING THE STATE, THE FLY RIVER PROVINCE GOVERNMENT AND THE CMCA COMMUNITIES, REQUESTED THAT OTML SHOULD UNDERTAKE AN INVESTIGATION INTO VARIOUS OPTIONS TO CONTINUE THE MINE’S OPERATING LIFE.
Studies commenced in 2009 and culminated
in November 2012 with a mine continuation
feasibility study submitted to the State for
approval. The study findings showed that
mining could continue to 2025 whilst still
meeting the economic criteria set by the
Board with an acceptable environmental
impact comparable with closure of the
current operation in 2015, validated using a
series of complex models to predict future
environmental impacts.
Mine continuation will see OTML processing
18Mt of ore averaging 0.63% Cu and 0.77g/t
Au to produce 1Mt Cu and 3.3Moz Au in
concentrate over a 10 year period from 2015.
The ore will be predominately sourced from
the resources along the western wall of the
Mt Fubilan pit. The project requires waste
rock stripping of approximately 50Mtpa
between the years 2014 to 2021.
In order to achieve an acceptable
environmental risk profile based on existing
mitigation processes the ore milling rate will
continue at 23Mtpa till 2016 and then reduce
to an average throughput of 15Mtpa.
Existing infrastructure, services and logistics
(road, river and air) will be adequate for
continued mining with ongoing maintenance
and sustaining capital expenditure.
During the mine continuation studies
extensive community consultation was
conducted over a three year period. The 156
CMCA villages gave consent to the mine
continuing operations which will result in
new compensation packages from OTML
and the State.
Approval for mine continuation is dependent
upon the State’s review of the feasibility study,
the environmental study, independent review
findings and community consent. The final
step in 2014 will require the PNG Parliament
to pass the enabling legislation (Mining (Ok
Tedi Eleventh Supplemental Agreement) Act
2014)) that will give the force of law to the
CMCA Extension Agreements.
BENEFITS OF CONTINUED MINING OTML is currently valued in terms of Net
Present Value (NPV) at a 7.5% discount rate.
The incremental NPV is PGK 1,012 million
(USD 425 million) with an Internal Rate of
Return (IRR) of 13.2%, based on after tax
incremental cash flows.
Whilst continuing mining operations requires
significant capital expenditure of PGK 1,938
million (USD 814 million) in 2013 to 2015
for new mining equipment the social and
economic benefits to PNG are significant
compared to the closure option 2015.
Summary of continuing total social and
economic benefits to PNG with continuing
mining operations
STAKEHOLDER PGK MILLION USD MILLION
PNG State* 5,795 2,434
PNG Communities 2,302 967
Fly River Provincial Government
690 290
Total 8,787 3,691
* Total taxes (Dividends, Company and Payroll) payable to PNG includes PGK 5,438 million (USD 2,284 million), which is an incremental PGK 2,229 million (USD 936 million) compared to a 2015 closure.
MINE CONTINUATION STUDIES
Recovered Cu in Conc. (ktpa)Recovered Au in Conc. (kozpa)
0
100
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
200
300
400
500
Mine Cont Waste (Mtpa) Total Truck Fleet (No)
Current Pit (Mtpa) Mine Cont. Ore (Mtpa)
Annual Mining Rates & Truck Fleet Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Current Pit Mtpa 27 24 8.3 8.1 4.9 6.2 2.7 Mine Cont Ore Mtpa 0.8 1.8 12 18 14 9 12 13 12 13 14 14 15
Mine Cont Waste Mtpa 50 52 52 46 45 45 57 56 50 18 8 4.9 1.2Total Truck Fleet No 17 30 40 40 40 37 40 37 33 13 9 9 9
0
10
20
30
40
50
60
70
80
Material Mined (Mtpa)
0
5
10
15
20
25
30
35
40
Cat 793F Truck Fleet
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
CASE STUDY
SECURING OUR FUTURE 31
OWNER OPERATOR MININGOTML mining operations currently use the services of Starwest Constructions
Limited (Starwest) to carry out excavation activities, whilst the haul trucks are
owned and operated by OTML. Mine continuation studies conducted by OTML
identified an opportunity for OTML to take on all mining excavation and haul
services as an owner operator. The studies identified potential NPV savings
of PGK 98.9 million (USD 44.5 million). Additional benefits include OTML
maintaining control of core operations, common Occupational Health, Safety
and Wellness (OHS&W) systems across mining operations, improved operational
controls and equipment productivity reducing the cost per unit tonne mined.
Following the Board’s approval, OTML has commenced the process of moving
to an owner/operator model and has purchased 36 Caterpillar 793F haul trucks
and six excavator/shovels to replace an aging fleet. This new equipment will
increase availability and productivity whilst reducing maintenance costs.
A six month transition period has been negotiated with Starwest till June 2014.
The transition will enable OTML to acquire support for maintenance and recruit
competent supervisors, trainers, equipment simulators and operators. It is expected
that a number of Starwest operators will transfer across as OTML employees.
Image: New Caterpillar 793F truck hauling ore from Mt Fubilan pit.
MINE CONTINUATION COPPER AND GOLD PRODUCTION
ANNUAL MINING RATES & TRUCK FLEET
H
P'nyang 2/ST1
#
EL 1595Bulago
500000 520000 540000 560000 580000 600000
9400
000
9400
000
9420
000
9420
000
9440
000
9440
000
9460
000
9460
000
9480
000
9480
000
OTML ExplorationNear Mine Tenements
Port Moresby
Locality Map: Papua New Guinea
F0 5 10 15 20
km
GCS_Australian_1966Datum: D_Australian_1966
Scale:
Petroleum Licence)È Oil and Gas Discovery(% Oil and Gas shows
Lead
Gas/Condensate Field
Petroleum Retention Licence
Licence Boundary
Key to Map Features:Prospects/Project SitesOTML TSF Sites
OTML Special Mining Licence
OTML Mining Leases/LMP'sOTML EL
Competitor LicencesHighlands Pacific Res. LtdLava Resources
Frieda Leases
OK TEDI MINING LIMITED
Ok Tedi Mining Near Mine Exploration Licenses
Owner/Title:
Drawn by:
Checked by:
Revision Date:
Map doc. name:
24 - April - 2014
D.Hastings
Nigel Andy
Near Mine Tenements & Prospects
D.Hastings - Geology Manager
Near Mine Projects_DH 20140409.mxd
revised by NDA
LMP-88
OK LAN
LMP-24
LMP-18
SPL (Portion 3)OK MENGA
P’NYANG
TELEFOMIN
FRIEDA COPPER PROJECT
Tabubil
Tifalmin
LMP-87
EL 2256
Lukwi
W E S T S E P I K P R O V I N C E
W E S T E R N P R O V I N C E
Mianmin
Dorongo
MINESML
EL 1677
EL2156
EL 2276
EL 2289
IND
ON
ESIA
PAP
UA
NEW
GU
INEA
LOCALITY MAP
Port Moresby
32 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
KEY TO MAP FEATURES
Prospects/Project Sites
OTML TSF Sites
OTML Special Mining Licence
OTML Mining Leases/LMP’s
OTML EL
COMPETITOR LICENCES
Highlands Pacific Res. Ltd
Lava Resources
Frieda Leases
PETROLEUM LICENCE
Oil and Gas Discovery
Oil and Gas shows
Lead
Gas/Condensate Field
Petroleum Retention Licence
Licence Boundary
IN 2013, OTML CONTINUED PURSUING ITS FOCUS ON INCREASING THE MINE’S POTENTIAL OPERATING LIFE BY INVESTING PGK 38 MILLION (USD 17 MILLION) IN EXPLORATION IN THE FORM OF MINERAL RESOURCE DEVELOPMENT DRILLING PROGRAMMES AND IDENTIFYING ADDITIONAL DRILLING TARGETS FROM WITHIN THE COMPANY’S SUITE OF “GREENFIELD” PROSPECTS ACROSS THE EXPLORATION LICENCES. OTML WILL CONTINUE WITH NEAR MINE EXPLORATION ACTIVITIES OVER THE NEXT FEW YEARS COMMENCING WITH THE MT FUBILAN DRILLING PROGRAMME, TO FURTHER DEFINE THE EXTENT OF MINERALISATION AT OK TEDI. THE OBJECTIVE IS TO INCREASE THE LIFE OF MINING AND PRODUCTION CAPACITY INTO THE FUTURE.
GEOLOGYOK TEDI EXPLORATION TENEMENTS
SECURING OUR FUTURE 33
In terms of regional exploration
the main focus for the Geology
team in 2014 will be the drilling
of currently identified targets.
The Townsville project is the
most advanced where the
expectation is to estimate an
indicated mineral resource.
The Geology team will also
embark on a review of historical
exploration data, an exercise with
the catch phrase “mining our
data”, which will provide a better
understanding of the controls
on regional and prospect scale
mineralisation and enhance the
length of the mine life at Ok Tedi.
MINERAL RESOURCE AND ORE RESERVE STATEMENTThe focus for the Geology team
on the primary Mt Fubilan pit is to
increase the mineral resources and
hence ore reserves by undertaking
pit wall cutbacks and even
exploring the potential to convert
to an underground operation.
During 2013 over 17,000m of
Mineral Resource development
and delineation drilling was
completed and this effort has
contributed to the revised and
current Mineral Resource and
Ore Reserve Statement as at
31 December 2013. During 2013,
Ok Tedi’s Mineral Resource
estimate decreased from
881.7Mt to 871.4Mt, largely due
to mining depletion (17.7Mt),
resource block model and shell
changes increasing by 45.8Mt
and a reduction of 38.3Mt due to
changes in assumptions. The net
effect was the Mineral Resource
reduction of 10.3Mt.
NEAR MINE CORRIDOR PROGRAMMEProject/Target and Ranking
1 Townsville
2 New York East
3 Moscow East, Marakesh
4 Gilor/Geochem Team
5 Mount Ian
• defining a new Mineral Resource for the
Townsville prospect; and
• continuing with exploration activities to
identify new targets and develop long term
prospects towards future new ore bodies.
The current OTML exploration programme
is centred on five exploration licences
covering 3,450km2. In 2013, the exploration
tenement portfolio increased due to the
granting of three additional tenements
(EL 2256, EL 2289 and EL 2276).
In line with a re-invigorated exploration
strategy that is focussed on the near-mine
environment where the mineralisation potential
is highest and easily accessible, the majority of
the exploration licences are located along the
prospective “Ok Tedi Corridor”. This corridor
is a deep-seated geologic feature that trends
north-northeast through the Ok Tedi deposit
into the West Sepik province where currently,
all known copper and gold mineralisation in the
region is located.
The Mt Fubilan open-pit deposit is one
of the key future expansion opportunities
for OTML and is the main focus for the
Mineral Resource development team.
During 2013, an extensive drilling campaign
continued in and around the Mt Fubilan pit
to upgrade the mineral resources according
to the guidelines of the 2012 Joint Ore
Reserves Committee (JORC) Code. As at
31 December 2013, the Mt. Fubilan Mineral
Resource estimate was 871Mt at 0.44% Cu
and 0.54 g/t Au using a cut-off based on
‘net smelter return’ which is a composite
parameter, simulating the return after
processing. The cut-off used was USD 10
Net Smelter Return (NSR) per tonne.
The OTML Geology team started focussing
on geometallurgy in 2013, led by specialist
consultants JK Tech Consultants, based in
Brisbane. This strategy relates to combining
geology and geostatistics with extractive
metallurgy, to create a geologically based
predictive model for the processing plant.
OTML’s Geology team focusses on four
areas of investigation:-
• mine geology support, providing a day
to day service to the mine production
department and improving ore recovery
through improved knowledge of
deposit metallurgy;
• Mineral Resource development, to
increase the near-term and future life of
the mine with particular emphasis placed
on defining and expanding the Mt Fubilan
open pit deposit;
OK TEDI CORRIDOR
34 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
The change reflected in the Mineral Resource Statements of 2012 and 2013 are shown below.
MINERAL RESOURCE AND ORE RESERVE STATEMENT AS AT 31 DECEMBER 2012, USING A USD 10 NSR CUT-OFF PER TONNE
CLASSIFICATIONTONNAGE
(Mt)CU
(%)AU
(g/t) CLASSIFICATIONTONNAGE
(Mt)CU
(%)AU
(g/t)
RESERVE/RESOURCE
RATIO
Measured 390 0.51 0.57 Proven 171 0.57 0.68 44%
Indicated 351 0.43 0.54 Probable 48 0.80 0.98 14%
Inferred 141 0.41 0.56
Total 882 0.46 0.55 Total 219 0.62 0.75 25%
MINERAL RESOURCE AND ORE RESERVE STATEMENT AS AT 31 DECEMBER 2013, USING A USD 10 NSR CUT-OFF PER TONNE
CLASSIFICATIONTONNAGE
(Mt)CU
(%)AU
(g/t) CLASSIFICATIONTONNAGE
(Mt)CU
(%)AU
(g/t)
RESERVE/RESOURCE
RATIO
Measured 344 0.52 0.58 Proven 156 0.59 0.69 45%
Indicated 417 0.39 0.51 Probable 58 0.71 0.93 14%
Inferred 110 0.41 0.57
Total 871 0.44 0.54 Total 215 0.62 0.76 25%
GEOLOGY CONTINUED
In addition, during 2013, the Ok
Tedi Ore Reserve also decreased
from 219Mt to 215Mt, again due
to mining depletion (19.0Mt),
an increase of 21.1Mt from Ore
Reserve model and mine design
changes, but a decrease of 6.4Mt
due to assumption changes.
Examples of the assumption
changes were density calculations,
different pit measuring methods
and adjustments in ore/waste
allocation from smaller grade
control blocks. The net effect was
an Ore Reserve decrease of 4.4Mt.
Because of these changes the
recoverable copper metal tonnes
decreased from 1.19Mt to 1.16Mt
(2.3%) and gold fell from 3.9Moz
to 3.87Moz (0.8%).
SECURING OUR FUTURE 35
The information in the tables above relates to
Mineral Resources and Ore Reserves based
on information compiled by Isaka Bisansaba
(Mineral Resource) and Stephen Kable (Ore
Reserve) who are members of the South
African Institute of Mining and Metallurgy
and Australasian Institute of Mining and
Metallurgy respectively.
Mr Bisansaba and Mr Kable are full-time
employees of OTML and have sufficient
experience that is relevant to the style of
mineralisation and type of deposit under
consideration and to the activity being
undertaken to qualify as “Competent
Persons” as defined in the 2012 Edition
of the Australasian Code for Reporting of
Exploration Results, Mineral Resources and
Ore Reserves.
Isaka Bisansaba and Stephen Kable
consent to the inclusion of the above tables,
which have been based on their information
in the OTML Mineral Resource and Ore
Reserve Statement, in the form and context
in which it appears.
Signed on 21 March, 2014
ISAKA BISANSABASAIMM 703638
Superintendent,
Resource Geology
STEPHEN KABLEAusIMM 211690
Senior Engineer
Long Term Planning
Mt Fubilan open cut pit and processing plant.
CENTRE PIT
HARVEY CREEK DUMP
MONZODIORITESOUTH
PARIS
BERLIN
EDINBURGH
VANCOUVER
TARANAKI
NEW YORK
MOSCOW
GOLD COAST
WESTWALL
SILTSTONERIDGE
SECTION B
CENTRE PIT
HARVEY CREEK DUMP
MONZODIORITESOUTH
PARIS
BERLIN
EDINBURGH
VANCOUVER
TARANAKI
NEW YORK
MOSCOW
GOLD COAST
WESTWALL
SILTSTONERIDGE
SECTION B
Section A
DDH1260
DDH1255
DDH1236
DDH1261
DDH1259A
DDH1251
DDH1241
DDH1237
DDH1272
GDH1055A
DDH1234UDH0012DDH1270
DDH1271
DDH1273
DDH1274
UDH0014
DDH1257
DDH1247GDH1057
DDH1248
UDH0017
DDH1275
GDH1059
DDH1276
DDH1244
DDH1250
DDH1277
DDH1243DDH1243A
DDH1279
UDH0013
DDH1282
DDH1250A
DDH1262DDH1263
DDH1265
DDH1266DDH1269
DDH1264
DDH1232
UDH0018
DDH1268
DDH1278
DDH1267
DDH1230
DDH1249
DDH1288
DDH1289
DDH1284
36 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
NEAR MINE – MT FUBILAN MINERAL RESOURCE DEVELOPMENT AND EXPLORATIONMt Fubilan is a rich copper-gold-
silver deposit with several phases
of mineralisation centred on two
intrusions, a monzonite porphyry
and monzodiorite stock works with
subsequent alteration. The majority
of the contained copper and gold
is found within sulphide skarns,
located adjacent to the intrusions
along a contact with limestone and
siltstone units. These skarns have
been formed by the introduction
of mineralised fluids that have
reacted with the host rocks.
Over 21,900m were drilled from
a completed 59 drill holes. The
locations of the holes completed
in 2013 are shown on the geology
map of the Mt Fubilan mine area.
The drilling programme improved
the understanding of the deposit
and highlighted the extension
of significant mineralisation to
the North East of the current
pit (Siltstone ridge area) and
to the South-southeast of the
Pit (southern monzodiorite
extension). These findings
generated significant intercepts
improving the potential for
additional cutbacks for the
current Mt Fubilan pit. The
location of the section lines are
shown in the geology map.
GEOLOGY CONTINUED
MT FUBILAN MINE AREA
LEGEND
2013 Completed Drillholes
LITHOLOGY
Pnyang Siltstone
Limestone
Ieru Siltstone
Monzodiorite
Monzonite Porphyry
Skarn
Endoskarn
Taranaki Skarn
Parrot’s Beak Thrust
Dec 2013Pit Asbuilt
Pit design
DDH1267
DDH1283DDH1281
ResourceShell
5.001.000.750.500.250.1<0.1Cu(%)
Pit design
Dec 2013Pit Asbuilt
DDH1230
DDH1232
DDH1225
DDWPR443DD
HWPR
459
ResourceShell
5.001.000.750.500.250.1<0.1Cu(%)
SILTSTONE RIDGE -SECTION A - LOOKING NORTH
DDH1267 Significant Intercepts
63 metres @ 0.24%Cu, 0.19g/t Au and 2.54% S From 0 - 63metres.
124 metres @ 0.33%Cu, 0.18g/t Au and 1.96% S From 103 -228metres.
DDH1281 Significant Intercepts
102 metres @ 0.37%Cu, 0.19g/t Au and 2.32% S From 220 - 322metres.
181 metres @ 0.39%Cu, 0.09g/t Au and 1.55%S From 398 -579metres; Including 13 metres
@0.65%cu, 0.09g/t Au and 2.45% S
DDH1283 Significant Intercepts
81 metres @ 0.22%Cu, 0.20g/t Au and 2.31% S From 0- 81metres.
102 metres @ 0.47%Cu, 0.32g/t Au and 1.22%S From159 -261metres; Including 45metres
@0.75%cu, 0.47g/t Au and 1.36% S
GOLD- MOLY TARGET SECTION B - LOOKING NORTH
DDH1225 Significant Intercepts
427.2m @ 0.51% Cu: 0.56g/t Au: 2.84% S: From 22.8m - 450m including
47.2m @ 1.73% Cu: 1.69g/t Au: 2.72% S: From 22.8m - 70m
87.0m @ 0.40% Cu: 0.78g/t Au: 2.48% S: From 291m - 378m
DDH1230 Significant Intercepts
409.9m @ 0.78% Cu: 0.69g/t Au: 3.57% S: From 0m - 409.9m including
121m @ 1.96% Cu: 1.47g/t Au: 4.89% S: From 0m - 121m
174m @ 0.12% Cu: 0.27g/t Au: 2.79% S: From 145m - 319m
22.8m @ 2.31% Cu: 1.93g/t Au: 7.42% S: From 387.1m - 409.9m
DDH1232 Significant Intercepts
623.1m @ 0.43% Cu: 0.71g/t Au: 2.72% S: From 14m - 638m including
66.5m @ 1.98% Cu: 1.85g/t Au: 4.21% S: From 14m - 80.5m
84.1m @ 0.34% Cu: 0.79g/t Au: 3.18% S: From 189m - 274m
234m @ 0.31% Cu: 0.88g/t Au: 2.45% S: From 344m - 578m
SECURING OUR FUTURE 37
Information obtained from these
drill holes was used to update
the geological model, which is
then used to update the annual
Mineral Resource Statement. The
design and development of the
geological model and Mineral
Resource estimates were carried
out according to the guidelines
of the JORC Code (2012). This
estimate was completed,
validated and signed off internally
by OTML’s Competent Person.
As at 31 December 2013, the
Mt. Fubilan Mineral Resource
Estimate is 871Mt at 0.44% Cu
and 0.54 g/t Au.
The orientation of certain drill
holes and significant grade
intercepts are shown alongside
for Section A and Section B. The
locations of both Sections are
shown on the geology map of the
Mt Fubilan mine area.
Section A - Looking North; Deeper Mineralisation in
Siltstone Ridge is hosted
within Monzonite porphyry sills
and dykes characterised by
disseminated chalcopyrite in a
phyllic alteration halo.
Section B – Gold-molybdenum target. High grade gold Mineralisation
is hosted within a Monzodiorite
intrusive; elevated grade zones
are characterised by vuggy quartz,
chalcopyrite, molybdenite veins.
SECTION A SECTION B
GEOMETALLURGYIn line with company strategy and
a smaller and more efficient mine,
Mineral Resource development is
focussed on geometallurgy, with
the objective of optimising and
improving metallurgical recoveries
through effective blending
strategies. This involves state
of art core scanning techniques
to create detailed mapping of
alterations and mineralogy. In
addition, detailed testing will be
performed on various lithological/
alteration units to investigate
optimum feed scenarios for
different blends. It is expected
therefore that the project will
display effective ore classification
for optimum recoveries and
feed rates. These technological
developments are led by Brisbane
based, JK Tech Consultants and
managed by the Mineral Resource
development team. An outcome
from this work is expected to be
completed in 2015.
The main focus for the Geology
team in 2014 will be the drilling
of the currently identified targets.
Additional geo-metallurgical
studies will also be continued to
better understand the current ore
characteristics from a chemical,
rheology and impurities aspect,
with the intention on filtering
down to providing more insight
into the general impact on the
flotation/leaching circuit and how
efficiencies can be improved.
12.1% CU 10.6 G/T AU 161 G/T AG
8.93%CU 5.97 G/T AU 125 G/T AG
38 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
TOWNSVILLE PROSPECT SELECTED DEPTH INTERCEPTS AND ASSOCIATED GRADES COMPOSITES, TVLDDH081
DEPTHDOWN HOLE
INTERVAL (M) CU (%) AU (g/t) AG (g/t)
From 68m 46m 0.06 6.33 3.23
Including from 79m 20.5m 0.07 10.51 4.12
From 184m 80.7m 1.67 1.27 20.32
Including from 195m 40m 2.63 1.96 25.95
Including from 200m 11m 5.05 4.09 31.77
NEAR MINE EXPLORATION – TOWNSVILLE PROSPECTThe exploration focus in 2014 will be on
targets within a five to ten kilometre radius
of the mine and this includes the Townsville
project. This prospect is hosted within the
Pnyang Formation (Miocene age, 5 to 23
Ma), comprising of near-surface high-grade
gold hydrothermal mineralisation and fault
breccia’s grading up to 60g/t Au and deeper
copper-gold calcium-silicate skarns.
The main objective of the 2014 drilling at
Townsville is to have an Indicated Mineral
Resource estimated according to the JORC
Code guidelines and obtain additional
samples for metallurgical studies. The drilling
in late 2013, resulted in one particular hole
(TVLDDH81), returning the highest copper
grade down-hole intercept (up to 12.1%
copper) for skarn mineralisation since
drilling commenced at Townsville in 1992.
This result was 200m west from the main
resource area at “Zone 3” and will be the
subject of follow-up drilling in 2014.
GEOLOGY CONTINUED
Townsville Project drill hole (TVLDDH81) core through copper-gold skarn showing high-grade intercept.
SECURING OUR FUTURE 39
40 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
GEOLOGY CONTINUED
REGIONAL EXPLORATIONIn addition to drilling and associated
fieldwork, the Geology team has planned
other key work for 2014, commonly phrased
as “mining our data”. A wealth of geoscientific
exploration data has been generated over the
last two decades by OTML. This important
data will be subject to an internal review and
analysis and incorporate the Geographic
Information System (GIS) technology, together
with the latest geological research findings on
porphyry copper gold systems in the Indo-
Pacific rim region.
This analysis will review data received from
the 2009 aerial (helicopter) geophysical
survey that was conducted over key
portions of the Ok Tedi corridor. The aim of
the “mining our data” project, is to obtain
a better understanding of the controls on
mineralisation from a regional scale level
down to an individual prospect scale. It
is expected that the outcomes from this
programme will greatly enhance the length
of mining operations at Ok Tedi through the
provision of a host of new targets to feed
into the exploration project pipeline.
RESOURCE DEFINITION DRILLING
RESOURCE DEVELOPMENT DRILLING
DRILL DATA APPRAISAL
TARGET EXPLORATION DRILLING
FIELD WORK
CONCEPTUAL TARGET GENERATION DATA COMPILATION AND REVIEW
2016
2015
20152016
2016 2016
2016
2015 2015
TOWNSVILLE PROJECT
PROJECT DEVELOPMENT CRITERIA ASSESSMENT
NEAR MINE/SML/ SULPHIDE CREEK
NEAR MINE/SML/ SULPHIDE CREEK
NEAR-MINE GIS AND TARGET GENERATION
OK TEDI 2009 MAGNETIC SURVEY RE-INTERPRETATION
MT. ANJU EL MIANMIN EL
DORONGO EL TOWNSVILLE REGIONAL
SECURING OUR FUTURE 41
GEOPHYSICS REPROCESSING AND INTERPRETATION: NEW TARGETS• 2009 OTML Heli-magnetic Survey yet to be fully
interpreted and evaluated – currently underway in
conjunction with SRK.
• Key OTML dataset that will help define additional
exploration targets, including skarns and blind deposits.
• Revised interpretation will also help provide geological
framework and improve understanding of mineral
systems within OTML ELs for improved targeting.
OK TEDI EXPLORATION PROJECT PIPELINE FOR 2014 AND BEYOND
MEASURED RESOURCE
INDICATED RESOURCE
INDICATED RESOURCE
INFERRED RESOURCE
5KM
KAOWOL EL1677
MOUNT IAN INTRUSIVE COMPLEX
TOWNSVILLE
OK TEDI INTRUSIVE COMPLEX
OK TEDI MINE
42 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML MANAGEMENT CONTINUES TO INVESTIGATE FUTURE OPPORTUNITIES TO IMPROVE OPERATING EFFICIENCIES AND CONTINUE THE MINE’S OPERATING LIFE THROUGH DEVELOPMENT OF EXISTING KNOWN RESOURCES OR DISCOVERY OF NEW RESOURCES. MINE CONTINUATION STUDIES IDENTIFIED A NUMBER OF OPPORTUNITIES THAT REQUIRED WORK LEADING TO FURTHER FEASIBILITY AND ECONOMIC STUDIES. THESE INCLUDE THE FOLLOWING:
FUTURE IMPROVEMENT PROJECTSFUTURE ORE FROM MT FUBILAN EAST WALLMine continuation studies investigated the
opportunity to access additional resources
dipping under the east wall of Mt Fubilan Pit
through underground mining. Results showed
that recovery of the ore was feasible however
the tonnages would be far lower than required
by the processing plant on a daily basis and
the cost per tonne of recovered ore was
far higher, compared to open cut mining
methods. As a consequence the underground
mining option was put on hold and a
recommendation was made to undertake a
feasibility study on an East Wall cutback. This
work will continue through 2014.
NEAR MINE EXPLORATION PROGRAMMEThe exploration Geology department has
identified a number of potential targets in
the near mine region and through sampling
and drilling programmes, will investigate the
opportunity to increase the Mineral Resources
through development of these targets.
PROCESSING PLANT CRUSHING AND GRINDING REVIEWIn 2013 the Sag Mill No 2 outer shell failed
requiring major repairs and ordering of a
replacement shell. The crushing and grinding
circuit has operated for over 30 years and
requires continuous repairs. With the mining
scheduled continuing until 2025, there is
a risk of future failures with the current old
plant and equipment. Since the installation
of the existing plant there have been
technological advances in the crushing and
grinding of ores. Modern equipment is more
energy efficient per tonne of ore processed.
The Processing department will lead a review
of current available technology and develop
economic justification of preferred options to
meet OTML’s future needs.
ALTERNATIVE POWER SUPPLYOTML uses both hydroelectric and diesel
thermal power generation. Thermal power
costs are significantly higher than hydroelectric
power. When river levels are high, hydroelectric
power is maximised to reduce the demand
from high cost diesel generation. A study
into the development of extra hydroelectric
capacity is planned to offset some thermal
generation. Another option under review is to
partner with the emerging gas sector searching
for natural gas resources in the Bige/Kiunga
basin. Development of a regional gas fired
power station to supply the major Western
Provincial centres is a long term option. OTML
could install a high voltage power line from a
gas fired power station to the mine to replace
onsite thermal generation. This project is
still at a conceptual planning phase and
will require lengthy engineering studies and
stakeholder engagement.
TAILINGS STORAGE FACILITY A preliminary study was completed during the
mine continuation work to identify suitable
locations for a close to mine engineered
Tailings Storage Facility (TSF) to hold future
processing waste. A TSF could potentially
store all or a portion of the tailings and also
be designed to contain future requirements.
A preliminary option study is complete which
identified three general locations. These
include two traditional sub aerial “valley fill”
impoundments at Ok Lan and Lukwi and
engineered “turkeys nest” structure in the
Ningerum area. The projects pose technical
risks, have high capital costs and require
extensive work including survey, geotechnical,
geochemical, engineering, social consultation
and environmental impact assessments.
The OTML Board approved a further staged
engineering study to evaluate the TSF
feasibility in 2014. This work will include
engineering and environmental studies to
identify the preferred location and complete
preliminary designs to definitive feasibility level.
This will include further risk assessments and
the estimate of the capital and operational
costs to construct and operate a facility.
SECURING OUR FUTURE 43
44 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML CONTINUES TO BE THE SINGLE LARGEST EMPLOYER IN THE WESTERN PROVINCE OVER THE PAST 32 YEARS OF OPERATION. THE COMPANY IS PROUD OF THE HIGH SKILL LEVELS ATTAINED BY ITS EMPLOYEES THROUGH ON THE JOB AND FORMAL TRAINING PROGRAMMES. THE COMPANY’S PREFERENCE IS TO EMPLOY PEOPLE FROM THE “PREFERRED AREA’” WHICH ENCOMPASSES THREE DISTRICTS IN THE WESTERN PROVINCE AND THE TELEFOMIN DISTRICT IN THE SANDAUN PROVINCE.
PEOPLE
In early 2013, the mine continuation project
identified that the Company would require
a restructuring of the workforce to meet
production targets at lower costs. The
Company decided to take a holistic review of
all labour positions including the permanent
workforce, contractors, casual labour and
overtime worked. The review identified that
over the years, there had been a lack of
consistency with rosters and employment
packages. The aim was to simplify the
complex roster systems and offer a series
of new rosters and employment packages
in line with industry standards that would
meet OTML’s needs into the future. The
review also identified the need to maintain or
improve certain conditions of employment
whilst reducing overall employment costs.
The review also recommended a change to
the organisational structure and this resulted
in the removal of 288 permanent positions
and also a call for voluntary redundancies.
Many of OTML’s long-term employees
have worked in excess of 20 years and
this was deemed to be an opportunity for
them to retire with respect and dignity. The
Company developed a Voluntary Departure
Offer (VDO). The VDO conditions exceeded
all previously offered redundancy packages
by other companies in PNG. This included
as a minimum; all of the normal termination
benefits, statutory redundancy requirements
under the Company’s Industrial Agreement
(2010) and enhanced separation benefits.
The enhanced separation benefits included:
balance of wages paid out till 31 December
2013, pro-rata sick leave entitlement for
all years of service, full housing employee
assistance package forgiveness of
unamortised amounts, a once off PGK
15,000 payment at the end of 2013, an
annual bonus (if eligible) and resettlement
of employee family and household effects
to point of hire. The Company also provided
counselling and professional support for
financial planning, life skills and money
management free of charge.
SECURING OUR FUTURE 45
The VDO attracted a further 457 employees
who took the opportunity to either retire or
relocate back to their point of hire or other
preferred location. This process was highly
successful partially due to the generous
benefits on offer but also through an
extensive internal communication and change
process lead by each departmental head,
supervisor and human resource staff member.
In September 2013, with the State acquiring
full ownership of OTML, the Board
recommended that as of 31 December 2013,
all remaining employees should be fully paid
out with entitlements and sign onto new
employment packages and roster
arrangements. This has proven to be a
windfall for employees who have accumulated
generous entitlements. This process has
removed the liability from the balance sheet
and as of 1 January 2014, there were no
outstanding back entitlements.
The new fixed roster system was adopted
after consulting with roster and productivity
experts, reviewing the industry standard
and also advice from fatigue management
consultants. The new roster system
implementation commenced in February
2014 and includes the following:
Shift workers Work 14 days on and have a scheduled 14 days off;
Day staff Work 6 days on and 1 day off for 4 weeks and then have 2 weeks off; and
Residential staff Work 5 days on and 2 days off and have 7 weeks of annual leave to take during the year.
These rosters are not only simpler and easier to understand, but they align the hours
worked and general conditions of employment suited towards each type of employee and
across all pay grades to provide a more equitable workplace. The rosters also align shift crew
100%, so they are working with the same crews all the time, also intended to reduce fatigue
by minimising body clock changes and allow for more time off site with families for shift
workers and day staff.
In order to support the new
FIFO rosters, OTML leased new
aircraft to mobilise employees to
their field break locations. The
planes include three Dash 8s
and through a lease with OTDF,
two Series 400 Twin Otters. The
Company has also completed the
construction of three new single
persons’ accommodation blocks,
with two more to be completed
by June 2014. Each three level
block can house 108 persons
and have been designed to
provide modern lodgings which
are quiet, safe and comfortable.
These facilities will replace some
of the older facilities still in use.
NEW SKILLSWith the commencement of the
mine continuation, OTML has
increased the mining rate to
remove the West Wall overburden
and waste rock in the Mt Fubilan
mine. This requires an increase in
the mining operations, with new
trucks and shovels or excavators
and ancillary equipment. OTML
has also decided to move to full
owner operator status for the
mining operations. This requires
recruitment of mine operators
including experienced shovel and
excavator operators (as this was
previously contracted out) and
maintenance staff to maintain
the new equipment. Similar
arrangements have been made
for the supporting shipping fleet,
with four new ships purchased
outright by the Company in place
of existing lease arrangements
and a further two purchased
by the CMCA communities and
leased to OTML through OTDF.
Mine operators commencing pre-start vehicle checks prior to work.
46 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
EMPLOYMENT AND LABOUR RELATIONSIn 2013, OTML employed 2,310 employees
and 5,147 contractors. Ninety five
percent of all staff employees were PNG
nationals and of these, 37.3% were from
the Western Province. Women made up
11% of the workforce. These percentages
have remained constant through the
organisational structure and VDO process.
There is no seasonal variation in employment
numbers. All OTML employees in all areas
of the operations are paid in excess of
any minimum wage requirement in PNG.
This applies to all employment categories
including operators, supervisors, apprentices
and graduates. Both women and male
employees are renumerated with the
same pay grades for similar positions.
The number of “local” senior managers in
OTML’s operations is 19 from 43 positions.
“Local” refers to employees who identify
the mine associated communities as their
area of birth. Senior Management refers
to employees on fixed-term three year
renewable contracts. All employees have
annual performance reviews.
OTML supports the following International
Labour Organisation Conventions as
ratified in PNG:
• Discrimination (Employment and
Occupation, No. 11);
• Freedom of Association (No. 87);
• Abolition of Forced Labour (No. 105);
• Worst Forms of Child Labour (No. 182);
• Maternity Protection (No. 103); and
• Equality of Treatment Accident
Compensation (No. 19).
In 2013, 78% of the OTML workforce
was covered by a registered industrial
agreement. All OTML employees are
supervised by Company supervisors and
none are supervised by contractors. All OTML
employees are free to form Union collective
agreements. The Company does not stipulate
if there are or are not collective agreements
in place. OTML holds regular meetings with
registered Union officials. All meetings are
minuted and actions followed through. In the
reporting period there were 12 labour related
issues raised between employees, the union
and management. These were all addressed
and successfully resolved and did not result in
work stoppages.
During 2013 there were four illegal work
stoppages over various issues that required
mediation and intervention or advice from
PNG Department of Labour and Industrial
Relations. Three of the issues were resolved
through the internal resolution process and
one issue required external intervention.
PEOPLE CONTINUED
One group of staff specifically
targeted for recruitment are
experienced PNG nationals.
Over the years, OTML’s training
and development and study
assistance support has produced
a range of high calibre PNG
professionals in the fields
of engineering, chemistry,
metallurgy and finance. During
the mining boom in Australasia
(2000 – 2012), experienced
PNG professionals left PNG and
gained employment overseas
in often senior mining roles. At
OTML this resulted in a 40%
loss of senior national staff that
had been targeted for leadership
roles. Many of these staff gained
Australian residency and in
late 2012, OTML commenced
communications with the expat
PNG community and networked
to bring them “back home”.
A remuneration policy was
developed for these staff to
match their expectations and
acknowledge their broader global
experience. To date three have
been attracted back to Ok Tedi
with a further eight professionals
showing interest in returning.
These highly experienced
professionals are respected
by their work colleagues and
are strong role models for the
workforce and are potential
future senior managers.
SECURING OUR FUTURE 47
TRAINING AND DEVELOPMENTOTML has implemented a
comprehensive training and
development programme across
all levels of the Company. This
is underpinned by promoting on
the job training and ongoing skills
development for employees. A
succession plan is in place for
key roles and employees are
encouraged to improve their
skills and competencies through
internal and external learning and
development programmes.
OTML supports opportunities for
employees to up-skill and seek
promotion into more senior roles
within the Company. Looking
ahead, many of the higher level
training programmes which
were provided for by external
agencies will be managed in-
house, allowing for more flexible
delivery and the development of
employees in training roles.
Employee breakdown by category and location is as follows:
EMPLOYEE CATEGORIES 2009 2010 2011 2012 2013
National Staff 1,640 1,653 1,636 1,674 1,737
Senior National Staff 169 175 181 189 198
Expatriates 101 110 108 106 115
Trainees - PNG Nationals in OTML training programmes
201 224 204 204 260
Total 2,111 2,162 2,129 2,173 2,310
2012 2013
EMPLOYEES NO % NO %
Expatriates 106 4.9 115 5.0
Western Province 801 36.9 863 37.3
Non-Western Province 1,266 58.2 1,332 57.7
Total 2,173 100.0 2,310 100.0
GENDER NO % NO %
Male 1,933 89.0 2,057 89.0
Female 240 11.0 253 11.0
Total 2,173 100.0 2,310 100.0
DEMOGRAPHICS NO % NO %
Under 30 343 15.8 363 15.7
30-39 708 32.6 764 33.1
40-49 679 31.2 710 30.7
Over 50 443 20.4 473 20.5
Total 2,173 100.0 2,310 100
Augustine Wama and Iso Ealedoria discussing planned work in Mt Fubilan Pit.
48 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
SCHOLARSHIPS AND GRADUATE PROGRAMMEOTML’s commitment to providing
a pipeline of future employees
continued in 2013 by providing
363 scholarships and school fee
assistance. The scholarships
enable children to move through
the high school education system
to year 10. If their grades meet
entry requirements, then students
go to National High School for
years 11 and 12. OTML also
reviewed its funding policy in
2013 and an effort was made to
continue funding students who
met University entry requirements.
This resulted in 46 graduates
attracting two year funding
scholarships commencing in
2013, a 70% increase on the 2012
graduate intake. The aim is to
facilitate permanent job offers to
those graduates with appropriate
qualifications. OTML has always
had a strong commitment to
developing trades people through
the apprenticeship programme.
Since 1982, 1,065 sponsored
apprentices completed their
courses and in 2013 a further
59 young men and women
were given the opportunity to
commence an apprenticeship.
A further 42 sponsored trainees
commenced enabling courses
as a precursor to full time
employment with OTML. Training
and development is targeted to
the “preferred area” employees.
An additional 154 employees commenced sponsored courses at the Centre of Distance
Education (CODE). These courses range from year seven to ten high school certificates,
year 11 to12 matriculation studies and year 12 upgrading. Thirty employees enrolled
in International courses. In 2013, total training and education costs (excluding salaries)
amounted to PGK 14.5 million (USD 6.4 million). A total PGK 23.3 million (USD 10.3 million)
was spent on local trainee, apprentices, graduates and other sponsorship and financial
assistance as part of the training and education programme.
CORPORATE TRAINING COURSESThe OTML Training Department offers the following corporate development courses and the
breakdown of employees and total hours training completed in 2013 were:
COURSE NAMENO. OF
EMPLOYEES MALE (%) FEMALE (%)TRAINING
HOURS
Diploma of Management (LDP) 14 93 7 1,568
Diploma of Vocational Education and Training (VET)
6 100 0 4,80
Certificate IV in Frontline Management 22 82 18 2,640
Certificate IV in Training and Assessment
19 79 21 3,040
Seven Habits of Highly Effective People
28 70 30 1,120
First Aid Training 468 90 10 5,616
Computer Training 599 80 20 9,584
Professional Development and Leadership Development
31 100 0 744
Certificate III in Instrumentation 13 92 8 1,560
Diploma IV in Instrumentation 10 80 20 1,200
Total 1,210 26,352
PERSONAL VIABILITY COURSE As part of the personal development programme, OTML offers a Personal Viability Training
course. In 2013, 340 staff completed the course which coaches individuals on how to better
understand their own makeup and how they operate. From this understanding employees
learn how to become more confident, self-reliant, prosperous and sustainable. The course
introduces the concepts of moral and spiritual growth which teaches individuals to better
understand and organise themselves to achieve their goals in life.
PEOPLE CONTINUED
SECURING OUR FUTURE 49
50 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML IS COMMITTED TO ACHIEVING THE HIGHEST PERFORMANCE IN OCCUPATIONAL HEALTH AND SAFETY (OHS) WITH THE AIM OF CREATING AND MAINTAINING AN ORGANISATIONAL CULTURE THAT ACTIVELY SEEKS TO IMPROVE WORK PRACTICES WHICH SUSTAIN A SAFE AND HEALTHY WORKING ENVIRONMENT THROUGHOUT ITS BUSINESSES. THIS COMMITMENT IS UNDERPINNED BY THE “ZERO HARM” PHILOSOPHY WHERE AN INCIDENT AND INJURY FREE WORKPLACE IS ACHIEVABLE.
OHS is a critical requirement of OTML’s
business and the requirements are set-
out in the OHS Policy and the Code of
Corporate Conduct and Business Ethics. It is
a requirement that all OTML employees and
contractors follow the OHS Policy, standards
and procedures; attend daily safety talks and
on-going training programmes.
OTML requires all employees, contractors
and visitors to be inducted prior to entering
OTML controlled work areas. The inductions
are specific to the area of work and provide
information on area hazards, emergency
contacts and Personal Protective Equipment
(PPE) requirements.
OHS training is important to ensure that people
have the necessary understanding of the
hazards and risks associated with the work
they undertake and also to implement the
appropriate controls and procedures so that
work can be completed correctly and safely.
In 2013, Occupational Health and Safety
and Wellness (OHSW) training totalled
61,560 person hours. The OHSW Training
(OHSW&T) Department offers a 104 OHS
courses across all areas of the business.
The OHSW&T team is a centralised resource
providing support and advice on OHSW
issues to the operating departments. They co-
ordinate a centralised OHSW management
system and organise monthly OHSW
campaigns based on various safety themes.
Each major operating section has dedicated
OHSW staff including an OHS manager at the
Mine and Processing departments.
SAFETY PERFORMANCEThe safety performance in 2013 was
outstanding with the best results recorded
in the past five years with a significant
reduction in serious injuries compared to
2012. OTML reports against the industry
standard lagging indicators of; Total
Recordable Injury Frequency Rate (TRIFR),
Lost Time Injury Frequency Rate (LTIFR) and
Significant Incident Frequency Rate (SIFR).
There was a 47% improvement in TRIFR,
a 69% improvement in LTIFR and a 45%
improvement in SIFR in 2013 compared to
2012. This result was achieved even through
there was considerable uncertainty during
the workforce restructuring in the latter part
of the year and the complexity of the risks at
Ok Tedi. A total of 15.5 million person hours
were worked for the year for both OTML and
its contractors.
As at December 31 2013, OTML had worked
a total of 6.1 million person hours without a
lost time injury. During 2013, PGK 6.4 million
(USD 2.8 million) was spent on OHSW capital
projects. These results maintain OTML’s
position as a premier safety leader not only
in PNG but also when compared against the
global metalliferous mining industry.
OTML management is committed to
achieving Zero Harm and during the
restructuring period in the latter half of
2013, Visible Leadership was implemented
by managers attending shop floor safety
meetings and workplace inspections. These
interventions not only helped identify potential
hazards, but demonstrated management’s
commitment to OHS&W and also offered
employees further opportunities to discuss
issues with their supervisors and managers.
OCCUPATIONAL HEALTH, SAFETY AND WELLNESS
3.32
Significant Injury Frequency Rate Lost Time Injury Frequency RateTotal Recordable Injury Frequency Rate
3.51
2.69
3.25
2.80
1.49
1.94
3.47
2.41
1.89
0.56
0.21
0.53
0.82
0.26
0
1.0
2009 2010 2011 2012 2013
2.0
3.0
4.0Frequency Rate
SECURING OUR FUTURE 51
OCCUPATIONAL HEALTH AND SAFETY COMMUNICATIONSOTML has a monthly
occupational health and safety
theme which is rolled out to
all work locations through
toolbox meetings. Ongoing
OHS awareness sessions are
conducted throughout the
year. OTML has implemented
a layered approach to OHS
communications. This includes
face-to-face formal meetings,
informal coaching by peers and
supervisors, noticeboards and
the use of the Company radio
network and television channel
to broadcast OHS messages
and get the information to as
many people as possible. OHS
messages are also loaded onto
each computer screen saver on
the OTML network.
Formal communication
through structured meetings
provides employees and
contractors, the opportunity to
provide feedback and participate
in processes that impact their
areas of work and/or areas of
responsibility. These include:
• senior managers’
leadership: health, safety,
community relations and
environment meetings;
• safety technical
committee meetings;
• departmental OHS meetings;
• occupational health,
safety and environment
contractor meetings;
• tool box meetings;
• shift pre-start meetings;
• technical working groups; and
• risk assessment working
parties and review meetings.
OTML annual safety performance indicatorsLAGGING TARGETS (OTML AND CONTRACTOR) 2009 2010 2011 2012 2013
LTIFR (per year) 0.56 0.21 0.53 0.82 0.26
TRIFR (per year) 3.51 2.69 3.25 2.80 1.49
SIFR (per year) 1.89 2.41 3.32 3.47 1.94
OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEMSWork continued on further integration and
standardisation of the OHS management
system to align with OHSAS 18001
requirements. In 2013, an external audit of the
system indicated an overall 8% improvement
against the OHSAS 18001 criteria compared
to 2012. In late 2013, the business decided
to upgrade all of its operating systems to a
fully integrated management system using
the SAP business software in 2015. This
opportunity will enable both the Risk and
OHS modules to be fully embedded into the
integrated system. Whilst this may impact
on the Company’s immediate goal to have
the OHS system aligned with OHSAS 18001
by 2015, there are still significant benefits to
be gained by having a fully integrated OHS
system by late 2015.
Each year the management team review
the findings of the OHS audits and as part
of the annual planning cycle develop OHS
improvement programmes. These plans
are compiled in the Safety, Health and
Environmental Action Plan (SHEAP) and
actions are allocated to departments and
individuals for implementation. Progress
against the SHEAP is formally reviewed
during each quarter. In 2013, the target for
SHEAP completion was 80%, however an
actual completion rate of 83% was achieved.
A review of the Company risk and injury
data identified that there were twelve areas
of significant risk. A major awareness
programme was rolled out to all employees
and contractors. Monthly safety themes
address a particular risk. Resource training,
wall posters, task observations and audits
will continue to be deployed throughout
2014 to ensure safe work procedures are
being followed.
ANNUAL SAFETY PERFORMANCE
52 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OCCUPATIONAL HEALTH PROGRAMMEDuring 2013, OTML continued to
develop its occupational health
monitoring programme. OTML
has engaged external specialists
who have completed target
occupational health monitoring
campaigns, supported the
Company’s management system
development and provide training
to occupational health staff.
A review of potential
occupational aspects that
could impact on employees’
health identified the following
occupational hazards:
• dust and fibrous minerals;
• noise;
• lighting;
• vibration; and
• ergonomics.
Not all employees are exposed to all of these
hazards and therefore work activities were
assessed to identify which occupations
were potentially at risk. A number of
these hazards are seasonal, for example,
dust during short periods when the Ok
Tedi region is dry. Baseline monitoring
programmes continued to be conducted
to collect information across all work sites.
The information collected in 2013 has
been analysed and will assist in a more
targeted monitoring programme in 2014. In
areas where the monitoring has indicated
higher than recommended exposures, a
review of engineering controls and PPE
requirements were completed. Associated
with this information is the development of
information training packages on the hazards
and controls for delivery to employees and
contractors as part of the Company’s OHS
toolbox talks.
EMPLOYEE HEALTH AND WELLNESS PROGRAMMEThe aim of the Employee Health and
Wellness Programme (EHWP) is to assist
employees to remain physically and
medically fit for work and also enjoy quality
time with their families. As part of the EHWP
in 2013, the Company commenced with
targeting lifestyle factors including those
that contribute to heart complications like
obesity, high blood pressure and diabetes.
In 2013, an increased number of patients
were referred from the hospital for non-work
related illnesses requiring overseas attention
in Singapore, Philippines or Australia. The
number of referrals increased from 10 in
2012 to 41 in 2013, with the increase being
mainly due to improved diagnosis. In 2013,
the Company reviewed its pre-employment
medicals and this resulted in adopting a
number of lifestyle factor assessments for
inclusion in future testing. As a result of this
review, annual medicals will be introduced
in 2014 commencing with employees in
the higher risk exposure groups, in order to
monitor changes in the individual’s health
and to allow the implementation of suitable
interventions. OTML is also working with the
catering partners, to provide healthy meal
options to all the meal facilities.
During 2013, the services that provide part
of the Employee Wellness programmes were
restructured, resulting in the centralisation of
all services under the OHSW&T Department.
The Department coordinates the EHWP,
the Recreational Services Section and the
Employee Assistance Programme (EAP),
combining all areas relating to the promotion
of a holistic approach to employee support
through physical, medical and psychological
wellbeing. The medical staff at the mill,
mine, Kiunga and Bige clinics are also part
of the Department. In 2013 a new medical
assessment facility was approved at
Tabubil to facilitate mandatory medical and
position profile assessments services in the
workplace, whilst the Tabubil hospital under
the management of DPhL, will continue to
provide routine and emergency care to the
greater Tabubil community.
OCCUPATIONAL HEALTH, SAFETY AND WELLNESS CONTINUED
SECURING OUR FUTURE 53
54 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
FATIGUE MANAGEMENTThe management of fatigue in the
workplace is a priority for OTML.
In 2012, fatigue was identified
as a contributing risk factor to
incidents that need to be pro-
actively managed. Factors that
can contribute to fatigue include;
the work hours and rostering
and night shift employees not
sleeping adequately during
the day. In 2013, OTML
commenced a three year fatigue
management programme, by
engaging Dr Adam Fletcher of
Integrated Safety Support Pty
Limited, a fatigue specialist from
Melbourne, Australia.
The programme kicked-off
with site surveys and includes
awareness training, supervisor
fatigue tool kits, assessment
of fatigue across all areas of
the operation and the impact
of cultural issues. The report
identified areas for improvement
including rosters, single persons’
accommodation, and the need
for awareness and management
training. These findings have
been incorporated into new
working roster arrangements, for
implementation in February 2014
and also incorporated into the
design of the new single person
accommodations. The fatigue
monitoring programmes will be
continually reviewed and refined
during 2014 to 2015.
OFF-THE-JOB HEALTH AND SAFETYOTML also introduced an “Off-the-Job”
safety campaign that has targeted families
and schools. The Company believes that
safety does not stop at work and that it
is part of everyday life. Mechanisms to
ensure that safety and health awareness are
available to the families of OTML employees
and contractors were incorporated into the
campaign and form an important part of
getting commitment for the ongoing health and
safety improvement of OTML’s employees.
A school health and safety programme was
conducted over a five month period for all
the local schools. The programme featured
topics such as bicycle safety, playground
safety, road safety, dental care, healthy diet
and eye care. The OTML healthy eating and
wellness mascot “Moses Munch” kept the
children focused on the important topics
being presented.
OTML organised a safety week in Tabubil
as part of PNG Mineral Resources Authority
nationwide initiative to showcase the OHS
initiatives and work being undertaken by
OTML and the contractors towards safety
improvements. During the week a variety
of activities were staged to focus on the
importance of health, safety, and wellness.
The highlight of the week was the Expo,
which was open to all stakeholders, schools
and the general community.
OTML AND STATE MINING DEPARTMENTSThe OTML OHSW&T Department is active in
partnering with the PNG Mines Inspectorate
through the Apex Mining Safety Council to
develop mining specific guidelines for major
hazards. OTML coordinated with other PNG
mines to develop the guidelines for Light
Vehicle operations. Other guidelines currently
under review by the Apex Mining Safety
Council that OTML has contributed towards
include fatigue management, supervision,
and contractor management. The PNG
Department of Mineral Policy & Geohazard
Management is currently undertaking a review
of the Mining Health and Safety Act. OTML
has provided senior staff support to the PNG
Chamber of Mines and Petroleum peer review
of the draft Act and Regulations. OTML also
prepares regular OHS reports for the PNG
MRA including monthly, quarterly and the
Annual OHS Year Books as requested by the
PNG Chief Inspector of Mines.
SECURITY HUMAN RIGHTS TRAININGThe OTML Asset Protection Department
(APD) manages security and contractor
security for OTML Assets. Human Rights
training completed in 2013 meets the
content intent of the International Voluntary
Principles on Security and Human Rights.
OCCUPATIONAL HEALTH, SAFETY AND WELLNESS CONTINUED
CASE STUDY
SECURING OUR FUTURE 55
2013 PNG MINING EMERGENCY RESPONSE CHALLENGEIn November 2013, OTML was the proud host of the 3rd National Mining
Emergency Response Challenge in Port Moresby. The aim of the challenge was
to allow the Company’s emergency response teams to compete in both theory
and practical exercises. The challenge provides an avenue for individual and
team self-improvement and for individuals to take away positive experiences.
Karl Spaleck, Chairman of the National Apex Mining Safety Council, told the
participating teams at the welcoming night that anything was possible in PNG
if they applied themselves diligently. ‘The challenge itself is not only about
winning trophies, it’s about the opportunity to measure oneself as a team and to
challenge oneself to reach full potential. It is about being leaders and respecting
others and about integrity, honesty, and also responsibility’.
The teams came from the following PNG mineral resource projects and companies:
• Hidden Valley Gold Mine - Morobe Mining Joint Venture;
• Porgera Gold Mine - Barrick Gold;
• Oil Search Limited;
• Ramu Nico Management (MCC) Limited;
• Simberi Operations – St Barbara Limited,
• Lihir Gold Mine – Newcrest Mining Limited; and
• Ok Tedi Mining Limited.
All teams took part in the following seven events: Hazardous Material
Management, Rope Rescue, Search and Rescue, Fire Fighting, Multi-Casualty,
Endurance, and Theory.
The following assessments were carried out during each event: Captain Assessment,
Team Safety Assessment, First Aid Assessment, and Scenario Assessment.
On the afternoon of the welcome reception, the 63 participants undertook a
written theory paper followed by the Chief Inspector’s question session.
During the presentation night, OTML’s MD and CEO, Nigel Parker remarked that
the nine teams were all to be congratulated on the participation and enthusiasm
for the challenge and that their skills were an integral part of safety management
in the resource sector in PNG.
Image: OTML emergency response members recovering a simulation motor vehicle accident victim during the challenge
EMERGENCY RESPONSEOTML has developed competent
Emergency Response Teams (ERT) under
the direction of the APD. Due to the remote
location of the mine and limited public
emergency response capability, OTML
has to be able to mobilise its teams in
the event of an emergency. Regular risk
reviews are completed to identify the range
of emergencies that could occur during
exploration and mining activities, at the
processing facilities at Kiunga and Bige and
during logistic and transport activities. Due
to the distance between each operational
base, the Company has developed an ERT
at each centre.
Training of Emergency Response Teams
is an ongoing commitment so each team
member can develop the skills required to
rapidly deploy in the case of an emergency.
Training is to Certificate IV competencies
and based on Australian course material
and hands on practical training sessions.
Following each training session and
emergency callout, debriefing sessions are
conducted to identify what worked well
and areas for improvement. In 2013, OTML
hosted the 3rd National Mining Emergency
Response Challenge at Sir Hubert Murray
Stadium in Port Moresby.
56 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML IS COMMITTED TO ACHIEVING IMPROVEMENTS IN ITS ENVIRONMENTAL PERFORMANCE AND AS A MINIMUM REQUIREMENT, MEETING THE CURRENT ENVIRONMENTAL LICENSE CONDITIONS.
The Ok Tedi mining operations are centred
on the Mt Fubilan deposit in the upper
Fly River catchment in the remote Star
Mountains, Western Province and only
16 km east of the Indonesian border. The
mine is located at approximately 2,000
m relative elevation in an area of dense
rainforest where annual average rainfall
is approximately 10,000 mm per annum.
Geotechnical hazards comprise fractured
and friable siltstone with limestone outcrops
that erode easily, resulting in frequent
localised landslips.
The OTML Environment department is
responsible for providing advice and
support to the operational teams, by
monitoring and assessing the effects of
the mining and associated activities on
the receiving environment, implementation
of environmental mitigation programmes
and support to the Community Relations
department with environmental information.
The team is responsible for monitoring
impacts along the 900 km downstream
riverine system from the mine to the Gulf
of Papua. This includes maintaining a
hydrological network of monitoring stations
along the river system, regular field sampling
campaigns and community consultation and
information dissemination in consultation
with the community relations team. The
environmental department uses contract
local labour to assist with monitoring and
maintaining the hydrologic network. The
department has its own environmental
testing laboratory facilities that are PNG
Laboratory Accredited and also sends
samples overseas for complex determinants
and to maintain a high level of quality
control. In 2013, PGK 235.6 million
(USD 88.5 million) was expended on
environmental programmes.
The 2013 focus areas for the environmental
team are as follows:
• monitoring and assessing the effects
of tailings and waste rock disposal
on the downstream riverine receiving
environment and the communities
who depend upon natural resources
throughout the Fly River system;
• mine mitigation programmes aimed at
reducing sediment and chemical effects
on the riverine system;
• monitoring the establishment of the
engineered waste rock stable dump;
• rehabilitation trials on the riverine dredged
stockpiles at Bige;
• working with the PNG Department of
Environment and Conservation and
their external reviewers to complete an
external review of the environmental
studies for mine continuation studies;
• waste management initiatives; and
• environmental management system
development.
COMPLIANCE MONITORINGThe Ok Tedi Mine is governed by the
Mining (Ok Tedi Agreement) Act, 1976 as
amended and supplemented. The schedule
to this Act is the Principle Agreement that is
amended from time to time and to date has
been amended ten times previously. The Ninth
Supplemental Agreement that was passed by
the PNG Parliament in 2001 has adopted the
“Environmental Regime” which contains OTML’s
environmental management and reporting
obligations against a set of six environmental
values. The Environmental Regime requires
OTML to undertake specific annual monitoring
activities and to prepare an Annual Environmental
Report (AER) for the State.
ENVIRONMENT
SECURING OUR FUTURE 57
OTML prepared the 2013 AER (covering July 2012 – June 2013) and submitted a copy to the State in September 2013.
The Mine was in compliance with all the Environmental Regime conditions and there were no fines or non-monetary sanctions.
This is summarised below and compared to the previous four years of monitoring:
ENVIRONMENTAL CRITERIA 2009 - 2013 COMMENTS REGARDING 2013 ASSESSMENT
Water in main channel satisfies drinking water standards
Compliant
The water in the main channel and the floodplain satisfies drinking water standards if allowed to settle. Apart from dissolved copper (dCu), key water quality parameters measured in 2013 were within acceptable limits of aquatic ecosystem standards (ANZECC, 2000). Dissolved copper is the main concern for water quality within the river system. While the concentration measured is variable with time and space, an improving trend has been observed, especially in the Middle Fly, over the last decade. This improvement reflects changes in mine cut-off grade and the implementation of the mine waste tailings project in 2008.
Fish metal concentrations are below ANZFA Food standards guidelines
Compliant
Levels of contaminant metals (Cd, Cu, Pb and Zn) in Fly River fish were comparable to levels in similar food within relevant international (Australian and US) and regional (Porgera, Strickland and Fly) market basket and dietary studies. Intake of these metals was within the range of the values established by the World Health Organisation.
Terrestrial food resources are below ANZFA Food standards guidelines
CompliantLevels of contaminant metals (Cd, Cu, Pb and Zn) in terrestrial food were comparable to international (Australian and US) and regional (Porgera, Strickland and Fly River catchments) market basket and dietary studies. Intake of these metals is low compared to the World Health Organisation thresholds.
Fly River navigability CompliantRiver levels over the past decade have generally been above average due to the absence of El Nino conditions. There was no unusual impediment to shipping due to low river levels during 2013. There were 47 non-shipping days at Kiunga in 2013 compared with 52 in 2012.
Dissolved and bioavailable copper concentrations
Compliant
A general decrease in dCu and bioavailable copper concentration has been observed over the last decade. These decreasing trends are caused by a combination of factors including: high water levels, decreasing exposure of oxidisable sediments, implementation of the mine waste tailings project and a decrease in copper cut-off grades.
Undertaking eco-toxicological monitoring programme
Compliant
Algal growth inhibition (%AGI) at all compliance sites except Ningerum was below or only slightly exceeding the 5% threshold for significance, as has been the case over the last five years. Bacterial growth inhibition (%BGI) at all sites mostly exceeded the 25% threshold value for significance. %BGI for Obo and to a lesser extent, Nukumba has generally decreased over the last five years. The improvement in %AGI and to a lesser extent %BGI observed over the last decade is associated with the observed decrease in the concentrations of dissolved copper and bioavailable copper.
Fish biomass remains sufficient to provide food for households along the river
CompliantAnalysis of the long term (1983-2013) catch data shows a biomass decrease at all sites monitored with the highest decreases observed closest to the mine. While biomass decreases are observed throughout the system, there remains sufficient fish to satisfy the food needs of the community.
Extent of vegetation dieback Compliant
Vegetation dieback mapping undertaken in 2013 revealed that the total area affected by dieback was 1,875 km2, representing a 3.0% (55 km2) increase over the previous year. The area under some form of recovery has fallen 3.4% (from 298 km2 to 288 km2). The area of dieback is approaching its maximum likely extent, which is significantly less than the previously predicted future maximum extent of 2,395 km2.
Monitoring of potential for ARD formation within mine and river
Compliant
Results of the extensive surveys of sediments in the river system and the mine waste dumps conducted during 2013 indicate that the acid-base chemistry of the riverine sediments continues to improve following the implementation of various mitigation measures, especially the mine waste tailings project. The critical ANC/MPA ratio in dredged sediments at Bige increased to an annual average of 1.98 in 2013, the third consecutive year that the ratio has exceeded the target of 1.5.
58 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
MANAGEMENT OF MINING WASTE ROCK AND TAILINGSThe primary effect of the mine operation
on the environment is caused by the use of
riverine waste disposal. In 2013, 15.7Mt of
tailings was discharged to the upper reaches
of the Ok Tedi, and 44.9Mt of waste rock
was discharged to a failing dump to the
north of the mine and the stable waste dump
to the south of the mine. The discharge
of waste to the river results in sediment
deposition on the bed of the river and to a
lesser extent on the associated floodplains.
The primary environmental and human
health risks associated with riverine waste
disposal based on external and internal risk
assessments include:
• increased duration of overbank flooding
and associated forest dieback;
• the potential to generate Acid Rock
Drainage (ARD) due to oxidation of
residual pyrite in waste rock dumps and
tailings exposed on raised sandbanks
and river banks during low flows.
Limestone waste, which can neutralise
the ARD has decreased as mining
accesses deeper ore zones;
• increased metal concentrations
(especially copper) in both dissolved and
particulate phases in the river system and
the risk of adverse ecological effects; and
• decrease in fish biomass in the main
channels through smothering of habitat
and dissolved metal concentrations.
ENVIRONMENT CONTINUED
Fungal communities growing in the natural environment.
SECURING OUR FUTURE 59
The table below summarises the main environmental risk mitigation programmes implemented by OTML.
MITIGATION APPROACH RATIONALE AND EFFECT
Removal of riverine sediments by dredge at Bige.
(1998 – current)
Bed aggradation occurs when sand particles settle on the bottom of the river bed, which increases the amount of time the river floods its floodplain in high flow and consequently can cause vegetation dieback. While the area of dieback has continued to slowly increase since 1998, the rate of increase has markedly decreased and presently is not expected to reach the original estimated area of 2,395 km2.
The dredge removes 85% of sand passing Bige which is approximately 100 km downstream of the mine. In 2013, 18.9Mt of sand and silt were removed from the river and placed in engineered stockpiles on the East and West Banks of the Ok Tedi River. Measurement of the river’s cross-section at various points downstream of the dredge show that the bed aggradation has stabilised since the implementation of dredging.
However, there is a ‘wave’ of sand that was downstream of the dredge in 1998 that is slowly moving through the system and which will cause increased floodplain inundation in the lower reaches of the middle Fly River over the next few decades.
Mine Waste Tailings Project (MWTP) (2008 – current)
The removal of pyrite from tailings is important to reduce the risk of ARD formation when sulphur oxidises if left exposed on sandbars or river banks in low river flow conditions.
The MWTP treats tailings to remove most of the pyrite and transports the PCon 125 km downstream by pipeline to Bige where the PCon is stored in pits below the water table on the West Bank of the Ok Tedi River at Bige.
When full, the PCon pits are covered with at least 10m of dredged sand to ensure that the PCon remains saturated with water (which renders it unreactive) even under drought conditions.
The material being dredged at Bige in 2013 was not acid forming and is being used to produce a final capping cover for the stockpiles. In addition, the sulfur concentration of sediments in the river system has shown a gradual decrease in concentration. The MWTP will ensure that the sulphur concentrations in the river will continue to decrease.
-150 NAPP plan
(2002 – current)
To minimise the risk of ARD developing in the failing waste dumps at Mt Fubilan, limestone is added to the waste rock stream to make sure that there is sufficient excess limestone to control any oxidation of pyrite in the waste rock. This is referred to the -150 NAPP (Net Acid Production Potential) plan.
OTML monitors the NAPP of the mine area creeks immediately downstream of the waste dumps on an annual basis. Since the implementation of the -150 NAPP plan, sediments in the mine area creeks have generally approached or exceeded the -150 NAPP target and no evidence of ARD formation is observed.
Milling Limestone
(2010 – current)
To increase sand-sized limestone particles to the riverine deposits in the Ok Tedi River, the mill has produced on average, 4,000t of limestone per day. Monitoring shows that the limestone content of material reaching Bige increases, but the effect is muted due to deposition of limestone in the river upstream of Bige (which improves ARD control upstream of Bige). Since the implementation of this initiative, a gradual increase in limestone content at Bige has been observed.
Changes to mine cut-off ore grades
(continuous)
In 2013, the cut-off ore grade was lowered due to location of the ore zones in the pit and ore availability. This has the effect of converting waste containing significant quantities of copper into ore. The copper is extracted by metallurgical processing before disposing of the residue tailings material. The effect of this is to decrease the total load of copper being added to the rivers.
In combination with the MWTP the copper concentration in dredged material at Bige has decreased by approximately 20% over the last three years.
The average dissolved copper concentrations in the river system have fallen year on year to a low 7 microgram per litre (ug/L) in 2013 compared to 10 ug/L in 2009.
60 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
BIODIVERSITY IMPACTSThe primary impacts on
biodiversity are caused by the
use of riverine waste disposal
and to a lesser extent land
clearing for Bige stockpiles. The
discharge of waste to the river
results in sediment deposition
on the bed of the river and to a
lesser extent on the associated
floodplains. The secondary
effect of sediment deposition on
the bed of the river has caused
an increase in the duration of
floodplain inundation, which has
in turn resulted in conversion of
parts of the forested floodplain to
grassed floodplain in the lower Ok
Tedi and the Middle Fly reaches
of the river system. The forest
dieback extent is monitored
annually and reported to the
State in the Annual Environmental
report. In 2013, 1,875 km2
of dieback was recorded, of
which 288 km2 showed some
form of recovery. The areas
have not been recorded on the
PNG register as having high
biodiversity values or protected
status. OTML has not developed
Biodiversity Management Plans
for the impacted area. No direct
restoration of impacted areas
has occurred, however regular
monitoring is completed.
Since 1998, OTML has operated a
dredging operation at Bige that removes
approximately 85% of the sand-sized
material passing through the river system. By
removing the sand, increases in floodplain
inundation downstream is reduced and since
the implementation of dredging, the rate of
increase of dieback has decreased markedly.
A second major effect on biodiversity relates
to fish diversity. OTML has monitored fish
biomass and diversity using standardised
methods since 1983 and is therefore able to
assess the effect of riverine waste disposal
on diversity particularly in the main channels
of the river where the effect of riverine waste
disposal is greatest. It is conservatively
assumed that the decrease in fish diversity
is solely due to the Mine’s riverine waste
disposal practices. However, there are also
other effects due to:
• a rapidly increasing human population
with greater access to modern technology
(e.g. outboard motors and fishing nets);
• a commercial fishery that operates
periodically in the middle Fly; and
• introduced species such as Tilapia
appearing in the rivers and off water bodies.
Fish diversity is monitored annually at three
sites in the middle Fly River and reported to
the State in the annual environmental report.
In 2013, decreases in species richness (used
here as a surrogate for ‘diversity’) of 35%,
51% and 37% over the period from 1983 to
2013 were reported at the three monitoring
sites at Kuambit/Erekta, Bosset and Ogwa.
Detailed fish diversity studies throughout
the Ok Tedi and Fly River systems have
been completed in 2005 and 2011/12. The
most recent independent report; “Fly River
fish diversity survey 2011/2012”, stated
that, “Overall the 2005 and 2011/2012 fish diversity surveys and associated sampling in the catchment since 2000 have demonstrated that the majority of the fishes in the Fly River system continue to maintain populations within the catchment, but with marked reductions in the diversity of fishes in most reaches downstream of the Ok Tedi mine, at least as far as Everill Junction where the Strickland River converges with the Fly River, and possibly downstream of that point. Declines are more pronounced in the channel, but changes in the floodplain are also evident”.
OTML will continue to monitor the
riverine biodiversity as part of the annual
monitoring programme and maintain the
environmental mitigation projects to reduce
the overall impacts.
ENVIRONMENTAL PERFORMANCEOTML is committed to improving
environmental performance across all
aspects of the Company’s operations and
have prepared the 2013 data tables and
previous four years of data for comparison.
The total volume of waste rock and tailings
disposed in the riverine environment in 2013
was 59.9Mt, consisting of 44.2Mt of rock and
15.7Mt of tailings. The tailings production
was 37% lower than 2012 production. This
was due to extended down time as a result
of the failure of the SAG mill 2, pit flooding
impacting on ore delivery and general
maintenance time in the processing circuit.
ENVIRONMENT CONTINUED
CASE STUDY
SECURING OUR FUTURE 61
WATER USAGEIn 2013, total water use was 31% lower than
in 2012 and 77% of the water was recycled
through the processing plant with only 23%
made up of freshwater. Whilst the overall total
water use reduced, the water use per tonne of
copper increased from 109 to 122m3/t.
ENERGY CONSUMPTIONMining and processing of ores is an energy
intensive industry. OTML is a significant
user of diesel fuel in PNG. Fuel costs are a
major component of the overall costs and
where possible high cost fossil fuel use is
minimised whilst hydroelectric base load
power is being generated.
Diesel is used for all major transportation
including: powering of cargo ships and
concentrate barges, road transportation
of materials and goods from the Kiunga
wharf facility to Tabubil town and the mining
fleet consisting of trucks and shovels and
ancillary equipment and supplementary
power generation at Tabubil and Kiunga.
In 2013, total diesel consumption was
93.3 Megalitres (ML) and 26% was used
for power generation. Diesel is sourced
from the PNG State owned Interoil refinery
in Port Moresby and shipped to Kiunga.
Hydroelectric power provided 74% of
the power requirement through the two
hydroelectric generation stations, one at Ok
Menga and the other at Yuk Creek.
Twelve Gigawatt hours (GWh) of electricity,
comprising approximately 2% of OTML’s
total of 520GWh of electricity generated, was
sold to Western Power Utility for distribution
in the Kiunga town.
Greenhouse gas emissions were 40% lower
at 232,000 t CO2-e in 2013 compared to
2012. This decrease is attributed to less
fuel use and higher hydroelectric power
generation. The main CO2 sources include
diesel power generation, transportation and
CO2 generated as part of the conversion of
limestone to lime in the lime kiln.
WASTE RUBBER RECYCLING PLANTDisposal of mobile mining equipment waste tyres is a global mining industry
environmental management issue. Current industry practice has been to bury
these tyres in engineered constructed waste dumps. Environmental concerns
have been raised about the potential risk that tyres can resurface from the waste
dump burial in the future and the leaching of contaminants into waterways.
At OTML burial of tyres in engineered waste dumps is not an option, due to the
failing waste dump methodology. Tyres and other major rubber waste such as
used conveyor belts have been stockpiled at various locations at the Mt Fubilan
mine site and at Tabubil. This waste stream totals approximately 40,000m3 in
2013 and occupies valuable land, is unsightly, a fire hazard, does not break
down and is a potential community health risk by providing a breeding site for
rodents and mosquitoes.
In 2012, OTML purchased plant and equipment suitable to convert tyres and
conveyor belts into three recyclable products including: rubber crumb, steel and
waste textile. This plant is a first for PNG and cost PGK 14 million (USD 6 million).
The plant was commissioned in 2013 and small batches of tyres processed
to confirm product consistency. In 2013, 139t of tyres and conveyor belt was
crumbed, resulting in 107t of rubber crumb with the rest being steel or fibre belt.
The plant produces a rubber crumb (1-3 mm granules), and OTML sold 70t
to an Australian firm specialising in using the crumb for recycled products.
This includes; a component of asphalt road construction as a residual binder,
low impact surfaces for sporting fields, playgrounds and gymnasiums, sound
suppressing cladding for walls, bollards, boundary posts, road barriers, speed
bumps and rubber bricks. Further developments are planned to recycle the
rubber crumb into usable products onsite.
Image: Waste rubber recycling plant during commissioning.
62 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
ENERGY TYPE 2013 CONSUMPTION (PJ)
Total energy used (fossil + renewables) 5.07
Total energy (fossil) 3.69
Total renewable energy 1.38
Energy used for transportation (ships, planes, transport etc.) 3.2
ENVIRONMENTAL MANAGEMENT PERFORMANCE 2009 2010 2011 2012 2013
Environmental induction (No. of OTML and contract employees) 3,339 1,403 1,364 1,978 1,745
Environmental action plan (% completed) 74 81 85 81 81
Incidents level 3+ (medium, major or catastrophic) 0 1 5 1 1
WATER MANAGEMENT
Total water used (‘000 m3) 44,051 64,354 56,434 75,542 57,665
Freshwater (‘000 m3/% of total) 18,569 / 42 12,227.3 / 19 9,730 / 17 13,601 / 18 12,840 / 23
Recycled water (‘000 m3/% of total) 25,482 / 58 53,259 / 81 46,704 / 83 61,940 / 82 44.820 / 77
Freshwater intensity index (m3/t contained copper) 124 77 75 109 122
WASTE MANAGEMENT
Total riverine disposal (‘000 t) 54,235 45,705 27,279 53,978 59,873
Waste rock (‘000 t/% of total) 33,965 / 63 25,412 / 56 9,485 / 35 32,517 / 60 44,177 / 74
Tailings (‘000 t/% of total) 20,270 / 37 19,570 / 44 17,794 / 65 21,461 / 40 15,696 / 26
Riverine disposal intensity index (t/t contained copper) 360 286 209 431 464
Annual dredge slot production rates (Mt) 18.2 18.0 17.9 18.0 18.9
Average annual % sulphur in waste rock 1.46 0.92 0.25 0.53 0.68
Average annual % sulphur in tailings 0.82 0.99 0.95 0.86 0.86
Average annual ANC/MPA in dredged sediments 1.11 1.33 1.58 1.64 1.98
Average dissolved copper (ug/L) at Nukumba 10 9 9 8 7
Scrap metal (t shipped for recycling) 5,064 6,142 6,124 4,869 4100
ENERGY AND GREENHOUSE GAS PRODUCTION
Total diesel consumption (ML) 105.6 114 95 106 93.3
Diesel consumption for power generation (ML/% of total) 43.1 / 41 51.6 / 45 39 / 41 45 / 42 31.6 / 34
Diesel used for machinery / other (ML/% of total) 62.5 / 59 62.2 / 59 56 / 59 61 / 58 62.7 / 66
Electricity use (MWh) 521,500 483,516 469,478 532,899 519,700
Diesel generated electricity (MWh/% of total) 139,098 / 27 151,113 / 31 126,801 / 27 159,364 / 30 134,700 / 26
Hydroelectricity (MWh/% of total) 382,402 / 73 332,403 / 69 342,677 / 73 373,535 / 70 385,000 / 74
Power sold (MWh) NR NR NR NR 12
Energy intensity index (MWh/t contained copper) 3.5 3 3.6 4.3 4.8
GHG emissions (‘000 t CO2 e) 391 422 352 392 232
GHG emissions index (t CO2 e/t contained copper) 2 2 2 3.1 2.2
New land disturbed in 2013 (ha) 0 0 0 54.9 30
Total land disturbed to date (ha) 2,623 2,623 2,623 2,678 2,708
Land rehabilitated in 2013 (ha) 0 0 0 0 42
(NR = Not recorded)
ENVIRONMENT CONTINUED
SECURING OUR FUTURE 63
64 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
In 2013 a revised Mine Closure Plan (MCP)
was prepared to address the new mine
works and increased disturbance associated
with the mining West Wall Pit cutback,
development of the stable waste dump and
a further ten years of stockpile development
at Bige. The aim of mine closure planning is
to reduce the environmental impacts to as
low as practicable, progressively rehabilitate
final disturbed land when it comes available
for closure, to create stable landforms and
vegetate with plants and trees native to the
local areas. The MCP was submitted to the
State for approval. The MCPs are reviewed
with the CMCA communities.
At the Mt Fubilan mining area, there has
been no progressive rehabilitation to date
due to the mining area still being an active
operational area. However, self-seeding
and revegetation of areas of the older pit
wall and benches has occurred. At Bige,
the Company has established a nursery
where local trees have been propagated for
revegetation of the Bige Stockpiles. Trial
areas have been contoured and planted
with various grasses and tree seedlings with
the necessary fertiliser and organic material
which species can establish and survive.
This trial work will continue through 2014.
As part of planning for closure, OTML
has put aside PGK 555 million (USD 227)
million in a Financial Assurance Trust Fund
for closure works. This was reviewed as
part of the mine continuation studies.
Financial modelling has demonstrated that
the principle amount will meet the financial
needs for future closure based on normal
financial investment returns.
LAND DISTURBANCE AND MINE CLOSURE PLANNINGIn 2013, a further 30ha of new
land was disturbed for the
expansion of the Bige sediment
stockpiles, taking the maximum
disturbance to 2,708ha. During
this period, 42ha of Bige
stockpiles were rehabilitated
using a mixture of grasses and
tree species. No land rehabilitated
meets the end land use.
MINE CLOSURE PLANNINGThe progressive rehabilitation
of land and mine closure
planning are required to meet
stakeholder expectations and
environmental licence conditions.
The Mt Fubilan operation
and processing plant have a
comprehensive closure plan
in place. Implementation of
the plan was to commence in
2014/2015, however, with the
mine continuation, mine closure
will commence after 2025.
SECURING OUR FUTURE 65
ENVIRONMENTAL COMPENSATIONOTML reports on the amount of environmental compensation paid to communities and
landowners either as direct payment for damage to crops, gardens, waterways in the event of
a process or chemical spill or other mine related incident. These are reported as non-CMCA
related payments. In 2013, these payments totalled PGK 457,808 (USD 200,611) comprising
of PGK 360,000 (USD 157,752) for Kobom Creek vegetation dieback identified in 2012,
contamination of Kum Creek with copper concentrate from the Kilometre 59 pump station,
identified in 2012 PGK 30,000 (USD 13,146) and PGK 67,808 (USD 29,713) for sediment
impact to a creek line to the north west of the mine pit from mine operations. In addition to
compensation being paid, remedial actions were put in place as a result of these incidents.
The other annual compensation payment was made to the nine CMCA regions as direct
reparation due to legislated continued use of riverine tailings discharge. In 2013, this payment
totalled PGK 64,818,631 (USD 28,403,524).
ENVIRONMENTAL COMPENSATION (PGK) 2009 2010 2011 2012 2013
Non-CMCA related 0 8,000 1,077,140 0 457,808
CMCA related 64,565,984 65,153,570 66,410,654 64,373,513 64,818,631
Total 64,565,984 65,161,570 67,487,794 64,373,513 65,276,439
ENVIRONMENTAL COMPENSATION (USD)
Non-CMCA related 0 2,935 452,398 0 200,611
CMCA related 23,502,018 23,898,329 27,892,475 31,079,532 28,403,524
Total 23,502,018 23,901,264 28,344,873 31,079,532 28,418,511
Rural village in mine affected area.
WASTE MANAGEMENTOTML waste management
other than waste rock and
tailings, previously described
in this report includes the
recycling of various waste
products. No hazardous waste
was transported, imported or
exported. Other general waste
streams are sent to landfill.
Recycling included:
Waste oil2.3ML was used as fuel
in the lime kiln
Water73% of process water
was recycled through the
processing plant
Tyres and rubber139t of rubber was shredded
and 70t sold to A1 Rubber in
Australia for recycling
Steel4,100t of scrap steel was
shipped to Port Moresby for
onward sale as recycling.
66 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
CASE STUDYThe aim of the revegetation is to:
• stabilise the stockpile’s outer slopes
and crown through sustainable
vegetation cover;
• establish a primary vegetation cover
through which final canopy tree species
can be planted; and
• develop standard rehabilitation protocols
that include preferred species, vegetation
techniques and fertilisers that can then be
applied to future revegetation.
As part of the trials, the team identified
that the finer silt material could support
vegetation and harvesting of the silt material
naturally eroding from the stockpiles has
resulted in the recovery of over 20,000t of
material that has been reused in recent trials.
OTML purchased an industrial tub grinder to
mulch and chip trees and other vegetation.
This grinder was commissioned in
November and will be able to progressively
chip vegetation from areas where new
stockpiles are planned. The wood chip will
be incorporated into the final soil layer to
provide valuable organic material.
In May 2013, the Bige team commenced
the trials for the hydro mulch technology
on a 0.2ha area of the East bank stockpile
outer slope. The hydro mulch uses a
mixture of bonded fibre matrix (chipped
sorghum, paper, glues and tackifiers),
Japanese millet, Acacia auriculiformis, native seed (Premna serratifolia, Nauclea orientalis, Timonus timon, Paraserianthes falcataria and Glochidian novoguineense)
and inoculum. The mixture is sprayed onto
the slopes and initial success indicated a
healthy establishment of trees and grasses
after seven months. It is anticipated that the
learnings from this trial can be replicated on
future stockpiles.
BIGE REHABILITATION TRIALSThe Bige dredging project has
been operational since 1998 and
has recovered approximately
17Mtpa of sand and silt. This
material has been placed into
engineered stockpiles on the
East and West banks of the
river. Sections of the East bank
stockpile have reached final
design and the environmental
team commenced revegetation
trials on sections of the stockpile.
The stockpiles are predominately
constructed of sand-sized
particles and have negligible
organic and nutrient content.
MINE WASTE TAILINGS PROJECT ALLOWS COVERS TO BE PLACED ON BIGE EAST BANK STOCKPILES.In late 2008, the Mine Waste Tailings
Project (MWTP) was commissioned
by OTML. This project had been
implemented primarily in response to the
gradually increasing sulphur content of the
mine’s tailings and the associated risk of
ARD developing in the Bige stockpiles and
in some sediments deposited through the
lower Ok Tedi and Middle Fly Rivers.
The MWTP consists of three major
components with a capital cost exceeding
PGK 1,221 million (USD 466 million). The
first component is the Tailings Processing
Plant (TPP) which is effectively a complete
additional flotation circuit added to
the back end of the existing copper
concentrator. The TPP removes at least
80% of the sulphur in the form of the
mineral pyrite from the copper concentrate
tailings. The TPP produces two products;
a Pyrite Concentrate (Pcon) which is
transported via pipeline to Bige for safe
storage in constructed subaqueous pits
on the Ok Tedi floodplain at Bige and
a tailings stream comprising residual
ground up rock, with a mean sulphur
concentration of less than 1% that is
discharged to the river system. The second
component of the MWTP is a 125km
pipeline which transports the PCon to
OTML’s Bige site and the third component
is a series of large storage pits dredged
into the Ok Tedi floodplain that allow the
PCon to be safely and permanently stored
subaqueous and ultimately buried under at
least 10 metres of dredged sand.
By decreasing the sulphur content of the
tailings, the sulphur content of sediments
throughout the river system is gradually
decreased thereby decreasing the ARD
risk. At Bige the concentration of sulphur
in dredged material has decreased
to approximately 1.50% in 2013.
Simultaneously, the Acid Neutralising
ENVIRONMENT CONTINUED
0
0.5
1
1.5
2Median annual ANC/MPA ratio
20132012201120102009
SECURING OUR FUTURE 67
Capacity (ANC) of the dredged material has
increased as a result of targeted limestone
dumping into the mine’s waste dumps and
through the milling of barren limestone. As
a result the dredged material has changed
from being Potentially Acid Forming (PAF) in
2008 to being on average, Non-Acid Forming
(NAF) since the MWTP implementation.
The best measure of the improvements
in the geochemical quality of the dredged
material is through the ANC/MPA ratio which
is a measure of the risk of acid formation
occurring for a sample. Extensive testing on
OTML dredged materials shows that if the
ANC/MPA is less than one, then there is a
very high probability of the sediment being
acid forming ultimately. If the value is greater
than one, the risk of acid formation drops off
rapidly and the higher the ANC/MPA ratio
the lower the ARD risk. (The graph shows
how the median ANC/MPA ratio in dredged
material has continuously improved over
time since the MWTP was commissioned
and in 2013 was 1.98.)
Images (top to bottom): Mine Waste Tailings plant, Regrading Bige stockpiles prior to vegetation, Bige revegetation after seven months.
The alkaline material can be placed over
older, PAF material on the East Bank
stockpiles at Bige as a cover. This will
decrease the potential acid generation by
approximately 90%. Moreover since it has
such a high ANC/MPA ratio, the risk of future
acid generation forming on the cover is
minimised which allows for the successful
revegetation of the stockpiles.
VARIATION IN ANC/MPA AT BIGE BY YEAR
68 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OTML IS COMMITTED TO CONDUCTING ITS OPERATIONS IN A SOCIALLY RESPONSIBLE MANNER THAT RESPECTS CULTURAL HERITAGE AND TRADITIONAL RIGHTS. OTML BELIEVES THAT IT CAN CONDUCT BUSINESS IN A SAFE AND SUSTAINABLE MANNER THAT CAN BRING BENEFITS TO CURRENT AND FUTURE GENERATIONS. THE COMPANY RECOGNISES THAT THE OPERATIONS CAN HAVE BOTH POSITIVE AND NEGATIVE IMPACTS.
OTML acknowledges that its environmental
impacts are inherent with the business
and therefore the Company needs to fully
disclose the effects as part of transparent
communications and the license to operate.
The Company engages with its stakeholders
and maintains open and transparent
dialogue with the impacted communities
and government. The Community Relations
department (CRD) undertakes comprehensive
community engagement with all of those
communities who are affected by the
operations. The license to operate is linked
to Free Prior Informed Consent (FPIC) and
without a social license granted by the
CMCA communities, the PNG Government
and stakeholders, OTML acknowledges it
could not operate.
The social responsibility programmes
include a priority to recruit from the local
area wherever possible and engage local
businesses for contract services. The
programme’s focus is on developing
partnerships with local communities,
governments and businesses in order to
improve long term social and economic
development in Western Province.
This approach ensures the community
development programmes and benefits
are distributed appropriately and they
complement government initiatives and
aid agencies and Non-Government
Organisations (NGOs) working in the region.
A key goal is to build capacity within the
local community in order to manage long
term sustainable outcomes in health,
education, business and employment.
OTML participates in local business capacity
building through providing resources and
staff to participate on various boards and
trusts, strategic planning support, technical
services, networking assistance, financial
and in-kind resources.
The commitment to social responsibility
covers all phases of the project life cycle from
exploration, construction and development,
operations and mine closure activities.
COMMUNITY CONSULTATIONOTML believes that open dialogue with
its stakeholders is very important and key
to building strong relationships based on
trust and respect. By listening and openly
discussing issues, the views and concerns of
the community and stakeholders can be used
in the business decision making process.
The CRD is responsible for managing
the dissemination of information to the
communities and undertaking formal and
informal consultation. They are the main
interface between the stakeholders and
the Company. In the last ten years, there
has been no major community disruption
to OTML operations and the Company
generally enjoys a healthy working
relationship with the communities and this
has attributed to continuous consultation
and resolving issues promptly. Twice a year,
the team completes formal community
visits to each of the 156 villages in the
CMCA region. These meetings provide the
community and OTML a process to listen to
each other’s plans and grievances. OTML
uses the meetings to provide feedback
on issues previously raised, provide
information updates on mining operations
and environmental impacts. The community
is able to raise issues of concern and these
are recorded as requests or as grievances
through the grievance mechanism for follow-
up and resolution. Formal meetings are also
held with local, ward, provincial and national
government authorities. The bi-annual
community meeting process has proven to
be successful and has been used for the
CMCA community reviews and for the mine
continuation consultation. The patrols cover
all of the 156 CMCA villages and cover a
geographical area of over 98,000km2.
SOCIAL RESPONSIBILITY
SECURING OUR FUTURE 69
70 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
MINE CONTINUATION COMMUNITY CONSULTATIONMine continuation community consultation
was a phased approach, culminating in
a consultation programme in April 2013.
The mine continuation consultation was
completed by a PNG based consultancy as
independent facilitators supported by the
OTML CRD. The consultancy was assisted by
independent observers, two PNG nationals
of notable repute who were responsible for
monitoring the process and publicly reporting
on the conduct of each meeting.
During the consultation process, the
community expressed concern about waste
management practises and long-term impact
on the river. As part of the social license to
extend the mine, the Company proposed a
geotechnically stable waste rock dump be
constructed at the mine and also that the
total sediment loading impact to the riverine
system should not exceed that of the 2015
impacts. These constraints were incorporated
into the engineering studies and a suitable
mine plan was developed that enabled the
mine life to extend to 2025. To meet the
riverine constraint, processing production will
decrease after 2016 from 23Mtpa to 15Mtpa.
Lower production will reduce income and
subsequent royalty and community economic
benefits in the early years whilst the large
waste rock removal programme is completed
to expose the mineral resources.
The level of maturity in the
Company’s consultation
processes was tested during the
past three years of negotiations
regarding the proposed mine
continuation. This three-year
consultation programme
commenced with a request
from the communities to OTML
to investigate how the mine
operations could extend beyond
the proposed 2015 mine closure
date. A four-step consultation
process was implemented with
all of the 156 CMCA villages and
culminated in early 2013 with
CMCA communities consenting
to the mine continuation plans
to extend the mine operations
to 2025. Other material issues
raised by the communities and
other stakeholders during 2013
include the following:
• waste disposal of rock and
tailings to the riverine system;
• economic performance
and flow of benefits to
the community from mine
continuation;
• community consultation;
• community development
programmes;
• health;
• education; and
• employment and
training opportunities.
SOCIAL RESPONSIBILITY CONTINUED
12
4
3
SECURING OUR FUTURE 71
The four phase process that was incorporated into the mine continuation consultation included:
PHASE ONE June 2009 – “Preparations, Agenda Setting and Information Exchange”. Discussions with all the villages and the nine CMCA groups to select delegates.
Set out the consultation process and provide background information.
PHASE TWO March 2010 – “Options Discussed and Information Shared”. Formal meetings held in the village, regional and delegate levels. Meetings focussed on
open sharing of information and exchanging views and concerns between all parties.
PHASE THREE 2011 – 2012 – “Build Agreement” OTML presented to all parties the studies on the mine continuation project and the
findings from the environmental studies. The objective was to provide the communities
with a balanced understanding of the mine continuation benefits and environmental
impacts and the proposed environmental mitigation plans. This information exchange
was very important for the communities to make an informed decision.
PHASE FOUR November 2012 – April 2013 – “Signing of Mine Continuation Agreement”All nine CMCA regions consenting to the mine continuing through to 2025 and
signing of the Mine Continuation Agreement and communicating the outcomes
of the process to all 156 communities through a community consultation patrol.
Electrical maintenance workers completing transmission line repairs.
72 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
SIGNIFICANT DISPUTES RELATING TO LAND USE OR CUSTOMARY RIGHTSIn 2013 there were eight current land
disputes still open and under review or
involving court proceedings. The disputes
are generally about land ownership claims
around the Special Mining Lease land that is
leased to OTML and/or royalty payments.
In 2013 there was no resettlement of
community landowners on OTML leased lands.
ALLUVIAL SMALL SCALE MININGGold panning in the Upper OK Tedi provides
a livelihood to community members who are
unable to obtain other formal employment.
OTML completed surveys in 2008 and
2010 to determine the extent of small-scale
mining. In 2010, 241 miners were interviewed
comprising 70% male and 30% female, with
66% operating in the Western Province.
Those interviewed indicated they knew of up
to five other persons involved at any one time.
An estimate of potential miners engaged in
the activity is up to 2,300 persons. The survey
identified that a further three persons per
miner depend directly or indirectly on alluvial
mining. On average an alluvial miner could
earn up to PGK 1,000 (USD 230) per week
if conditions were favourable. The reasons
cited for mining were to earn an income to
meet daily living needs, pay school fees,
increase buying power and to meet bride
price demands. Issues associated with alluvial
mining include; impacts to the environment
through illegal settlements and uncontrolled
dumping of rubbish, health issues, increased
illegal sale of alcohol, drugs, theft, gambling
and prostitution.
INTEGRATED COMMUNITY DEVELOPMENT MANAGEMENT SYSTEM Considerable progress with development
of the Integrated Community Development
Management System (ICDMS) occurred
during the year. The ICDMS focus is
to provide a robust system to manage
community relation issues through till 2025.
The ICDMS builds upon previous work and
following a review of issues and challenges
a number of system components were
updated or developed. These include:
• community relations Strategic
Management Plan 2014 -2018. This plan
is aligned with the OTML 2025 Vision
and the content is aligned with the IFC
Performance Standards. The 2014 work
plan and budget was finalised;
• review of the community relations team
structure, roles and responsibilities. This
review also identified a need for updating
skills, training and knowledge transfer;
• development of the Community Grievance
Mechanism (CGM) system and database;
• Community Development Tool Kit
training; and
• Community relations data and records
management review and completed
analysis for a socio-economic database.
SOCIAL RESPONSIBILITY CONTINUED
The meetings held between
November 2012 and April 2013
concluded the formal mine
continuation consultation and the
following information and activities
were shared with the communities:
• final mine continuation
feasibility studies;
• final environmental studies
on the mine continuation;
• Community Mine Continuation
Agreement finalised;
• final OTML compensation
package for CMCA
communities;
• PNGSDP commitments;
• PNG Government
commitments; and
• other amendments to
legal documents including
Trust Deeds and Financial
Autonomy for Village
Planning Committees
The final step in providing
legal approval and setting
license conditions for the mine
continuation and all of the
social commitments is for the
PNG Parliament to develop
and pass the OTML Eleventh
Supplementary Agreement.
SECURING OUR FUTURE 73
OTML STAKEHOLDER COMPLIANT AND GRIEVANCE MECHANISMIn the Mineral Resource industry, addressing
environment and social complaints and
grievances in a responsible and systematic
approach is now an internationally accepted
standard. The United Nations and IFC
have encouraged the use of a Grievance
Mechanism tool in resource industries as
a means of empowering human rights and
resolving grievances.
The OTML Community Relations department
has developed a Grievance Mechanism
Framework for implementation under the “Ok
Tedi 2025 Securing Our Future”. The objective
of the CGM is to have a standard process
in place and a procedure for receiving,
registering and addressing complaints and
grievances in a timely manner. The CGM
has a process of escalation leading to
independent arbitration should a compliant
be unresolved through normal negotiation
processes with OTML management.
COMMUNITY RELATIONS STAFF UP-SKILLING IN COMMUNITY DEVELOPMENTDuring 2013, an external consultant provided
training for the Community Relations teams.
The course included 20 sessions of the
International Council of Metals and Mining
(ICMM) Community Development Toolkit
(2013) “Train the Trainer” and two additional
toolkit sessions on the ICMM Sustainable
Livelihoods Framework and Logical
Framework Approach. The training methods
were based on a participatory approach and
used problem based learning techniques,
short lectures and group presentations
to deliver capacity building outcomes.
The learnings will assist in development
of the ICDMS and improved community
development programmes.
COMMUNITY MINE CONTINUATION AGREEMENTThis agreement defines the cash
compensation, investment and development
payments that OTML will make to the 156
CMCA villages affected by the operations.
The CMCA communities are grouped into
nine areas (Regional Map) and represent over
120,000 people. The nine CMCA regions
extend from the mine to the South Fly. Each
region is represented by four representatives,
with at least one woman. A total of 36
elected community members comprise
the CMCA Working Group and attend the
delegates meetings along with government
representatives, OTML, churches, women
and youth organisations and NGOs.
WOMEN’S REPRESENTATION In 2007 during the mine
benefits stream negotiations for
communities affected by the
OTML operations, each CMCA
region was represented by one
woman. The women were able
to negotiate for 10% of the
funds from the mine operations.
These funds are to be dedicated
to women and children’s
programmes. This was a ground
breaking achievement for women
in PNG and reinforced women’s
access rights of representation
at the highest levels of decision-
making on mine benefits for local
communities. The Memorandum
of Agreement (MOA) following
the review specifically provided
for recognition of women’s
representatives on Village
Planning Committees (VPC), the
CMCA Association and the Board
of the OTDF. The 10% translated
into PGK 101 million (USD
45 million) and as expected,
planning and disbursing the
money into projects presented
implementation challenges.
Opening of the Kuem Primary School (Middle Fly) solar electrical supply project.
74 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
The CMCA women’s leadership
engaged with the PNG
Department of National Planning,
OTML, PNGSDP and the OTDF
who assisted in planning by
articulating and prioritising
the vision and needs into nine
respective CMCA Women and
Children’s Action Plans for
implementation. Drawdown
of the funds and successful
project implementation has been
slower than anticipated due
to the challenges on capacity
deficits and knowledge around
the process of the MOA, funding
sources and responsibilities of
different entities charged with
project implementation.
In 2012, when the Mine
Continuation Agreements came
up for five year review, up to 30
women leaders participated in
the negotiation process. Each
region was represented by three
women negotiators with six from
the Mine Village CMCA. During
the negotiations, the women
were able to increase the trust
funding set-aside for women
and children from between 10%
to 18.24%, depending on the
region. Support for the increase
came from the male leaders
as they recognised that the
women leaders were facilitating
programmes that benefit the
whole village and the families.
During the planning stages the women
identified five high impact priority
expenditure areas for project design and
implementation as follows:
• capacity building and institutional
strengthening;
• infrastructure (feeder roads,
water transport, electricity and
communications);
• sustainable livelihoods and food security;
• education and adult literacy; and
• health (water and sanitation).
The CMCA women leaders identified the
main challenge as being ensuring mine
continuation compensation funds are
properly used for social and economic
infrastructure projects such as roads, jetties,
bridges, health centres, health outpost,
classrooms, libraries, teachers, doctors and
nurse’s houses. The view is that these are
the critical enablers for service delivery.
Other community needs include support
for the growing of cash crops such as
rubber and eaglewood and food production
including vegetables, fish and poultry to
support community livelihoods. The mine
continuation funding was seen as being a
lever for change leading to a self-supporting
sustainable future without OTML.
It was recognised by the women leaders that
there are still further steps to improve the
implementation including:
• Capacity Development – institutional
capacity and human resource development
are the primary means to ensuring
that women are able to manage their
associations, take control and manage the
Women and Children’s Fund separately
from current Trust arrangements;
• Stakeholder collaboration – closer
collaboration and partnership between all
stakeholders to complement each other’s
efforts in project delivery;
• Empowering Village Planning Committees
with project management skills –
empowering VPCs to manage small village
projects would ensure project ownership;
• Ownership and sustainability – the
negotiators would like women’s
leadership to be consulted to ensure
ownership and sustainability; and
• Greater representation on the OTDF board.
During the mine continuation’s final five weeks
of negotiations, the World Bank was invited
by OTML to be an independent observer of
the process and to observe women’s roles
in the process and to document women’s
aspirations and expectations from the
process. The World Bank prepared a report
on the process entitled, “Negotiating with the
PNG Mining Industry for Women’s Access
to Resources and Voice: The Ok Tedi Mine
Continuation Negotiations for Mine Benefit
Packages”, December 2013 can be found at
www.worldbank.org/png.
In 2013, eight of the CMCA Women’s
Associations were formally registered and
election of women leaders completed and
initial meetings conducted. Highlights in
2013 were the women earning first place
at the Morobe Show for their display, the
Middle Fly women funding their own agro-
forestry eaglewood project, the opening of
learning and training centres at Haidowogam
in North Fly and Deware in the South Fly.
COMMUNITY HEALTH Access to high quality health services by the
community and the Company’s employees
is a priority. OTML has been the main
provider and financial supporter of private
and public health services in the Tabubil and
mine affected regions. The Company works
closely with a number of multi-sectoral
stakeholders for provision of health services
through the Western Province. These include
the Western Province Provincial Health
Department, various church based providers,
NGOs and private health providers.
SOCIAL RESPONSIBILITY CONTINUED
CASE STUDY
SECURING OUR FUTURE 75
JOSEPH RETURNS HOME TO SAMARI VILLAGE AS A QUALIFIED PRIMARY TEACHERSiware Joseph lives in the Samari village in the South Fly district and returned as
a qualified primary school teacher thanks to sponsorship from the CMCA Kiwaba
Trust. After completing Grade 12 in 2008, Joseph was left with no opportunities
for continuing his education so he remained in the village for two years helping
his parents with gardening and fishing. In 2010 Joseph heard about the Catholic
Sacred Heart Teachers College in Port Moresby. He applied for entry and his
family submitted a sponsorship request to the Kiwaba Trust Board. Joseph was
accepted into the college and the Trust sponsored Joseph for two years so he
could complete his Diploma in Primary Teaching in 2012.
After graduating, instead of staying in Port Moresby teaching, Joseph returned to
Samari village to teach grade 3 and 4 at Samari Primary School.
Asked what made him return to his village, which is one of the most isolated
villages in the Kiwai Group of Islands, he said: “I had no opportunity for employment whatsoever but because of the (Kiwaba) Trust, I am now a teacher so I felt that I needed to return home and contribute something back to my village and the region. This is my way of saying thank you” and, “this is where I belong and this is where I can help bring change.”
Considered as educated elite within his own community, Joseph said in order
for Samari including the other 155 villages in the CMCA region to change,
people must change their attitudes. “Samari is one of the 11 villages that have been declared as Model Villages by OTDF in an attempt to deliver wholesale development changes within the CMCA. With education being one of the areas this programme will be looking at improving, I believe that this will change so many things, not just for myself and my family, but my whole village including the Kiwaba region and Western Province as a whole,” he said.
Image: Mr Joseph Siware (RHS) and headmaster Mr Bernard Bama from Samari Primary School, South Fly Region
OTML, as part of its long-term sustainability
vision, has outsourced the provision of major
health services to concentrate on its core
business of mining. OTML has engaged
Divine Word University’s (DWU) commercial
subsidiary, Diwai Pharmaceuticals Limited
(DPhL) to manage the Tabubil hospital.
The hospital, which is owned by OTML,
has served employees and their families,
contractors and communities from Western
Province and Telefomin District for many
years and is best known for being the
Western Province’s referral hospital,
servicing the North, Middle and South Fly
districts. OTML will continue to provide core
funding for the hospital and a new Board
comprising members from DWL and OTML
will provide oversight and governance.
Under the arrangements DPhL will develop
the hospital into a teaching hospital that will
support university students under the rural
health programme in their clinical training
and also conduct medical research. The
hospital has consistently rated five stars in
accreditation under the PNG National Health
Service Standards.
In 2013, the focus was on completing
the handover and transition to DPhL
management, whilst providing high level of
patient service and care. A review of staffing,
housing, funding and developing a 2014
strategic plan was completed. A number
of staff transitioned from OTML to DPhL
contracts. The hospital currently has over
80 staff with senior medical practitioners
specialising in obstetrics and gynaecology,
paediatrics, general surgery, consulting
physicians and offers outpatient, pathology,
x-ray, dental, blood bank services as well as
public health programmes.
The community has also established the
“Friends of Tabubil Hospital”, an auxiliary
group that meets monthly. The group
holds regular fund raising functions and
also provides support through visitations
especially to the children’s and maternity
wards. The group has donated ultrasound
equipment for the maternity ward and
televisions in the outpatient areas.
76 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
NORTH FLY HEALTH SERVICES2013 marked the completion of the first
five years of the North Fly Health Services
Development Programme (NFHSDP). This
public private partnership is funded by
OTML and is a partnership between OTML,
Evangelical Church of PNG, Catholic Health
Services, North Fly District Health Services
and Abt JTA, a specialist International
health sector firm. The programme works
with all health service delivery stakeholders
in North Fly to achieve sustainable health
improvements through the strengthening
of the existing health system. In November
2013, OTML committed funds for a further
five years of the programme.
The NFHSDP was designed and is being
implemented in line with the National
Department of Health’s (NDoH) Strategic
Plan and priorities. The NDoH priorities,
and therefore a number of the NFHSDP’s
12 objectives, align with several United
Nation Millennium Development Goals
(MDGs), including:
• MDG 4 - Reduce Child Mortality;
• MDG 5 - Improve Maternal Health; and
• MDG 6 - Combat HIV/AIDS, Malaria
and other diseases.
The PNG National Department of Health’s
Annual Sector Review reported that provision
across the North Fly District remained above
national averages for eight of the 14 indicators
used to monitor the performance of the health
system across the country in 2012 (2013
report is not due till May 2014). Key areas of
improvement in the North Fly District are:
• pneumonia related deaths in children
under five years of age decreased from
4.5% in 2011 to 3.2% in 2012;
• the percentage of low birth weights
decreased from 13% to 8%;
• a decrease in incidence in malaria from
342 cases per 1,000 population to 207
cases per 1,000 population;
• the proportion of women having
supervised births in health centres and
hospitals remains high at 95%;
• adequacy of medical supplies with the
percentage of months that facilities have
no shortages is high at 95%; and
• 3rd dose pentavalent immunisation
coverage remains high at 74%.
Tabubil hospital provides
support for the six local aid
posts in the mine lease areas
including Finalbin, Bultem,
Migalsim, Sissimarkem, Ok
Ma and Atemkit. As part of the
rural health plan functional aid
posts stocked with medicines
and qualified staff mean that the
community can be assessed
and treated for most illnesses
by the aid post and if serious,
referred to the Tabubil hospital.
Local treatment options mean
that patients do not have to
travel to centralised services and
this has reduced the number of
outpatients presenting at Tabubil.
In June 2013 the CMCA
committees and governmental
health officials created the
Western Province Health Steering
Committee in collaboration
with the Fly River Provincial
Government (FRPG). This
committee combines all interested
stakeholders from the community,
public and private sectors and
meets quarterly to bring together
the key stakeholders with the
will to improve health outcomes
across the Province.
Recently constructed regional Balimo Hospital funded from the Ok Tedi Tax Credit Scheme.
SOCIAL RESPONSIBILITY CONTINUED
SECURING OUR FUTURE 77
• repaired radio and cold chain
equipment at Kiunga Hospital,
Catholic Health Services and
Rumginae Hospital;
• 11 participants from all
health service agencies
participated in a two day
radio maintenance training
programme in November;
• commemorated World TB
day (24 March) in Kiunga and
Tabubil, with a community
programme to raise awareness
about the prevention and
treatment of TB; and
• commemorated World AIDS
day (1 December) in Kiunga
with a community programme
to raise awareness about the
prevention and treatment of HIV
and reducing stigma for people
living with HIV and AIDS.NFHSDP achievements in 2013 include:
• 16,100 outpatient services at Tabubil
Urban Clinic. This was an increase of over
1,000 consultations compared to 2012;
• 22 Maternal and Child Health (MCH)
patrols conducted in collaboration with
health service partners. MCH patrols
include immunising children, antenatal
checks, family planning clinics treating
sick people and school health visits;
• over 10,000 immunisations have been
administered. In addition to routine MCH
patrols with partner organisations, the
NFHSDP participated in the national
Supplementary Immunisation Activity in July;
• 6-weekly MCH outreach clinics from
Tabubil Urban Clinic to villages along the
Tabubil-Kiunga highway;
• participated in an integrated multi-
stakeholder response to a typhoid
outbreak in the Tabubil area in April;
• constructed a multi-purpose building
at Matkomnai Health Centre, a Catholic
Health Services-run facility;
• North Fly District Administrator assumed
the role of Chairperson of the North Fly
District Health Management Committee.
The committee was previously run as the
Programme Implementation Coordinating
Committee convened and chaired by
NFHSDP and has now evolved into a
broader forum for health sector coordination,
a significant achievement towards
sustainability in health sector governance;
• drafted an options paper for using mobile
health to address challenges in health
service delivery in North Fly District.
Recommendations will be considered and
implemented in 2014;
• one vehicle donated to Callan Services
to assist with their outreach services to
people with disabilities;
• new Tuberculosis (TB) ward, surgical
ward and morgue constructed at Kiunga
Hospital, and completed in April;
• assisted Catholic Health Services
to conduct Village Health Volunteer
Community Action and Participation
training in three villages in September;
• coordinated and participated in the
International Education Agency Couple’s
Counselling training in Kiunga in September;
• 23 health workers trained in administering
TB shots in December, a training
programme funded by NFHSDP;
• six rain water tanks installed at Kungim
Health Centre, in partnership with North
Fly District Health Services;
• attended a ceremony for the re-opening
of Mogulu Health Centre, for which
NFHSDP contributed building materials
in 2009;
• mobilisation activities with the
communities of Timinsiriap and
Rudmesuk which saw the villages adopt
the World Health Organisation endorsed
Healthy Village principles;
• 15 ventilated and improved pit
toilets constructed in Timinsiriap, a
collaborative effort between NFHSDP
and community members;
78 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
EDUCATIONOTML has been a long-term supporter of
the local schools and, through the PNGSDP
and OTDF, has constructed and refurbished
many new school classrooms and teacher’s
houses. Education is widely accepted by the
Western Province communities as a way their
children can improve their self-worth and a
pathway to obtaining quality employment and
a career. Provision of high quality education
is important for all residential employees who
raise their families in Tabubil. In Tabubil there
are the Primary and Secondary Schools.
In 2013, OTML provided funding for the
completion of new classrooms for years 11
and 12 at the Secondary school and these
classrooms were completed in time for the
2014 school intake.
In Tabubil, OTML also supported the
International School. The school was
recently managed by Star Mountains
Institute of Technology, a subsidiary of
the PNGSDP, which closed operations in
late 2013. OTML invited DWU to take over
management of the school, in a similar
private partnership to the Tabubil Hospital.
DWU is a premier university in PNG and has
strong strategic links with the education
primary sector. The school offers the
International Baccalaureate curriculum for
primary students aged three to 12 years
and a middle year’s programme for students
aged 12 to 16. The plan is to extend the
school programme to include classes up
to year 12. In 2014, the Memorandum
of Agreement will be finalised and the
management transition completed.
Other initiatives include DWU taking over
management of the Community Learning
Centre, which offers adult distance learning
up to year 12. Development of this centre
into a Flexible Learning centre will result in
DWU being able to offer flexible learning
diploma, degree and masters level courses.
Following a request from CMCA regarding
improving education through the Western
Province, OTDF facilitated the formation of
the Western Province Education Steering
Committee in collaboration with the Fly River
Provincial Government. The committee is
expected to meet quarterly and bring together
the key stakeholders with the aim to improve
the education sectors across the Province.
The Education Steering Committee had
its inaugural meeting in June 2013 and
is chaired by the Provincial Education
Adviser. By year-end a second meeting saw
members deliberate on an evaluation of 19
Expressions of Interest submitted to conduct
an education feasibility study, namely:
“To develop a Provincial Education
improvement programme with a focus on
elementary, primary and vocational education”.
Three companies were short listed and
approached to prepare a detailed proposal
by February 2014.
The Education Steering Committee also
agreed to return to the former centralised
schooling system created under the previous
Australian administration. Consequently,
OTDF took the opportunity to select model
schools in the Middle and South Fly and
partner with the Trinity Anglican School in
Cairns, OTML and the Liklik Skul Foundation
to deliver school resources, improve teacher
capacity and infrastructure. To date there
has been the installation of commercial solar
power at the Kuem and Nakaku Primary
schools funded by OTML, the delivery
of more than a tonne of school books,
stationery, craft and sporting equipment from
Trinity Anglican School and the rehabilitation
of the Kuem and Bosset elementary
classrooms by the Liklik Skul Foundation. In
2014, the Trinity Anglican School teachers
will visit Kuem for a fortnight during school
term to understand the needs of the school
and to subsequently develop a teacher
capacity-building plan.
The OTDF has been encouraging funding to
potential teachers and health workers with an
agreement with the FRPG to then return to
vacant positions in their respective regions.
SOCIAL RESPONSIBILITY CONTINUED
MIDDLE AND SOUTH FLY HEALTH SERVICESDue to the success of the North
Fly Health Services Development
Programme, OTDF was invited
by the Western Province Health
Steering committee to complete
a health feasibility study to
investigate how to improve
Primary Health care in the Middle
and South Fly districts. Abt JTA
were selected by the committee
to deliver a comprehensive
health improvement programme
throughout all Middle and South
Fly CMCA villages over the next
five years, worth PGK 43 million
(USD 20 million). Abt JTA recently
completed a six-month baseline
study including visiting 65
villages and reviewing capacity
and infrastructure assessments
and an action plan for 2014,
prepared in consultation with
key stakeholders (Fly River
Provincial Government,
Churches and local communities).
SECURING OUR FUTURE 79
OK TEDI DEVELOPMENT FOUNDATIONThe Ok Tedi Development Foundation (OTDF)
is a non-profit organisation established to
manage the delivery of projects for the people
of the CMCA in Western Province. OTDF
has proven to be successful in planning and
delivery of services, training and infrastructure
and is now the community provider of choice
for projects funded from CMCA Trust Funds,
The Western Province People’s Dividend
Trust Fund (WPPDTF) and the Women and
Children’s Funds. OTDF also takes on delivery
of OTML’s TCS projects.
OTDF works both independently on behalf
of the communities and also partners with
multi-sectoral stakeholders including the Fly
River Provincial Government, PNGSDP, The
PNG National Government and aid agencies
like the Australian Agency for International
Development (AusAID) to deliver a wide
range of community development and
infrastructure programmes.
OTDF has a team of 120 comprising both
full time employees and contractors. Within
the OTDF structure the three main groups to
support the delivery of services and projects
to the Western Province communities are:
• Regional Development – this group
engages in development projects that
benefit people living in the North, Middle
and South Fly Areas;
• Project Support Services – this group
manages services such as the Tax Credit
Scheme, Special Support Grants and
CMCA infrastructure projects; and
• Finance and Logistics – this group
comprises the CMCA Trust Administration
Team, OTDF Logistics, Finance and
Support teams.
In 2013, OTDF completed 285 Trust
Development Projects across the Province
worth PGK 14.1 million (USD 6.2 million).
The larger projects included:
• sponsorship of 1,869 students to attend
various education institutions across
PNG - PGK 3.3 million (USD1.5 million);
• building and housing infrastructure
improvements benefiting 305 families -
PGK 4.3 million (USD 1.9 million);
• Women and Children’s Programme -
PGK 478,992 (USD 210,725); and
• livelihood development programmes
(food security, forestry, water supply) -
PGK 601,874 (USD 264,825).
In 2013, PGK 135.8 million (USD 60.0 million) was available in the WPPTDF and four major
projects were approved by the committee for funding. These included:
Middle and South Fly CMCA Area Health Programme PGK 43.0 million (USD 18.9 million)
Pampenai Road Rehabilitation Project PGK 10.1 million (USD 4.4 million)
Ningerum to Nupmo Footbridge PGK 10.6 million (USD 4.7 million)
Aiambak to Lake Murray and Kasa Feeder Road Project PGK 61.3 million (USD 27.0 million)
Total PGK 125.0 million (USD 55.0 million)
Further information on OTDF activities can be found on the website: www.otdfpng.org and in
the OTDF Annual Report, 2013.
80 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
PNGSDPThe PNGSDP was established as an
Independent not-profit, special purpose
company with a mandate to apply OTML
dividends for infrastructure and other
sustainable projects are in the Western
Province and other regions of PNG.
PNGSDP had committed PGK 33.2 million
(USD 14.6 million) in funding to various
projects, including the Women and Children’s
fund, South Fly water project and other
projects to be delivered by OTDF. With the
freeze in funds subsequent to the cessation
as a shareholder of OTML, delivery of these
projects has been put on hold. It will be
important for OTML to work with the State
to release these funds from the PNGSDP to
honour the agreed funding commitments.
ECONOMIC CONTRIBUTION Part of OTML’s social responsibility is the
ability to make positive social and economic
contributions to the region and communities
in the Western Province. OTML is the single
largest business in the Western Province
and provides significant funds towards
sustainable socio-economic development.
To maintain the social license to operate the
Company has a commitment to comply with
various agreements. Development must be
undertaken in partnership with stakeholder
involvement including communities and
various levels of governments. OTML
contributes economically to the communities
both directly – through services and
infrastructure provided specifically for
community benefit and indirectly – through
facilitating community access to services and
infrastructure necessary for the business.
OTML’s economic contribution to PNG and
the Western Province economy is through
the following ways:
• royalties from sales of copper,
gold and silver product;
• salaries paid directly to employees;
• capital and operating expenditure to
suppliers of goods and services in PNG;
• payments under the various land and
community agreements;
• various business taxes including, company,
payroll, goods and services, TCS;
• donations and investments in community
development programmes; and
• investment in local and regional
infrastructure including roads, bridges,
jetties, etc.
A summary showing all payments over the
past five years is shown in the following Table.
The total payments to all entities were lower
in 2013 than for the previous four years. Due
to declining ore grades, metal prices and
considerable operational down time in 2013,
the Company’s profit in 2013 was much lower
than in 2012. During 2013, the mine moved
into the first phase of commencing the mine
continuation with large stripping of waste rock
from the Mt Fubilan pit. No dividends were
paid. Salaries and wages were higher due to
redundancy payouts.
OTDF SUPPORT FOR CMCASThe CMCA has many small
enterprises wanting to start
business opportunities as well
as primary industry opportunities
thanks to improved transport
infrastructure, agriculture
and forestry projects being
delivered by OTDF. To support
small businesses startups
and cooperatives, OTDF has
recruited a Team Leader and
three staff members to fully
support communities from 2014.
Other CMCA projects that the
OTDF has facilitated include
financial literacy and agriculture
(e.g. rice farming, aquaculture),
agroforestry (eaglewood) and
livestock training (e.g. Muscovy
duck husbandry) across the
CMCA as well as the Women and
Children’s Programme delivery
(e.g. cooking and sewing).
CMCA small business Muscovy duck husbandry project.
SOCIAL RESPONSIBILITY CONTINUED
SECURING OUR FUTURE 81
OTML contributions to Western Province and the PNG Economy in 2013
PGK MILLIONS USD MILLIONS
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013
Taxes & levees paid to PNG Government 310.0 919.5 1,173.5 444.8 261.5 112.8 337.3 496.0 214.3 114.6
Dividend Paid
- PNGSDP 485.4 939.0 490.4 458.3 - 176.7 344.4 221.9 221.9 -
- Government 140.0 303.9 141.6 132.3 - 52.5 110.0 64.1 64.1 -
- Fly River Provincial Government, MRA 140.0 237.7 141.6 132.3 - 52.5 85.0 64.1 64.1 -
765.4 1,480.6 773.6 722.9 - 281.7 539.4 350.0 350.0 -
Royalty Payment
- Western Provincial Government 33.6 46.8 42.9 32.7 25.1 12.2 17.2 18.1 15.8 11.0
- Land Owners 33.6 46.8 42.9 32.7 25.1 12.2 17.2 18.1 15.8 11.0
Less: Royalty tax - Land Owners (1.7) (2.3) (2.1) (1.6) (1.2) (0.6) (0.8) (0.9) (0.8) (0.5)
65.4 91.3 83.7 63.8 49.0 23.8 33.5 35.4 30.7 21.5
Tax Credit Scheme (TCS)
- Health 17.5 8.8 2.9 5.6 0.9 6.4 3.2 1.2 2.7 0.4
- Education 7.8 12.4 11.8 0.1 6.7 2.8 4.5 5.0 0.05 2.94
- Roads, bridges, airports 0.6 11.9 11.5 0.2 6.2 0.2 4.4 4.9 0.1 2.7
- Utilities 14.7 13.7 16.2 0.1 11.9 5.4 5.0 6.9 0.0 5.2
40.6 46.8 42.4 6.0 25.7 14.8 17.2 17.9 2.9 11.3
Goods Purchases in PNG 284.2 434.7 286.8 313.3 294.0 103.4 159.4 121.2 150.9 128.8
PNG Contractors 1,025.3 503.7 507.7 483.0 441.3 373.2 184.8 214.6 232.7 193.4
Local training costs 6.6 7.6 8.6 8.0 8.1 2.4 2.8 3.6 3.9 3.5
Salaries and wages 302.8 315.9 202.6 209.4 460.2 110.2 115.9 85.6 101.1 190.8
TOTAL 2,800.3 3,800.1 3,078.9 2,251.2 1,539.8 1,022.4 1,390.2 1,324.4 1,086.5 663.9
82 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
SOCIAL RESPONSIBILITY CONTINUED
ROYALTY PAYMENTS In 2013, OTML paid PGK 49 million (USD 22 million) in royalties based on the copper
production. The royalties were distributed as follows to the various recipients:
Western Provincial Government PGK 25.1 million (USD 11.2 million)
Landowners PGK 25.1 million (USD 11.2 million)
National Government (IRC withholding tax) PGK (1.2) million (USD -0.4 million)
An annual payment of PGK 34.8 million (USD 15.3 million) was also incurred for the Kiunga to
Tabubil road maintenance.
COMPENSATION PAYMENTSOTML makes annual compensation payments. These payments typically cover payment for
the various leases the mine and its infrastructure overlay, general compensation payments to
CMCA, donations, mine landowner projects, environmental and other general compensation.
In 2013 compensation payments totalled PGK 72.8 million (USD 32.0 million).
CMCA PAYMENTS The CMCA provides specific funding on an annual basis to the 156 CMCA villages. The
funding includes reparation for the mining impacts on the receiving environment. The
Agreement requires OTML to seek consent prior to making material changes to its operations
and make investment and development payments through the eight Trust Regions and
six Mine Villages. To mobilise the Trusts, the VPC are empowered to identify and prioritise
sustainable development projects. The Trustees of each Trust meet every quarter to approve
new projects submitted by the VPC’s and to review progress of projects under construction.
In 2013 the following funds were deposited to the various groups and Trusts accounts:
Mine Landowners (6 village communities) PGK 2.68 million (USD 1.18 million)
Development Fund PGK 15.96 million (USD 7.02 million)
Women & Children’s Fund PGK 4.91 million (USD 2.16 million)
Investment Fund PGK 7.19 million (USD 3.16 million)
Special Compensation PGK 22.18 million (USD 9.76 million)
Logi, Kawok, Komokpin Villages PGK 1.83 million (USD 0.81 million)
TOTAL PGK 54.75 million (USD 24.09 million)
SECURING OUR FUTURE 83
TAX CREDIT SCHEME The Tax Credit Scheme (TCS) was established by the PNG National Government in 1996
to deliver infrastructure and development projects to the Province in which the resource
company operates. This funding stream is poorly understood and is often thought to be
the resource developer’s funds, where in fact it is the National Government’s direct funding
for projects, from the taxes collected in the Province where they were generated. The TCS
guidelines issued by the Internal Revenue Commission define the types of projects that
qualify for TCS funding. The funding is based on the lesser of the income tax payable for the
year or 0.75% of assessable income.
OTML’s TCS was established in 1997 and has provided significant development and impact
project funding to the Western Province and Sandaun Province worth circa PGK 287.7 million
(USD 115 million). In 2013, the OTML TCS contribution was PGK 25.7 million (USD 11.3 million).
The projects included:
HEALTH
Balimo Hospital – Redevelopment (Stage 2) PGK 0.9 million (USD 0.4 million)
EDUCATION
Oksapin High School Development Project PGK 3.3 million (USD 1.4 million)
Telefomin High School Repair & Maintenance PGK 2.8 million (USD 1.3 million)
Raiakam Primary School Development PGK 0.6 million (USD 0.3 million)
ROADS, BRIDGES, AIRPORTS & BUILDINGS
Rehabilitation of existing Jetties and one new Jetty PGK 6.2 million (USD 2.7 million)
UTILITIES
Kiunga Town Water Supply Upgrade PGK 11.9 million (USD 5.2 million)
TOTAL PGK 25.7 million (USD 11.3 million)
CMCA women’s small business sewing training project.
LOCAL BUSINESS DEVELOPMENTOTML is a major customer for
local businesses who can provide
a reliable and competitive
service. Local business is a very
important industry that provides
direct employment and services
to OTML and the broader
community. To be sustainable in
the longer term, local businesses
need to diversify and develop a
larger customer base rather than
just rely on OTML.
OTML’s Contracts and
Procurement department
engages over 40 local businesses
with small to medium and large
contracts. Annually, over PGK
294 million (USD 130 million)
is being awarded in contracts
to PNG businesses. The local
businesses that have been
proven suppliers usually have
well developed management and
governance frameworks which
provide them with the capacity
to be awarded larger and more
complex contracts with OTML.
84 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
With the mine continuation
reducing production and costs
by approximately 30% into the
future, a review of the impact on
local businesses identified the
following issues:
• there are many small
businesses competing
against each other offering
the same services, and with
limited capacity;
• the larger, well-performing
businesses do not consistently
declare dividends and local
shareholders miss out,
especially in joint ventures and
partnerships; and
• local shareholding structures
are not clearly defined for
landowner businesses.
In the future, local businesses
will not be immune to an overall
reduction in purchasing from
OTML and the challenge going
forward for OTML is to review its
contractor local businesses and
implement a strategy that still
upholds its social responsibility
without compromising viability.
There are a number of options
that the OTML and OTDF
business teams are reviewing
to ensure that the Small and
Medium Enterprises (SME)
supply chain remain viable, are
dependable business partners
with OTML and the underlying
shareholders receive dividend
returns from the business profits.
SOCIAL RESPONSIBILITY CONTINUED
In 2013, there were 2,154 service contracts (e.g. labour, plant and equipment hire, etc.)
awarded to PNG companies which was 84% of all contracts. The overall percentage value
was 49% of total value. The total value of service contracts was PGK 441.3 million
(USD 194.2 million). Goods purchased in PNG totalled PGK 294.0 million (USD 129.4 million).
The breakdown of purchase of goods by location is shown in the table below.
ORIGIN VALUE IN PGK VALUE IN USD
Western Province, PNG 50,021,685 22,009,541
National Papua New Guinea 244,006,605 107,362,906
Overseas 390,395,796 171,774,150
TOTAL 684,424,086 301,146,597
Breakdown of Purchase of Goods in Western Province, PNG
LOCAL PURCHASES IN WESTERN PROVINCE VALUE IN PGK VALUE IN USD
Daru 57,991 25,516
Kiunga 3,963,405 1,743,898
Tabubil 46,000,289 20,240,127
TOTAL 50,021,685 22,009,541
SECURING OUR FUTURE 85
SOCIALLY RESPONSIBLE PLANNING FOR 2014The Community Relations Strategic Plan
outlines the programme planned for
deployment in 2014. The plan includes:
• improvement of functionality of the
Integrated Community Development
Management System (ICDMS) and staff
training. This will include a review and
update of all Community Relations (CR)
procedures and development of an
updated CR manual. This will support the
overall CR strategies and objectives;
• implementation of a CR document control
and data management system that meets
data collection and storage requirements
for IFC Performance Standards;
• Tabubil household survey. As part of the
mine continuation Social Management Plan
a commitment to update the 2009 Tabubil
household survey was recommended
and will provide updated social data for
assessment and future planning;
• complete an internal audit against
ISO26000: Guidance on Social
Responsibility. This standard comprises
seven core subjects aimed at identifying
and maintaining a social license to operate;
• complete a Pilot Social Impact
Assessment review of a village affected
in Middle Fly River by overbank flooding
and quantify against social mapping
and land-use criteria. The Pilot will be
used to develop and test social and land
mapping tools for a future wider review
and assessment of impacted villages; and
• delivery of Community Development and
infrastructure projects through OTDF.
Tabubil High School start of term student intake.
86 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
FINANCE
Breakdown of Contributions to the PNG Economy 2011 2012 2013
% % %
National Government, Tax Credit Scheme, Product levy 35 18 15
Dividend (National Government and PNGSDP) 23 27 0
PNG goods and services 16 20 27
OTML contractors 15 22 30
Employment 6 8 23
Royalty 3 2 2
Community compensation 2 3 3
Sales Revenue by Commodity (Million)2011 2012 2013 2011 2012 2013
PGK PGK PGK USD USD USD
Copper 2,981 1,960 1,602 1,241 943 706
Gold 1,638 1,352 1,091 692 650 482
Silver 90 52 45 37 25 20
FinaIisation/revaluation -173 -4 -68 -75 -3 -32
Total sales revenue 4,536 3,360 2,670 1,895 1,615 1,176
THE FOLLOWING INFORMATION SUMMARISES THE ECONOMIC PERFORMANCE FOR THE 2013 YEAR. THE FINANCIAL STATEMENTS HAVE BEEN EXTERNALLY AUDITED BY PRICEWATERHOUSECOOPERS PNG. DURING THE 2013 YEAR THERE WAS NO DIRECT FINANCIAL ASSISTANCE IN THE FORM OF TAX SUBSIDIES, ROYALTY RELIEF, GRANTS OR FINANCIAL INCENTIVES RECEIVED BY THE COMPANY FROM THE PNG GOVERNMENT.
New Caterpillar 793F truck tray enroute to Mt Fubilan mine.
SECURING OUR FUTURE 87
PRODUCT STEWARDSHIPOTML produces copper-gold-silver in concentrate which is sold to smelters or refineries
in Asia or Europe. The OTML marketing division is located in Brisbane, Australia and has
formalised agreements with customers in Japan, the Philippines, South Korea, India and
Germany. Despite a decrease in output in 2013, customers remain committed to retaining
contracts to purchase copper concentrate due to the consistent quality and to OTML’s
reliability as a supplier.
OTML’s commitment to product stewardship is from the processing plant to the storage
vessel from where international ships load the copper concentrate for export markets.
OTML’s product management systems ensure that the concentrate chain-of-custody follows
the product from the processing mill via the pipeline to the drying and storage facilities
at Kiunga. From Kiunga the product is blended to meet specific customer contractual
specifications and then loaded onto copper feeder vessels where it is shipped to the
storage silo vessel, which is either moored in the Gulf of Papua or in Port Moresby harbour,
depending on seasonal weather factors.
OTML’s copper concentrate is considered to be clean by world standards with fluorine as
the only potential trace element of concern. The production process is carefully monitored to
ensure the copper concentrate product meets customer’s contractual specifications.
There were no outside penalties applied to OTML shipped concentrate product and no
external customer complaints in 2013.
Exports in 20132011 2012 2013
Concentrate (t) 553,574 459,335 394,622
Contained copper (t) 146,336 121,432 100,212
Contained gold (oz) 456,869 395,820 352,050
Contained silver (oz) 1,189,033 889,381 929,380
Exports by Recipient Countries
2011 2012 2013CHANGE
(2012 TO 2013)
% % % %
Japan 43.8 64.3 43.6 -32.2
South Korea 15.5 6.5 12.6 93.8
Philippines 17.3 7.7 23.6 206.5
Germany 3.6 12.9 5.1 -60.5
India 14.4 8.6 10.1 17.4
Indonesia 5.4 0 5.0
88 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
RESULTS: INCOME STATEMENT2011 2012 2013 2011 2012 2013
PGK’MILLION PGK’MILLION PGK’MILLION USD’MILLION USD’MILLION USD’MILLION
Sales revenue 4,536 3,360 2,670 1,895 1,615 1,176
Other operating income 20 0 5 8 0 2
Marketing costs -271 -263 -274 -114 -127 -120
Cash operating costs -1,918 -1,468 -1,526 -719 -768 -772
Change in product inventories -66 93 -47 -19 31 -5
Depreciation and amortisation -471 -470 -614 -187 -116 -245
Profit from operations 1,830 1,252 214 864 635 36
Net finance costs 18 -8 7 -4 -1
Profit from ordinary activities before tax 1,848 1,244 212 871 631 35
Income tax expense -604 -331 -31 -250 -159 -18
Net profit for the year 1,244 913 181 621 472 17
RESULTS: BALANCE SHEET2011 2012 2013 2011 2012 2013
PGK’MILLION PGK’MILLION PGK’MILLION USD’MILLION USD’MILLION USD’MILLION
Assets
Cash and cash equivalents 506 448 423 237 214 167
Trade and other receivables 314 212 295 147 101 117
Inventories 385 483 453 160 205 201
Income tax refundable 0 49 77 0 24 31
Other 38 30 40 19 15 16
Total current assets 1,243 1,222 1,288 563 559 532
Financial assurance fund 462 483 577 217 230 228
Property, plant and equipment 1,299 1,682 1,819 545 740 758
Restoration and rehabilitation 170 121 78 63 47 32
Other 128 14 297 53 8 117
Total non-current assets 2,059 2,300 2,771 878 1,025 1,135
Liabilities
Trade and other payables 116 156 362 55 74 143
Income tax payables -73 0 0 -34 0 0
Derivative financial instrument 34 17 0 69 9 0
Provisions 147 118 60 15 56 24
Total current liabilities 224 291 422 105 139 167
Deferred income tax liability 167 125 259 78 60 103
Restoration and rehabilitation 484 476 577 227 227 228
Derivative financial instrument 16 0 0 8 0 0
Provisions 21 23 0 10 11 0
Total non-current liabilities 688 624 836 323 298 331
Net assets 2,390 2,607 2,801 1,013 1,147 1,169
Share capital 195 195 195 234 234 234
Reserves -40 -13 0 -18 -5 0
Retained earning 2,235 2,425 2,606 797 918 935
Total equity 2,390 2,607 2,801 1,013 1,147 1,169
FINANCE CONTINUED
SECURING OUR FUTURE 89
PRODUCTIONOverall production during the year was
disappointing due to a high number of lost
production days brought about by flooding
at the mine pit and breakdown of major plant
equipment. As a mitigating action some old
low grade stockpiles were processed to
maintain throughput. Last quarter production
was also impacted by high fluorine content.
Overall mill throughput was 16% below
budget whilst concentrate production was
9% below budget.
REVENUEGross revenues were 34% down in USD
terms (25% in Kina terms) against budget
mainly due to lower shipments and falling
metal prices. Concentrate shipments were
18% down on budget due to the lower
production and a buildup of inventories at
year end, whilst realised copper and gold
prices were 8% and 16% below budget
respectively. The strengthening USD
bolstered Kina revenues.
OPERATING COSTSAlthough production during the year was
significantly lower than budget, Kina
operating costs were over budget by 16%.
The main causes was the redundancy
payout expenses of PGK 224 million (USD
80 million) in December. Excluding this
abnormal item, other operating costs were
actually PGK 159 million (USD 70 million)
lower than budget, reflecting an increased
focus on operating costs in the changing
economic environment.
RECEIVABLESThe higher receivables at balance date
reflect the timing of shipments with three
shipments in December and the last BOL
dated 28 December 2013.
INVENTORYPhysical concentrate stocks were high
at balance date due to the high fluorine
product being held back, although the strong
December production volumes reduced unit
costs. A provision of PGK 28 million (USD 12
million) was raised to cover the fluorine issue.
EQUITYNil reserves at year end as small limited hedging contracts expired in mid-2013.
No dividends were declared during the year due to the reduced revenues, profit and the
resultant impact on cash.
Five-Year Summary of Earnings Before Interest and Tax (PGK) 2009 2010 2011 2012 2013
EBIT 2,252 2,869 1,847 1,244 211
EBIT Margin 56% 56% 41% 37% 8%
Five-Year Summary of CL Cash Cost (USD)2009 2010 2011 2012 2013
Copper Cash Cost 1.54 1.9 2.33 2.99 3.49
Metal Credits -1.47 -1.75 -2.35 -2.50 -2.21
Cash Cost 0.07 0.15 -0.02 0.49 1.28
NON-CURRENT ASSETSThe Financial Assurance Fund
(FAF) increased from PGK 483
million to PGK 577 million due to
the strengthening of USD against
Kina, with no significant change
in the USD 228 million value of
the portfolio.
Significant capital expenditure
in the year included west wall
stripping and payments for new
mining equipment in Capital work
in progress. Higher depreciation
was charged during the year due
to significant capital expenditure
in 2012 and 2013, offset by
continuation of mine life for
depreciation purposes to 2025.
CURRENT LIABILITIESPayables increased due to the
tax withheld for the redundancy
payments made in December.
Provisions decreased mainly due
to lower Share in Success Scheme
(SISS) charges for the year.
NON-CURRENT LIABILITIESNo change in the estimated
Restoration & Rehabilitation
provision at PGK 582 million (USD
230 million), with unwinding of the
discount offset by the significant
exchange rate movement.
90 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
SECURING OUR FUTURE 91
CONTENTS PAGE NO.
Annual Report of the Directors to the Shareholders 92
Independent Auditor’s Report to the Shareholders 94
FINANCIAL STATEMENTS:
Income Statement 96
Statement of Comprehensive Income 96
Statement of Changes in Equity 97
Statement of Financial Position 98
Statement of Cash Flows 99
Notes to and forming part of the Financial Statements 101
FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013
SECURING OUR FUTURE 91
92 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
ANNUAL REPORT OF THE DIRECTORS TO THE SHAREHOLDERS FOR THE YEAR ENDED 31 DECEMBER 2013
DIRECTORS’ REMUNERATIONThe following Directors’ fees and remuneration were paid during the year:
2013 K’000
2012K’000
Mr N. Parker 3,353 2,392
Mr A. Roberts 270 560
4,518 2,952
THE DIRECTORS ARE PLEASED TO PRESENT THEIR REPORT ON THE AFFAIRS OF THE GROUP, INCLUDING THE FINANCIAL STATEMENTS, FOR THE YEAR ENDED 31 DECEMBER 2013.
ACTIVITIESDuring the year, the Group has continued its principal activity of mining and processing copper ore. Shipments for the year totalled 394,622 (2012: 459,335) dry metric tonnes of copper concentrate.
FINANCIAL RESULTSThe Group made a profit after tax of K180,744,000 for the year (2012 of K913,450,000). In US dollar terms the result was a profit after tax of USD16,835,000 (2012 of USD471,799,000). The profit was low for the year as compared to previous year mainly due to low revenue attributed to lower metal prices and lower shipments as a result of lower production due to the shutdown of SAG2 and flooding in the pit.
DIRECTORSThe Directors as at balance date were:
Mr D. Vele (Chairman) Mr N. Parker (Managing Director/CEO) Mr M. Gumoi Mr J. Weiss
The Company Secretaries as at balance date were:
Mr E. Tajonera Mr C. Clark
DIVIDENDSThe Directors did not declare and pay any dividends during the year (2012: K3.75: USD1.82 per share / 2012: K722,946,000 or USD350,000,000).
AUDITORSDetails of amounts paid to the auditors PricewaterhouseCoopers for audit and other services are shown in note 3(a) to the financial statements.
DONATIONSThe total amount of donations made by the Company is stated in note 3(a) to the financial statements.
SHARE REGISTERDuring the year, the 122,200,000 ordinary shares in the Company held by PNG Sustainable Development Program Limited were cancelled and 122,200,000 new ordinary shares were issued to the Independent State of PNG consequent to the 10th Supplementary Agreement passed by Parliament.
ACCOUNTING POLICIESAny changes in accounting policies are stated in note 1 to the financial statements.
INTEREST REGISTERNo entries were made in the interest register in 2013.
SECURING OUR FUTURE 93
REMUNERATION OF EMPLOYEESRemuneration paid to employees during the year, in excess of K100,000 in bands of K10,000 were:
SALARY BANDS K’000
NO. OF EMPL.
SALARY BANDS K’000
NO. OF EMPL.
SALARY BANDS K’000
NO. OF EMPL.
SALARY BANDS K’000
NO. OF EMPL.
100-109 107 400-409 4 720-729 2 1,110-1,119 1
110-119 104 410-419 8 730-739 4 1,120-1,129 1
120-129 81 420-429 11 740-749 1 1,150-1,159 2
130-139 90 430-439 11 760-769 1 1,160-1,169 1
140-149 75 440-449 10 770-779 1 1,170-1,179 1
150-159 77 450-459 4 780-789 3 1,190-1,199 1
160-169 72 460-469 5 790-799 2 1,230-1,239 1
170-179 71 470-479 1 800-809 2 1,300-1,309 1
180-189 69 480-489 1 810-819 2 1,310-1,319 1
190-199 84 490-499 5 820-829 2 1,320-1,329 2
200-209 77 500-509 4 830-839 1 1,340-1,349 1
210-219 90 510-519 5 840-849 1 1,360-1,369 1
220-229 85 520-529 3 850-859 4 1,400-1,409 1
230-239 57 530-539 4 860-869 4 1,420-1,429 2
240-249 65 540-549 5 870-879 1 1,450-1,459 2
250-259 61 550-559 2 880-889 2 1,500-1,509 1
260-269 49 560-569 5 890-899 2 1,560-1,569 1
270-279 53 570-579 2 900-909 1 1,570-1,579 3
280-289 44 580-589 3 910-919 2 1,590-1,599 1
290-299 44 590-599 2 920-929 1 1,630-1,639 1
300-309 34 600-609 4 930-939 2 1,690-1,699 1
310-319 35 610-619 1 940-949 1 1,780-1,789 1
320-329 23 620-629 8 960-969 2 1,950-1,959 1
330-339 19 630-639 1 980-989 2 2,070-2,079 1
340-349 27 640-649 1 990-999 1 2,120-2,129 1
350-359 18 660-669 3 1,000-1,009 2 2,330-2,339 1
360-369 17 670-679 5 1,010-1,019 1 3,010-3,019 1
370-379 8 680-689 2 1,020-1,029 1 3,350-3,359 1
380-389 14 690-699 3 1,030-1,039 1
390-399 10 710-719 1 1,090-1,099 1
Signed for, and on behalf of, the Board on 28 February 2014.
DIRECTOR DIRECTOR
94 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF OK TEDI MINING LIMITED
REPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying financial statements of Ok Tedi Mining Limited (the Company), which comprise the statements of financial position as at 31 December 2013, the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 31 December 2013 or from time to time during the financial year.
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe Directors are responsible for the preparation of these financial statements such that they give a true and fair view in accordance with generally accepted accounting practice in Papua New Guinea and the Companies Act 1997 and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls relevant to the Company and the Group’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
SECURING OUR FUTURE 95
OPINIONIn our opinion, the accompanying financial statements:
1. comply with International Financial Reporting Standards and other generally accepted accounting practice in Papua New Guinea; and
2. give a true and fair view of the financial position of the Company and the Group as at 31 December 2013, and their financial performance and cash flows for the year then ended.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSThe Companies Act 1997 requires in carrying out our audit that we consider and report on the following matters. We confirm in relation to our audit of the financial statements for the year ended 31 December 2013:
1. we have obtained all the information and explanations that we have required;
2. in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records; and
3. other than in our capacity as auditor, we have no relationship with, or interests in the Company or any of its subsidiaries. These services have not impaired our independence as auditor of the Company and the Group.
RESTRICTION ON DISTRIBUTION OR USEThis report is made solely to the Company’s shareholders, as a body, in accordance with the Companies Act 1997. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditor’s report and for no other purpose. We do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
PRICEWATERHOUSECOOPERS
STEPHEN BEACHPartner Registered under the Accountants Registration Act 1996
Port Moresby 5 March 2014
96 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2013
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
CONTINUING OPERATIONSOperating Revenue:
Sales revenue 2(a) 2,670,179 3,359,570 2,670,179 3,359,570
Other operating income 2(b) 4,931 220 37,305 254
Total Operating Revenue 2,675,110 3,359,790 2,707,484 3,359,824
Operating costs 3(a) (2,461,851) (2,107,627) (2,492,957) (2,108,066)
Profit from Operating Activities 213,259 1,252,163 214,527 1,251,758
Finance costs 3(b) (4,976) (14,126) (5,132) (14,126)
Finance income 3(b) 3,071 6,306 3,164 6,711
Profit Before Income Tax 211,354 1,244,343 212,559 1,244,343
Income tax expense 4 (30,610) (330,893) (30,645) (331,088)
Net Profit for the year 180,744 913,450 181,914 913,255
STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2013
Net Profit for the year 180,744 913,450 181,914 913,255
Other Comprehensive Income:
Changes in fair value of derivative financial instruments 18,864 38,016 18,864 38,016
Tax effect of change in fair value of derivative financial instruments (5,301) (10,891) (5,301) (10,891)
Other Comprehensive Income Net of Tax 13,563 27,125 13,563 27,125
Total Comprehensive Income for the year 194,307 940,575 195,477 940,380
This statement is to be read in conjunction with the Notes on pages 101 to 124.
SECURING OUR FUTURE 97
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2013
COMPANY CONSOLIDATED
NOTE
ORDINARYSHARES
K’000
HEDGERESERVE
K’000
RETAINEDEARNINGS
K’000TOTALK’000
RETAINEDEARNINGS
K’000TOTALK’000
BALANCE AT 31 DECEMBER 2011 195,102 (40,688) 2,234,779 2,389,193 2,230,845 2,385,259
Comprehensive Income
Net Profit for the year - - 913,450 913,450 913,255 913,255
Other Comprehensive Income - 27,125 - 27,125 - 27,125
Prior Period Adjustment - - - - 916 916
Transactions with owners
Dividends paid 20 - - (722,946) (722,946) (722,946) (722,946)
BALANCE AT 31 DECEMBER 2012 195,102 (13,563) 2,425,283 2,606,822 2,422,070 2,603,609
Comprehensive Income
Net Profit for the year - - 180,744 180,744 181,914 181,914
Other Comprehensive Income - 13,563 - 13,563 - 13,563
Transactions with owners
Dividends paid 20 - - - - - -
BALANCE AT 31 DECEMBER 2013 195,102 - 2,606,027 2,801,129 2,603,984 2,799,086
This statement is to be read in conjunction with the Notes on pages 101 to 124.
98 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2013
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
CURRENT ASSETS:Cash and cash equivalents 5 423,470 447,924 570,902 490,110
Trade and other receivables 6 295,164 211,761 298,158 213,822
Inventories 7 452,826 483,116 452,826 483,116
Income tax refundable 14 77,214 49,443 78,087 48,304
Other current assets 8 39,610 30,263 39,610 30,263
Total Current Assets 1,288,284 1,222,507 1,439,583 1,265,615
NON-CURRENT ASSETS:Property, plant and equipment 9 1,344,413 1,521,655 1,344,585 1,521,867
Mine development costs 10 475,017 160,922 475,017 160,922
Restoration and rehabilitation 11 78,240 120,621 78,240 120,621
Deferred income tax asset 16 219,026 204,478 218,639 206,412
Investment in subsidiaries 24(c) 26 26 - -
Financial assurance fund 25 576,817 482,584 576,817 482,584
Other non-current assets 12 77,262 14,128 77,262 14,128
Total Non-Current Assets 2,770,801 2,504,414 2,770,560 2,506,534Total Assets 4,059,085 3,726,921 4,210,143 3,772,149
CURRENT LIABILITIES:Trade and other payables 13 361,778 156,490 367,874 164,456
Provisions 15 60,347 117,829 204,681 136,543
Derivative financial instruments 26(b)(ii) - 17,452 - 17,452
Total Current Liabilities 422,125 291,771 572,555 318,451
NON-CURRENT LIABILITIES:Deferred income tax liability 16 258,687 329,198 261,358 333,265
Provisions 17 - 22,909 - 40,603
Restoration and rehabilitation 18 577,144 476,221 577,144 476,221
Total Non-Current Liabilities 835,831 828,328 838,502 850,089Total Liabilities 1,257,956 1,120,099 1,411,057 1,168,540Net Assets 2,801,129 2,606,822 2,799,086 2,603,609
SHAREHOLDERS’ EQUITY:Ordinary shares 19 195,102 195,102 195,102 195,102
Hedge reserve - (13,563) - (13,563)
Retained earnings 2,606,027 2,425,283 2,603,984 2,422,070
Total Shareholders’ Equity 2,801,129 2,606,822 2,799,086 2,603,609
These financial statements were authorised for issue by the Board on 28 February 2014
For, and on behalf of, the Board.
DIRECTOR DIRECTOR
This statement is to be read in conjunction with the Notes on pages 101 to 124.
SECURING OUR FUTURE 99
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
CASH FLOWS FROM OPERATING ACTIVITIES:Receipts from customers 2,586,776 3,461,725 2,648,885 3,461,761
Payments to suppliers and employees (1,671,187) (1,683,412) (1,752,476) (1,684,181)
Cash Generated From Operations 915,589 1,778,313 896,409 1,777,580
Interest received 3,071 6,306 3,618 6,340
Realised gold & copper hedge settlements 26(b)(ii) (14,148) (35,754) (14,148) (35,211)
Fund received from trustee - - 137,673 -
Royalty payments (30,143) (65,454) (30,143) (65,454)
Production levy paid (5,990) (10,530) (5,990) (10,530)
Amounts paid to compensation trust funds 17(b) (12,643) (13,497) (12,643) (13,497)
Amounts paid under CMCA 15(a) (69,639) (54,154) (69,639) (54,154)
Amounts paid to Shares in Success 24(b) (52,884) (81,238) (66,678) (99,320)
Income tax paid 14 (104,966) (229,473) (104,966) (229,473)
Net Cash Generated From Operating Activities 628,247 1,294,519 733,493 1,275,738
CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, plant and equipment 9 (389,719) (467,903) (389,719) (467,903)
Mine development present costs 10 (318,472) (147,812) (318,472) (147,812)
Proceeds from sale of property, plant and equipment 214 425 214 436
Financial Assurance Fund investment 25 - (14,484) - (14,484)
Net Cash Used In Investing Activities (707,977) (629,774) (707,977) (629,763)
CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid 20 - (722,946) - (722,946)
Net Cash Used In Financing Activities - (722,946) - (722,946)
Net increase/(decrease) in cash and cash equivalents (79,730) (58,201) 25,516 (76,971)
Cash and cash equivalents at beginning of the year 447,924 506,125 490,110 567,081
Foreign exchange effect on foreign currency balances 55,276 - 55,276 -
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 5 423,470 447,924 570,902 490,110
This statement is to be read in conjunction with the Notes on pages 101 to 124.
100 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
RECONCILIATION OF NET PROFIT AFTER INCOME TAX TO NET CASH GENERATED FROM OPERATING ACTIVITIES
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
Net Profit For The Year 180,744 913,450 181,914 913,255
Add back non cash and non-operating items:
Depreciation of property, plant and equipment 566,044 244,761 566,044 246,034
Amortisation of restoration and rehabilitation 42,199 49,703 42,199 49,703
Amortisation of Lower Ok Tedi Compensation 182 463 182 463
Amortisation of pre-production expenditure 4,377 4,397 4,377 4,397
Non-cash finance charges - - - -
Non-cash interest – Financial Assurance Fund (4,976) (14,126) (4,976) (14,125)
(Gain)/loss on sale of property, plant and equipment (214) (95) (214) (95)
Net unrealised exchange (gain)/loss (117,436) (12,322) (117,398) (12,042)
Unrealised hedging (gain)/loss - 7,695 - 7,695
Provision for inventory obsolescence 39,237 10,195 39,237 10,195
Changes in Operating Assets and Liabilities:
(Increase)/decrease in trade and other receivables (83,403) 119,334 (84,336) 122,259
(Increase)/decrease in inventories 30,290 (97,625) 30,290 (97,625)
Increase/(decrease) in trade and other payables 205,288 30,717 203,418 26,145
Increase/(decrease) in provisions and others (121,255) (40,213) (13,327) (57,950)
(Increase)/decrease in income tax payable (27,771) 23,489 (29,783) 24,577
Increase/(decrease) in deferred income tax (85,059) 54,696 (84,134) 52,852
Net Cash Generated from Operating Activities 628,247 1,294,519 733,493 1,275,738
This statement is to be read in conjunction with the Notes on pages 101 to 124.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
SECURING OUR FUTURE 101
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013
1. PRINCIPAL ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(A) BASIS OF PREPARATION
These general purpose consolidated financial statements of Ok Tedi Mining Limited and its subsidiaries have been prepared in accordance with the Papua New Guinea Companies Act 1997 and comply with International Financial Reporting Standards (IFRS) and other generally accepted accounting practice in Papua New Guinea. All amounts are stated in Papua New Guinea Kina (K), the functional currency of the Company, rounded to the nearest thousand Kina.
The accounts have been prepared on the basis of historical costs and do not take into account changing money values or current valuations of non-current assets, other than for most financial instruments which are measured at fair value. Cost is based on the fair values of the consideration given in exchange for the assets.
The preparation of the financial statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 1(c).
The Directors have the power to amend these financial statements after its issue.
Changes in Accounting Policies and Disclosures
a) Standards, amendment and interpretations effective in 2013
The following new standards and amendments were applicable for the first time during the accounting period beginning 1 January 2013:
• Amendment to IAS 1, ‘Financial statement presentation’ (effective 1 July 2012) regarding other comprehensive income requires entities to separate items presented in other comprehensive income into two groups, based on whether they may be recycled to profit or loss in the future. This will not effect the measurement of any items recognised in the balance sheet or profit and loss in the current period.
• Amendments to IAS 19, ‘Employee benefits’ (effective 1 January 2013) require the recognition of all re-measurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of the so-called ‘corridor’ method) and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. The Group does not have a defined benefit pension scheme.
• IFRS 10, ‘Consolidated Financial Statements’ (effective 1 January 2013) replaces all of the guidance on control and consolidation in IFRS 27 Consolidated and Separate Financial Statements, and SIC 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent/principal relationships. Management do not expect the new standard to have any impact on the existing group.
• IFRS 11, ‘Joint arrangements’ (effective 1 January 2013) introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. As the Group is not a party to any joint arrangements, this standard will not have any impact on its financial statements.
• IFRS 12, ‘Disclosures of interests in other entities’ (effective 1 January 2013) includes the disclosure requirements for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. Application of this standard will not affect any of the amounts recognised in the financial statements, as the Group has no interest in other entities.
• IFRS 13, ‘Fair value measurement’ (effective 1 January 2013) aims to improve the consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The Group does not use fair value measurement extensively and it is unlikely the new rules will have a significant impact on any amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements.
• IAS 27 (revised 2011) ‘Separate financial statements’ (effective 1 January 2013) is now a standard dealing solely with separate financial statements. Application of this standard will not affect any of the amounts recognised in the consolidated or parent entity financial statements but may impact the type of information disclosed in relation to the parent’s investments in the separate parent entity financial statements.
• IAS 28 (revised 2011), ‘Associates and joint ventures’ (effective 1 January 2013) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The Group is not a party to any joint ventures.
• Amendment to IFRS 7, ‘Financial instruments: Disclosures’ on offsetting financial assets and financial liabilities (effective 1 January 2013) enhance current offsetting disclosures. They are unlikely to affect the accounting for any of the Group’s current offsetting arrangements.
• Amendment to IFRS 1, ‘First time adoption’, on government loans (effective 1 January 2013) is not relevant to the Group.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
102 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(A) BASIS OF PREPARATION (CONTINUED)
• Annual improvements 2011 (effective 1 January 2013) include minor changes to IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34. The Group does not expect that any adjustments will be necessary as of result of applying the revised rules.
• IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ (effective 1 January 2013) sets out the accounting for overburden waste removal (stripping) costs in the production phase of a surface mine. The interpretation may require mining entities to write off existing striping assets to opening retained earnings if the assets cannot be attributed to an identifiable component of an ore body. This interpretation has been early adopted by the Group effective 1 January 2012.
b) New standards, amendments and interpretations issued but not effective for the year ended 31 December 2013 or adopted early:
The following standards, amendments and interpretations to existing standards have been published and are mandatory for the entity’s accounting periods beginning on or after 1 January 2014 or later periods, but the entity has not early adopted them:
• IFRS 9, ‘Financial Instruments’ (effective date is open) is the first phase of replacing IAS 39, ‘Financial Instrument” with a standard that is less complex and principles based. The new standard addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not expected to change the entity’s existing accounting policy for its financial assets and liabilities. IASB has also amended IFRS 9 to allow entities to early adopt the requirement to recognise in OCI the changes in fair value attributable to changes in an entity’s own credit risk (from financial liabilities that are designated under the fair value option). This can be applied without having to adopt the remainder of IFRS 9.
• Amendments to IFRS 10, ‘Consolidated financial statements’, IFRS 12 and IAS 27 for investment entities (effective 1 January 2014) provides an exemption to investment entities from consolidating controlled investees. The Company is not an investment entity and will not therefore be affected by these amendments.
• Narrow scope amendments to IAS 36 “Impairment of assets” (effective 1 January 2014) address the disclosure of information about the recoverable amount impaired assets if that amount is based on fair value less costs of disposal. The Group has no such impaired assets.
• Amendments to IAS 32, “Financial Instrument: Presentation” (effective 1 January 2014). These amendments are to the application guidance in IAS 32 and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.
• Amendment to IAS 39, Financial instruments: Recognition and measurement, amendment in relation to “novation of derivatives” (effective 1 January 2014). This amendment provides relief from discontinued hedge accounting when novation of a hedging instrument to a central counter party meets specified criteria.
• IFRIC 21 “Levies”. This is an interpretation to IAS 37, “provisions, contingent liabilities and contingent assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have present obligation as a result of past event (known as obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.
• IFRS 9 “Hedge Accounting” (no effective date – the standard is available for immediate application”). IFRS 9 relaxes the requirements for hedge effectiveness and, consequently to apply hedge accounting. IFRS 9 replaces the 80%-125% hedge effectiveness test with a requirement for an economic relationship between the hedged item and hedging instrument, and for the ‘hedged ratio’ to be the same as the one that the entity actually uses for risk management purposes. Hedge ineffectiveness will continue to be reported in profit or loss (P&L). An entity is still required to prepare contemporaneous documentation; however, the information to be documented under IFRS 9 will differ. The new requirements change what qualifies as a hedged item, primarily removing restrictions that currently prevent some economically rational hedging strategies from qualifying for hedge accounting. The standard provides an accounting policy choice for an entity to continue to apply hedge accounting (and hedge accounting only) under IAS 39 instead of IFRS 9 until the IASB completes its separate macro hedging project.
• Amendment to IAS 19 regarding defined benefit plans (effective 1 July 2014). These narrow scope amendments simplify the accounting for contributions to defined benefit plans that are independent of the number of years of employee service.
• Annual improvements 2012 (effective 1 July 2014) makes minor changes to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 37 and IAS 39.
• Annual improvements 2013 (effective 1 July 2014) makes minor changes to IFRS 1, IFRS 3, IFRS 13 and IAS 40.
SECURING OUR FUTURE 103
the Minister for Mining on 7th May 2012. The Company have submitted an updated MCP in 19th December 2013, with no changes on the estimated Fund value of USD227 million. With the life of mine extension to 2025, the Company will be preparing another Detailed MCP in 2015. Should the new estimate of the Fund be higher than USD227 million, then the Company needs to make a bi-annual contribution to ensure the new estimated Fund requirements is met by 2025.
(iii) Provision for Obsolescence
Consumable items that have not been issued in the last two years are included as part of current inventory. A full provision however is made for potential write-off of these items. Management considers that it is prudent to make such provision given the uncertainties concerning the remaining life of the open pit mine.
(iv) Depreciation and Amortisation of Long Term Assets
In estimating the remaining life of the open pit mine, for the purpose of depreciation and amortisation calculations, due regard is given to the volume of remaining economically recoverable reserves but not to limitations that could arise from the potential for changes in technology, demand and other issues, such as early mine closure. These are inherently difficult to estimate and this uncertainty can lead to a financial limitation on the basis of depreciation and amortisation adopted and is reviewed annually under prevailing circumstances.
Major costs being depreciated or amortised over the extended mine life to 2025 that would have a significant financial impact should early mine closure eventuates are:
(B) CONSOLIDATION
The subsidiary undertakings and special-purpose entities for which the Company has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operation are consolidated. They are consolidated from the date on which control is transferred to the Company and are no longer consolidated from the date that control ceases. All inter-entity transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.
In the Company’s financial statements, investments in subsidiaries are stated at the lower of cost or recoverable amount.
(C) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The most significant estimates and judgements relate to the long term copper and gold price, mineral reserves and remaining open pit mine life, provision for restoration and rehabilitation obligations, recoverability of long-lived assets (including mine development costs) and depreciation. Actual results could differ from those estimates and may affect amounts reported in future years. Management believes that the estimates and assumptions are reasonable.
The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:
(i) Life of Mine
During 2013, Management have changed the estimated life of mine through which the mining and processing of copper ore operation of the open pit mine are forecast to continue from 2015 to 2025. The new mine life of 2025 is based on the mine life extension (MLE) feasibility study that was approved by the Board in February 2013. The completed MLE feasibility study together with the environmental impact plan has been submitted to both the Department of Mining and the Department of Conservation and Environment for approval.
Agreements for the extension of the mine life have been completed and agreed with the nine (9) Community Mine Continuation Agreement (CMCA) impacted regions in December 2012.
Management and the Board anticipate legislative changes to give legal effect to the Independent State of Papua New Guinea (the State) and CMCA agreement for MLE to be presented before Parliament during 2014.
The total costs on the MLE feasibility study was K111.6 million (2012: K111.6 million) which have been capitalised. Other MLE related capital expenditure on new or upgraded plant and equipment of K804.6 million has also been capitalised. Stripping cost to date of K466.3 million (2012: K147.8 million) in preparation for MLE have also been deferred in the balance sheet. Total costs included in the balance sheet related to the MLE as at 31 December 2013 are K1,382.5 million (2012: K452.5 million). Should the MLE not ultimately be approved, these costs will need to be assessed for impairment and write down.
The State has extended the Change Notice #52/4.2;27/29.2 in respect of access to the area up to March 2014.
The impact of a change in life of mine estimate is applied prospectively from the beginning of the financial year during which the change has been determined. The financial effect of increasing the estimated mine life by one year would be to decrease the life of mine asset’s depreciation and amortisation for 2014 by K51 million.
(ii) Provision for Restoration and Rehabilitation
The Provision for Restoration and Rehabilitation is based largely on an obligation to contribute to the Ok Tedi Financial Assurance Fund (refer note 1(i) and note 26). Pursuant to the Mine Closure Code, contained in the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001, the Company is required to update its Mine Closure Plan (MCP) and submit it to the Office of the Environment and the Department of Mining every two years. The updated MCP must notify, amongst other things, what the Company’s latest estimate is of the open pit mine closure costs. The Company previously agreed in 2002 a MCP submitted to the Department of Mining to contribute USD100 million into the Fund by 2010. However, with the mine continuation up to 2013, the 2006 Draft MCP which was approved by the Minister for Mining in January 2008, stated that the Fund should contain USD130 million by 2013. In December of 2010, the Company lodged its 2009 Detailed MCP in which the Fund was estimated to be USD227 million by 2013. The Detailed MCP was approved by
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
Property, plant and equipment 1,344,413 1,410,044 1,344,585 1,410,256
Mine development 475,017 160,922 475,017 160,922
Restoration and rehabilitation 78,240 120,621 78,240 120,621
Roadco prepayment 1,433 2,866 1,433 2,866
Total Costs At Risk 1,899,103 1,694,453 1,899,275 1,694,665
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
104 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(C) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
(v) Impairment Assessment of Long Term Assets
As a result of recent events in global financial markets the Company has reassessed its key economic assumptions in relation to its future cash flow. The future cash flows of the Company are most exposed to volatility in the following:
• Copper and gold prices;
• Fuel prices; and
• Exchange rates (PNG Kina, US Dollar and Australian Dollar).
In accordance with the Group policy (note 1(s)), the Company has undertaken an assessment of impairment indicators and not withstanding the potential impact of changes to these key economic assumptions, the Group does not at present, consider it necessitates any impairment provisions to be made against any of its long term assets.
(D) REVENUE RECOGNITION
Revenue from the sale of copper concentrate, which also contain quantities of gold and silver, is brought to account: at the time of shipment to the buyer; when the significant risks and rewards of ownership have been transferred to the buyer; the Group no longer has control over the goods; and the amount of revenue can be reliably estimated. The revenue is based on one hundred percent of provisional weights, assays and prices and is adjusted when actual values are determined and invoiced in accordance with the terms and conditions of the relevant sales contract. The final settlement adjustments on the copper portion of the sales contracts is generally based on the average London Metal Exchange (LME) price for a specified future period generally three to five months after arrival at the customers’ facility. The copper concentrate sales invoicing is
done net of treatment and refining charges. However, for revenue disclosure purposes the sales are grossed up and the treatment and refining charges from the smelters and refineries are included in marketing costs (note 3(a)).
Unfinalised shipments at balance date are valued using metal prices, weights and assays known at that date. Where, in accordance with the terms of the sales contract, prices have not been finalised, sales values have been determined using three months forward price for copper and spot prices at year end for gold and silver.
The average forward prices used at 31 December 2013 were USD3.34 per pound for copper (31 December 2012: USD3.60), USD1,222 per ounce for gold (31 December 2012: USD1,688) and USD20.00 per ounce for silver (31 December 2012: USD29.00).
Interest income is recognised on a time-proportion basis using the effective interest method.
(E) MINERAL HEDGING
Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequently remeasured at their fair values. On the date a derivative contract is entered into, the Group designates the contract as a hedge against specific future production. The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged.
Changes in the fair value of derivatives that are designated against future production and that qualify as cash flow hedges, and are deemed highly effective, are recognised in equity. Amounts deferred in equity are transferred to the income statement and classified as revenue in the same periods during which the hedged sales affect the income statement.
Certain derivative instruments, while providing effective economic hedges under the Company’s risk management policies, do not qualify for hedge accounting under the specific rules in IAS 39, “Financial Instruments - Recognition and Measurement”. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting under IAS 39 are recognised immediately in the income statement.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting under IAS 39, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the committed or forecast production is ultimately recognised in the income statement. If the committed or forecast production is no longer expected to occur however, the cumulative gain or loss reported in equity is immediately transferred to the income statement.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific forecast concentrate sales. The Group also documents its assessment, both at the hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
In assessing the fair value of non-traded derivatives and other financial instruments, the Group obtains a valuation from an external party.
The Company’s hedge programme expired in June 2013.
(F) PROPERTY, PLANT AND EQUIPMENT
All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be reliably measured.
Certain properties owned by the company and rented externally to third parties would be classified as Investment property under IAS 40. These properties are classified under Property and accounted for under IAS 16 at depreciated costs as the carrying amount is considered immaterial for re-classification. All other repairs and maintenance costs are expensed.
Property, plant and equipment are depreciated on a straight-line basis over their estimated economic lives or the extended life of the mine, whichever is shorter. Capital spare parts are depreciated over the life of the equipment for which they are purchased.
The range of estimated economic lives of the major asset categories are:
Buildings 5 years to life of mine
Automotives and other equipment
4 - 10 years to life of mine
Mobile mining equipment 4 years to life of mine
Support facilities 5 years to life of mine
Processing equipment 10 years to life of mine
The current life of the open pit mine estimate is that mining and processing of ore will continue until the end of 2025 (note 1(c)(i)) (2012: end of 2015).
SECURING OUR FUTURE 105
(L) FOREIGN CURRENCY TRANSLATION
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Kina, which is the Company’s functional and presentation currency.
Transactions denominated in foreign currency are translated at a rate of exchange which approximates the rate of exchange at the date of the transaction. Amounts owing to and by the Company denominated in foreign currencies at balance date are translated at exchange rates current at that date.
The rates used at 31 December 2013 for United States dollars and Australian dollars were 0.3955 and 0.4443 equal to one Kina respectively (31 December 2012 – 0.4775 and 0.4602 respectively).
Realised and unrealised foreign exchange variations on revenue accounts are recognised in the income statement.
(M) INCOME TAX
The Group provides for all taxes estimated to be payable on net profit for the year. It prepares and lodges its tax return using PNG Kina as the functional and presentation currency.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date, and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability settled.
Gains and losses on disposal of property, plant and equipment are brought to account in the determination of operating profit. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(s)).
Repairs and maintenance are charged to the profit and loss account during the financial period in which they incurred.
(G) PRE-PRODUCTION EXPENDITURE AND EXPLORATION EXPENDITURE
Pre-production expenditure represents the net cost incurred by the Company prior to the commencement of commercial production on 31 January 1985. Such expenditure is classified as a mine development asset and is being amortised on a straight-line basis over the life of the open pit mine (note 10).
All post-production exploration expenditure is expensed as incurred.
(H) DEFERRED STRIPPING COST
The company has adopted IFRIC 20 – stripping costs in the production phase of a surface mine. IFRIC 20 sets out the accounting for overburden and other mine waste materials during the operating phase of a surface mine where those stripping costs are incurred as part of a stripping campaign to access additional ore. This activity is referred to as development stripping. The directly attributable costs (inclusive of an allocation of relevant overhead expenditure) are initially capitalised as a mine development asset.
Capitalisation of development stripping costs ceases at the time that saleable material begins to be extract from the additional ore body associated with the stripping campaign. The stripping asset is then amortised over the life of the additional ore body accessed on a unit of production basis.
(I) RESTORATION AND REHABILITATION
A provision is raised for anticipated expenditure to be made on restoration and rehabilitation to be undertaken after the open pit mine closure (note 18).
These costs may include the costs of dismantling and demolishing of infrastructure or decommissioning, the removal of residual material, the remediation of disturbed areas and the relocation and retrenchment of employees under an agreed MCP. The amount of any provision recognised is the full amount that has been estimated based on current costs to be required to settle present obligations, discounted using a risk adjusted interest rate of 0.38 percent (2012: 0.38 percent).
The Mine Closure Code contained in the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001 requires the Company to contribute to a Mine Closure Fund (referred to as the Ok Tedi Financial Assurance Fund). The Ok Tedi Financial Assurance Fund is established to provide sufficient cash at mine closure for settlement of mine rehabilitation and restoration liabilities (note 25).
Where future economic benefits are probable a corresponding asset is raised and subsequently amortised using the straight line method (note 11).
The Group’s restoration, rehabilitation and environmental expenditure policy identifies the environmental, social and engineering issues to be considered and the procedures to be followed when providing for costs associated with the site closure. Site rehabilitation and closure involves the dismantling and demolition of infrastructure not intended for subsequent community use, the removal of residual materials and the remediation of disturbed areas. Community requirements and long term land use objectives are also taken into account.
(J) COMPENSATION
The Group has signed various compensation agreements with landowners and other surrounding communities affected by the mine. Compensation packages are denominated in the local currency and, in the majority of instances, are payable over the life of the open pit mine.
Where payments are contingent upon mine continuation, the anticipated amounts payable annually are accrued on a pro-rata basis. Where payments have to be made regardless of mine continuation, a full provision is created against future expected payments using the same principles as in note 1(i).
(K) INVENTORIES
Copper concentrate and product in process are physically measured or estimated and valued at the lower of cost or net realisable value. Cost is derived on an absorption costing basis which includes fixed and variable overheads and depreciation. Net realisable value is the amount estimated to be obtained from the sale of inventories in the normal course of business, less any costs anticipated to be incurred prior to sale.
Spare parts and consumables are valued at weighted average cost into store. An appropriate provision for stock obsolescence is raised in respect of slow moving inventory.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
106 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
(M) INCOME TAX (CONTINUED)
Deferred income tax assets are recognised to the extent that it is probable that future taxable income will be available against which the temporary differences can be utilised.
Income tax expense in the income statement comprises the estimated tax payable and the movement in deferred tax balances.
Current and deferred tax balances attributable to amounts recognised directly in equity and also recognised directly in equity.
(N) EMPLOYEE BENEFITS
(i) Wages and Salaries, Annual Leave and Sick Leave
Liabilities for wages and salaries, annual leave are recognised, and are measured as the amount unpaid at the reporting date at current pay rates in respect of employees’ services up to that date, including on-costs.
(ii) Long Service Leave
Liability for long service leave is recognised, and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
(iii) Termination Benefits
Termination benefits are payable when employment is terminated before the normal retirement date or when an employee accepts voluntary redundancy in exchange for those benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due after more than twelve months from the balance sheet date are discounted to present value.
The Group, as part of its MCP obligations (note 1(c)(iii)), has provided for comprehensive termination payments to all National employees (included as part of Restoration and Rehabilitation provision at note 18).
(iv) Profit-Sharing and Bonus Plans
The Company recognises a liability and an expense for bonuses and profit sharing (Share in Success Scheme), based on a formula that takes into consideration the profit attributable to the Company’s shareholders and available cash flows after certain adjustments. The Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. The Share in Success Scheme (SISS) ended in December 31, 2013, and going forward the Company will replaced SISS with a bonus scheme.
(O) RETIREMENT BENEFITS
The Group contributes to NASFUND, an independent defined contribution fund, on behalf of its citizen employees and contributions are charged direct to the income statement when payable. Once the contributions have been paid, the Group has no further payment obligations.
(P) ROADCO USER CHARGE
The total commitment under the Roadco agreement, for use of the Tabubil Kiunga road during the life of the open pit mine, was fully prepaid in August 1995. The prepayment is being charged to the income statement on a straight-line basis over the remaining life of the mine.
(Q) CASH AND CASH EQUIVALENTS
For the purpose of the statements of cash flows, cash and cash equivalents include cash at bank and on hand, net of overdraft, and deposits held on call with banks.
(R) FINANCIAL INSTRUMENTS
Financial instruments carried on the balance sheet include cash and bank balances, receivables, trade payables, derivative financial instruments and borrowings. These instruments are generally carried at their estimated fair value. For example, receivables are carried net of the estimated doubtful receivables. The particular recognition methods adopted are disclosed in the individual accounting policies associated with each item.
Where possible, financial assets are supported by collateral or other security. These arrangements are described in the individual accounting policies associated with each item.
SECURING OUR FUTURE 107
(S) IMPAIRMENT OF ASSETS
Non-current assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Impairment of assets is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is measured as the higher of net selling price and value in use. Value in use for individual assets is calculated by discounting future cash flows using a risk adjusted pre-tax discount rate. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).
(T) BORROWING COSTS
Prior to the commencement of commercial production in 1985, the amount of interest costs eligible for capitalisation was based on the actual interest costs incurred because the borrowings were incurred to fund development of the mine property. Capitalisation of borrowing costs ceased following the commissioning of the assets upon commercial production. These pre-production borrowing costs are amortised using the straight line basis over the life of the mine. Borrowing costs incurred subsequent to the commencement of commercial production are expensed when incurred over the period of the borrowing, unless the borrowing relates to the construction of a qualifying asset, in which case the borrowing costs are capitalised. Interest is expensed using the effective interest method. Facility fees are amortised over the period of the facility.
(U) LEASES
Leases of property, plant and equipment, where substantially all the risks and benefits incidental to the ownership are assumed by the Group, are classified as finance leases. Finance leases are capitalised, recording an asset and liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are amortised over their useful lives. Lease payments are allocated between the reduction of the lease liability and the interest expense for the period.
Operating lease payments, where substantially all the risks and benefits remain with the lessor, are expensed as incurred over the period of the lease. Commitments for such leases are disclosed in note 22(d).
(V) TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently, where required, reduced by provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the recoverable amount. The amount of the provision is recognised in the income statement. Subsequent recoveries of amounts previously written off are credited against expenses in the income statement.
(W) COMPARATIVE FIGURES
Comparative figures have been amended where appropriate to comply with changes in presentation adopted in the current year.
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
2(A) SALES REVENUECopper 1,602,557 1,959,634 1,602,557 1,959,634
Gold 1,091,218 1,351,942 1,091,218 1,351,942
Silver 45,143 52,182 45,143 52,182
Finalisation/revaluation adjustments (note 1(d))
(68,739) (4,188) (68,739) (4,188)
Total Sales Revenue 2,670,179 3,359,570 2,670,179 3,359,570
2(B) OTHER OPERATING INCOMEAirfares recoveries 53 37 53 37
Other 4,878 183 37,252 217
Total Other Operating Income 4,931 220 37,305 254
(X) DIVIDEND DISTRIBUTION
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the year in which the dividends are approved by the Company’s Directors.
(Y) TRADE AND OTHER PAYABLES
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
108 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
3(A) OPERATING COSTSChanges in inventories of product on hand and in process (increase)/decrease 46,929 (89,176) 46,929 (89,176)
Operating costs, external charges and materials 79,868 78,956 79,868 78,956
Marketing costs 274,041 263,291 274,041 263,291
(Gain)/Loss on derivative financial instruments 26(b)(ii) 14,148 43,448 14,148 43,448
Salaries, wages & associated employee costs 28 582,912 332,000 584,422 332,000
Contractors and consultants 537,175 555,391 537,175 555,427
Consumables 437,235 554,546 437,235 554,546
Services and others 72,950 90,024 103,633 91,239
(Gain)/loss on sale of non-current assets (213) (95) (213) (95)
Net foreign exchange gain/(loss) (195,996) (20,081) (197,083) (20,893)
Depreciation of property, plant and equipment 9 566,044 244,761 566,044 244,761
Amort. of restoration and rehabilitation asset 11 42,199 49,703 42,199 49,703
Amortisation of Lower Ok Tedi compensation asset 182 463 182 463
Amortisation of pre-production expenditure 10 4,377 4,396 4,377 4,396
Total Operating Costs 2,461,851 2,107,627 2,492,957 2,108,066
Included in the operating profit before tax are the following items:
Auditor’s remuneration:
- Auditing services 645 476 842 476
- Other services 396 625 396 625
Charge to provision for employee benefits 17(a) 131,466 60,740 133,068 61,107
Charge to provision for obsolete stock 7(a) 39,237 10,195 39,237 10,195
Roadco user charge amortisation 1(p) 1,433 1,433 1,433 1,433
Charge to provision for compensation 17(b) 13,305 13,305 13,305 13,305
Charge to provision for doubtful debts 6(c) - 2,163 - 2,163
Donations 1,151 1,277 1,151 1,277
Charge to provision for CMCA 15(a) 72,594 55,151 193,924 55,151
Royalties 30,143 38,703 30,143 38,703
Production levy 5,990 7,741 5,990 7,741
Legal fees 3,806 2,109 3,806 2,109
Operating lease expenses 210,509 213,956 210,509 214,214
3(B) FINANCE INCOME AND COSTS
Interest income 3,071 6,306 3,164 6,711
Realisation of discount on long term provisions:
- Restoration and rehabilitation (4,976) (14,126) (5,132) (14,126)
Total Net Finance Costs (1,905) (7,820) (1,968) (7,415)
SECURING OUR FUTURE 109
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
4. INCOME TAX EXPENSE
The prima facie tax charge on the profit for the year is reconciled to the income tax expense as follows:
Profit for the year 211,354 1,244,343 212,556 1,244,343
Prima facie tax on the profit for the year at 30% 63,406 373,303 63,767 373,303
Tax effect of permanent differences:
Non-deductible items 36 112 36 118
Non-taxable income 1,485 (4,238) 1,485 (4,238)
Double deduction – staff training (1,075) (1,320) (1,075) (1,320)
Dividend payment exchange - (1,591) - (1,591)
Unrealised exchange (gain)/loss (34,315) 6,634 (34,604) 6,823
Under/(over) provision in prior years 1,073 (42,007) 1,073 (42,007)
Income Tax Expense 30,610 330,893 30,645 331,088
Tax expense comprises:
Income tax - current year 14 116,592 304,044 115,720 304,239
Deferred tax - current year 16(a) (87,055) 68,856 (87,759) 68,856
Prior year adjustment 1,073 (42,007) 2,684 (42,007)
Total Income Tax Expense 30,610 330,893 30,645 331,088
5. CASH AND CASH EQUIVALENTSCash on hand 117 71 119 73
Cash at bank 170,443 101,129 217,423 142,923
Short term deposits 252,910 346,724 353,360 347,114
Total Cash and Cash Equivalents 423,470 447,924 570,902 490,110
6. TRADE AND OTHER RECEIVABLES (CURRENT)Accounts receivable – trade 277,051 198,026 277,051 198,026
Accounts receivable – sundry (a), (b) 18,693 17,519 21,687 19,580
295,744 215,545 298,738 217,606
Less: Provision for doubtful debts (c) (580) (3,784) (580) (3,784)
Total Current Receivables 295,164 211,761 298,158 213,822
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
110 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
6. TRADE AND OTHER RECEIVABLES (CURRENT) (CONTINUED)The Company’s and the Group’s exposure to credit risk is discussed in note 26 (c) (i).
(A) IMPAIRED RECEIVABLES
As at 31 December 2013, trade and other receivables of the Group with a nominal value of K580,000 which are over six months overdue (2012: K3,784,000) are considered to be impaired. The amount of impairment provision was K580,000 (2012: K3,784,000). The individually impaired receivables mainly relate to employee, local, overseas and PNG sundry receivables. It was assessed that a portion of the receivables was expected to be recovered. There were no impaired trade receivables in 2013 or 2012.
(B) PAST DUE BUT NOT IMPAIRED
As at 31 December 2013, sundry receivables of K3,213,000 (2012: K2,930,000) were past due but not impaired. These relate to employee, local, overseas and PNG sundry receivables for whom there is no recent history of default and/or regular partial payments are being received. The ageing analysis of these sundry receivables is as follows:
60 DAYS 90 DAYS 120 DAYS >120 DAYS
2013 K’000 938 540 533 1,202
2012 K’000 351 1,645 96 838
(C) PROVISION FOR DOUBTFUL DEBTS
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
Opening balance 3,784 1,911 3,784 1,911
Increase in provision 3(a) - 2,163 - 2,163
Write-offs applied against provision (3,204) (290) (3,204) (290)
Closing Balance 580 3,784 580 3,784
(D) FOREIGN EXCHANGE RISK
Information about the Group’s and the Company’s exposure to foreign currency risk in relation to Trade and Other Receivables is provided in note 26(b)(i).
(E) FAIR VALUE
Due to the short-term nature of the receivables, their carrying amount is assumed to approximate their fair value.
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
7. INVENTORIES (CURRENT)
CONSUMABLES:
Spare parts and consumables 320,397 274,765 320,397 274,765
Less: Provision for obsolete stock (a) (98,566) (87,398) (98,566) (87,398)
Goods in transit 102,539 92,295 102,539 92,295
Total Consumables 324,370 279,662 324,370 279,662
CONCENTRATE:
Product in process 40,792 24,755 40,792 24,755
Product on hand 115,733 178,699 115,733 178,699
Less: Provision for high flourine (28,069) - (28,069) -
Total Concentrate 128,456 203,454 128,456 203,454
Total Current Inventories 452,826 483,116 452,826 483,116
(A) PROVISION FOR STOCK
Opening balance 87,398 77,203 87,398 77,203
Provisions created 3(a) 39,237 10,195 39,237 10,195
Closing Balance 126,635 87,398 126,635 87,398
SECURING OUR FUTURE 111
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
8. OTHER ASSETS (CURRENT)
Prepayments 24,301 24,330 24,301 24,330
Home Ownership Scheme loans receivable 15,309 5,933 15,309 5,933
Total Current Other Assets 39,610 30,263 39,610 30,263
NOTE
BUILDINGSK’000
PLANT,MACHINERY AND
EQUIPMENTK’00
CAPITALWORKS IN
PROGRESSK’000
TOTALK’000
9. PROPERTY, PLANT AND EQUIPMENTOpening cost 1 January 2013 316,168 2,698,675 744,562 3,759,405
Opening accumulated depreciation (295,836) (1,941,914) - (2,237,750)
Opening net book value 20,332 756,761 744,562 1,521,655
Additions – Per Cash Flow - - 389,719 389,719
Transfer from capital works in progress 20,388 697,524 (717,812) -
Disposals and adjustments - (917) - (917)
Depreciation charge 3(a) (15,638) (550,406) - (566,044)
Closing Net Book Value 31 December 2013 25,082 902,962 416,369 1,344,413
Closing Cost 31 December 2013 336,661 3,318,953 416,369 4,071,983
Accumulated depreciation (311,579) (2,415,991) - (2,727,570)
Closing Net Book Value 31 December 2013 25,082 902,962 416,369 1,344,413
Opening cost 1 January 2012 312,373 2,592,634 392,463 3,297,470
Opening accumulated depreciation (289,484) (1,709,143) - (1,998,627)
Opening net book value 22,889 883,491 392,463 1,298,843
Additions – Per Cash Flow - - 467,903 467,903
Transfer from capital works in progress 3,795 112,009 (115,804) -
Disposals and adjustments - (330) - (330)
Depreciation charge 3(a) (6,352) (238,409) - (244,761)
Closing Net Book Value 31 December 2012 20,332 756,761 744,562 1,521,655
Closing Cost 31 December 2012 316,168 2,698,675 744,562 3,759,405
Accumulated depreciation (295,836) (1,941,914) - (2,237,750)
Closing Net Book Value 31 December 2012 20,332 756,761 744,562 1,521,655
In accordance with the Mining (Ok Tedi Agreement) Act, the State has the right, after the closure of the mine, to acquire certain infrastructure fixed assets. The accounting net book value of these fixed assets is K25,082,000 (2012: K20,332,000). At the time that these accounts were prepared the Company has not received, and does not expect to receive, notice that the State intends to acquire any of the assets concerned.
The schedule above do not include the OTDF property, plant and equipment which has a closing net book value of K172,000 (2012: K212,000).
There are no conditions that indicate impairment of property, plant and equipment as at 31 December 2013 and 31 December 2012.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
112 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
PRE-PRODUCTION
EXPENDITUREK’000
DEFERREDSTRIPPING
COSTK’000
TOTALK’000
10. MINE DEVELOPMENTOpening cost 1 January 2013 392,710 147,812 540,522
Accumulated amortisation (379,600) - (379,600)
Opening net book value 13,110 147,812 160,922
Additions - 318,472 318,472
Amortisation (4,377) - (4,377)
Closing Net Book Value 31 December 2013 8,733 466,284 475,017
Closing cost 31 December 2013 392,710 466,284 858,994
Accumulated amortisation (383,977) - (383,977)
Closing Net Book Value 31 December 2013 8,733 466,284 475,017
Opening cost 1 January 2012 392,710 - 392,710
Accumulated amortisation (375,204) - (375,204)
Opening net book value 17,506 - 17,506
Additions - 147,812 147,812
Amortisation (4,396) - (4,396)
Closing Net Book Value 31 December 2012 13,110 147,812 160,922
Closing cost 31 December 2012 392,710 147,812 540,522
Accumulated amortisation (379,600) - (379,600)
Closing Net Book Value 31 December 2012 13,110 147,812 160,922
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
11. RESTORATION AND REHABILITATION ASSETOpening net book value 120,621 169,527 120,621 169,527
Adjustment to cost 18 - 798 - 798
Amortisation 3(a) (42,381) (49,704) (42,381) (49,704)
Closing Net Book Value 1(i) 78,240 120,621 78,240 120,621
Cost 476,464 475,666 476,464 475,666
Adjustment to Cost - 798 - 798
Accumulated amortisation (398,224) (355,843) (398,224) (355,843)
Net Book Value 78,240 120,621 78,240 120,621
SECURING OUR FUTURE 113
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
12. OTHER ASSETS (NON-CURRENT)Roadco prepayments 1,433 2,866 1,433 2,866
Advances to suppliers 60,994 - 60,994 -
Home Ownership Scheme loans 14,835 11,080 14,835 11,080
Lower Ok Tedi - compensation asset - 182 - 182
Total Non-Current Other Assets 77,262 14,128 77,262 14,128
13. TRADE AND OTHER PAYABLES (CURRENT)(Unsecured)
Accounts payable – trade 227,218 133,851 227,248 133,775
Accounts payable – other 134,560 22,639 140,626 30,681
Total Current Trade and Other Payables 361,778 156,490 367,874 164,456
14. INCOME TAX PAYABLEOpening balance refundable (49,443) (72,932) (48,304) (72,881)
Prior year adjustment 4,758 (42,007) 3,016 (42,007)
Tax expense 4 116,592 304,044 115,720 304,239
Interest withholding tax/Tax credit scheme (44,155) (9,075) (43,553) (8,182)
Payments (104,966) (229,473) (104,966) (229,473)
Closing Balance refundable (77,214) (49,443) (78,087) (48,304)
15. PROVISIONS (CURRENT)Employee entitlements 17(a) 11,408 36,699 12,817 37,719
Community Mine Continuation Agreements (a) 8,827 5,872 130,157 5,872
Compensation provision 17(b) 14,718 14,056 14,718 14,056
Employee Incentives (SISS) provision 24(b) 19,404 53,461 40,998 71,155
Production levy 3(a) 5,990 7,741 5,990 7,741
Total Current Provisions 60,347 117,829 204,680 136,543
(A) COMMUNITY MINE CONTINUATION AGREEMENTS (CURRENT)
Opening balance 5,872 4,875 5,872 4,875
Provision created 3(a) 72,594 55,151 193,924 55,151
Less: Payments made against the provision (69,639) (54,154) (69,639) (54,154)
Closing Balance 8,827 5,872 130,157 5,872
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
114 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
16. DEFERRED INCOME TAX (NON-CURRENT)Deferred Income Tax comprises:
Deferred Tax Asset:
Provisions & employee benefits 215,901 210,014 215,901 210,081
Others 3,125 (5,536) 2,738 (3,669)
Total Deferred Tax Assets 219,026 204,478 218,639 206,412
Deferred Tax Liability:
Prepayments / consumables inventory 80,054 62,205 80,054 62,205
Property, plant and equipment 114,171 110,173 114,171 110,173
Hedge liability - (5,301) - (5,301)
Others 64,462 162,121 67,133 166,188
Total Deferred Tax Liabilities 258,687 329,198 261,358 333,265
Net Deferred Tax Liabilities 39,661 124,720 42,719 126,853
(A) MOVEMENT IN DEFERRED INCOME TAX (ASSET)/LIABILITY
Opening balance 124,720 70,024 126,853 74,001
Prior year adjustment (3,305) (25,051) (1,676) (26,895)
Charged to income statement 4 (87,055) 68,856 (87,759) 68,856
Charged to equity 5,301 10,891 5,301 10,891
Closing Balance 39,661 124,720 42,719 126,853
17. PROVISIONS (NON-CURRENT)Employee entitlements (a) - 22,909 - 22,909
Compensation provision (b) - - - -
Employee incentives (SISS) provision 24(b) - - - 17,694
Total Non-Current Provisions - 22,909 - 40,603
(A) EMPLOYEE ENTITLEMENTS (CURRENT AND NON-CURRENT)
Opening balance 59,608 57,497 60,628 58,172
Provision created 3(a) 131,466 60,740 133,068 61,107
Less: Payments made against the provision (179,666) (58,629) (180,879) (58,651)
Closing Balance 11,408 59,608 12,817 60,628
Current 15 11,408 36,699 12,817 37,719
Non-current - 22,909 - 22,909
Closing Balance 11,408 59,608 12,817 60,628
(B) COMPENSATION PROVISION (CURRENT AND NON-CURRENT)
Opening balance 14,056 14,248 14,056 14,248
Provision created 3(a) 13,305 13,305 13,305 13,305
Less: Payments made against the provision (12,643) (13,497) (12,643) (13,497)
Closing Balance 14,718 14,056 14,718 14,056
Current 15 14,718 14,056 14,718 14,056
Non-current - - - -
Closing Balance 14,718 14,056 14,718 14,056
SECURING OUR FUTURE 115
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
18. PROVISION FOR RESTORATION AND REHABILITATION Opening balance 476,221 483,792 476,221 483,792
Adjustment to cost 1 - 798 - 798
Impact of change in exchange rate on provision 95,947 (22,495) 95,947 (22,495)
Interest charged 3(b) and 25 4,976 14,126 4,976 14,126
Closing Balance 1(c)(iii) and 1(h) 577,144 476,221 577,144 476,221
19. ORDINARY SHARESIssued and paid up capital
192,700,000 shares (2012: 192,700,000 shares) 195,102 195,102 195,102 195,102
During the year, the Company cancelled 122,200,000 ordinary shares held by PNGSDP and issued new shares to the Independent State of PNG (note 27).
CAPITAL RISK MANAGEMENT
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group and the Company monitor capital on the basis of its gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total financial liabilities (including trade and other payables and derivative financial instruments as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus debt.
The gearing ratios at 31 December 2013 and 31 December 2012 were as follows:
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
Trade and other payables 13 361,778 156,490 367,874 164,456
Derivative financial instruments 25(b)(ii) - 17,452 - 17,452
Less: Cash and cash equivalents 5 (423,470) (447,924) (570,902) (490,110)
Net debts (61,692) (273,982) (203,025) (308,202)
Equity 2,801,129 2,606,822 2,799,046 2,603,609
Total capital 2,739,437 2,332,840 2,596,018 2,295,407
Gearing Ratio -0.02 -0.12 -0.08 -0.13
The decrease in the gearing ratio during 2013 resulted primarily from higher trade and other payables as at balance date.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
116 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
20. DIVIDENDS DECLARED AND PAID
As defined in the Company’s Constitution, the Available Cash Flow of the prior financial year determines, without the need for declaration, the level of ordinary dividends payable each year.
The Constitution provides that the Board may vote to:
- pay dividends as in the judgment of the Directors that the position of the Company justifies; and
- reduce or increase the amount or delay the payment of an ordinary dividend.
Furthermore, as defined in the Fifth Restated Shareholders Agreement, the declaration and amount of any dividend will be in accordance with the Constitution and otherwise at the sole discretion of the Board.
The Board did not declare and pay any dividends during the year:
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
First interim dividend - 308,008 - 308,008
Second interim dividend - 207,469 - 207,469
Final dividend - 207,469 - 207,469
Total Dividends Declared and Paid - 722,946 - 722,946
Dividend distributions to the Company’s shareholders are recognised as liability in the Company’s financial statements in the year in which the dividends are approved by the Company’s Directors.
21. CONTINGENCIES(A) GUARANTEES
ANZ 3,391 3,559 3,391 3,559
Total Guarantees 3,391 3,559 3,391 3,559
(B) LITIGATION
The Company is subject to various claims and litigation. The Directors however consider that the probability of significant loss from these claims is remote.
(C) MINE CONTINUATION
The agreement that led to the dismissal of proceedings in relation to environmental damage included an undertaking by the Company to use best endeavours to include the villages that supported the actions in the CMCA process. There is no obligation for the inclusion of these villages to add to the total amount paid under the existing CMCAs.
22. COMMITMENTS
(A) COMPENSATION PAYMENTS
The Mining (Ok Tedi Restated Eighth Supplemental Agreement) Act 1995 (No. 48) of Papua New Guinea was enacted in August 1995 and required the Company to make annual payments to compensation trusts over the remaining life of the mine. Required payments have been made by the Company and current liabilities are recognised in the accounts.
The Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001 (No. 7) was enacted in 2001 and required the Company to make annual payments initially aggregating to K161.5 million over the life of mine.
A requirement of the agreement was to have a mid-term review which addressed many factors including an assessment of whether predicted environmental impacts are being exceeded. This occurred during 2006 and agreements were successfully concluded during the second quarter of 2007 with the formal signing of the CMCA Review Memorandum of Agreement between the delegates of the CMCA regions and shareholders of the Company. The communities downstream of the mine will benefit from the agreed increased compensation deal.
The new benefits provided by the Company are approximately four times the amount of the previous package. The total benefits package,
including those to be provided by the other key stakeholders (PNGSDP and the PNG Government), are estimated to total K1.01 billion (USD342 million) over the seven years from 2007 to 2013, of which the company is responsible for K324 million.
With the agreement signed by the nine CMCA impacted regions for the MLE, total benefits agreed were approximately 85% of the existing package.
(B) ENVIRONMENTAL MONITORING COSTS
In OTML’s 2009 Detailed MCP, which was submitted to the PNG Office of Environment and Conservation and the Mineral Resources Authority in December 2009 which was approved by the Minister for Mining on 7th May 2012, the Company has undertaken to monitor key environmental aspects for a 30 year period following closure of the open pit mine. The Detailed MCP included a detailed estimate of the cost of this Post Closure Environmental Monitoring Programme (PCEMP) which totalled USD34.1 million. This comprises: Monitoring Activities which are aimed at the performance of the cover on the Bige stockpiles and, throughout the riverine system, ARD, water quality, fish biology and hydrography; Support Programmes which cater for labour, equipment, travel and access logistics, and operating, management and reporting costs; and Contingency and Escalation Costs which allow for both pre closure and post closure cost movements.
SECURING OUR FUTURE 117
(C) CAPITAL EXPENDITURE
As at 31 December 2013, the Company had contracted for capital commitments totalling K667,859,000 which are not provided for in the accounts (31 December 2012: K720,772,000).
(D) OPERATING LEASES
Payments due under operating leases for property and equipment not provided for in the accounts are:
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
Due within 1 year 141,942 184,749 141,942 184,749
Due within 1-2 years 31,003 118,477 31,003 118,477
Due within 2-5 years 27,425 79,052 27,425 79,052
Total Operating Leases 200,370 382,278 200,370 382,278
(E) FRONTIER RESOURCES LIMITED
In May 2010 OTML entered into Farm-in and Joint Venture Agreements with Frontier Gold (PNG) Limited and Frontier Copper (PNG) Limited in relation to five exploration licences. Under these agreements, OTML could earn an 80.1% interest in the three licences held by Frontier Copper (PNG) Limited and a 58% interest in the two licences held by Frontier Gold PNG Limited. OTML was also to act as manager of the joint venture.
OTML has entered into the above arrangements as trustee and on behalf of PNGSDP as beneficiary. PNGSDP funded the above transactions under a flow through arrangement set out in the Trust and Funding Deed. OTML had an option to assume the legal and beneficial ownership to the property and rights under the joint venture and farm-in agreements, at which time OTML will reimburse PNGSDP for the full costs incurred. OTML did not exercise this option.
In September 2013, through the recommendation of OTML and as approved by PNGSDP, OTML have withdrawn from the Farm-in and Joint Venture Agreements with Frontier Gold (PNG) Limited and Frontier Copper (PNG) Limited.
23. INSURANCEThe Company places insurance cover with insurers of high credit rating. The insurance policies cover the usual risks that are able to be transferred to insurers under property, liability and transit insurance policies.
At the time of renewing its major insurance coverage, on 1 July 2008, OTML changed the basis of indemnification for Business Interruption (BI) insurance from reimbursement of profits to reimbursement of fixed costs and increased the cover from USD100,000,000 to USD400,000,000 (both values are inclusive of self-insured retentions).
Self-insured retentions (ISR) include: Property Damage – USD25,000,000; Business Interruption – first 30 days after insurable event plus USD2,500,000 at various layers of the cover.
24. INVESTMENT IN SUBSIDIARIESThe holding company’s investment in subsidiaries comprises shares at cost.
ORDINARY SHARES
% SHAREHOLDING
Ok Tedi Development Foundation Limited (a) 3 75%
OTML Shares in Success Limited (b) 2 100%
Ok Tedi Australia Pty Limited (c) 10,000 100%
(A) OK TEDI DEVELOPMENT FOUNDATION LIMITED (OTDF)
OTDF was established pursuant to the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001. Before mine closure, the Company is under an obligation to transfer its shares in OTDF to four reputable organisations engaged in development activities in Papua New Guinea consistent with the objects of OTDF. If the Company does not transfer its shares prior to mine closure, OTDF must be wound up. During 2011, one share was transferred to PNG Sustainable Development Program Limited.
The objects of OTDF are to pursue the promotion of sustainable social improvement and economic activity in the Western Province and Telefomin district of the Sandaun Province for the well being of persons resident in these provinces. OTDF must act solely in pursuit of these objects.
OTDF have a break-even operating result for the year (31 December 2012: break-even). OTDF is exempt from PNG income tax and supplies to OTDF do not attract GST. Further, moneys paid or the cost of assets contributed to OTDF is an allowable deduction to the person making the payment or contribution in the year of payment or contribution.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
118 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
24. INVESTMENT IN SUBSIDIARIES (CONTINUED)
(B) OTML SHARES IN SUCCESS LIMITED (SISL)
SISL is the Trustee of OTML (SISS). SISS was established to provide rewards to Company employees for their individual and collective contributions to improving the productivity and profitability of the Company and to those employees who provide their services until mine closure.
The Company is required to pay SISL an annual amount of 5.2 percent of Available Cash Flow (denominated in US dollars and translated based on the year end exchange rate). The contributions made to SISL by the Company are held on trust for the employees. SISL also manages the funds it holds on trust for the employees.
As at 31 December 2013, the following liabilities existed:
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
Opening balance 53,461 81,403 88,849 134,873
Provision created 28 18,827 53,297 18,827 53,297
Less: Payments made against the provision (52,884) (81,238) (66,678) (99,320)
Less: Exchange variance - (1) - (1)
Total SISL Liability 19,404 53,461 40,998 88,849
Current 15 19,404 53,461 40,998 71,155
Non-current 17 - - - 17,694
Total SISL Liability 19,404 53,461 40,998 88,849
The SISS ceased on 31 December 2013 with fund distribution to be paid in early 2014.
(C) OK TEDI AUSTRALIA PTY LIMITED (OTAPL)
OTAPL was incorporated on 19 June 2008 as a wholly owned subsidiary of OTML. The objects of OTAPL are to provide marketing and logistics services to OTML.
As at 31 December 2013, the Company’s investment in OTAPL at cost is as follows:
Opening balance 26 26 - -
Shares - - - -
Total Investment 26 26 - -
25. OK TEDI FINANCIAL ASSURANCE FUND The Mine Closure Code contained in the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001 requires the Company to contribute to a Mine Closure Fund (referred to as the Ok Tedi Financial Assurance Fund). The Ok Tedi Financial Assurance Fund has been established with Standard Bank Offshore Trust Company (Jersey) Ltd acting as independent Trustee. The Fund covers costs of (a) deconstruction and cleanup, (b) revegetation, (c) environmental monitoring and maintenance, (d) employee retrenchment, (e) dredging after closure and (f) post closure monitoring which are valued on USD based on current cost with contingency and escalation considered up to mine closure.
The Ok Tedi Financial Assurance Fund is established to provide sufficient cash at the open pit mine closure for settlement of mine rehabilitation and restoration liabilities (refer note 1(i)). The Company’s updated estimate contained in the 2009 Detailed MCP submitted in December 2010 which was approved by the Minister for Mining on 7th May 2012, is that the Fund should contain USD227 million by 2013. As 31 December 2013, the Company have already met the fund required and ceased the semi-annual payments. The Funds are held by the Trustee to be applied in assisting both the Company and the State to comply with their respective MCP obligations under the Mine Closure Code.
The assets of the Ok Tedi Financial Assurance Fund are legally separate from the Company and are not available to meet the claims of creditors in any winding up of the Company. They are irrevocably dedicated to funding open pit mine closure costs and cannot be used for any other purpose. Contributions to the Fund are initially recorded at cost and the Company recognises its receivable from the Fund at fair value.
In accordance with accounting practice, the Ok Tedi Financial Assurance Fund is considered to be a special purpose entity controlled by the Company and it is consolidated in the Group financial statements. The assets of the Fund at 31 December 2013 comprised a portfolio of investments, valued at balance date at K577 million (USD228 million). These investments are accounted for as a financial asset at fair value through profit or loss.
SECURING OUR FUTURE 119
Total contributions by the Company to the Fund and the consolidated Fund equity are summarised as follows:
COMPANY
(RECEIVABLE FROM THE FAF)
CONSOLIDATED(CASH, CASH EQUIVALENTS AND AVAILABLE FOR SALE
INVESTMENTS AT FAIR VALUE)
2013K’000
2012K’000
2013K’000
2012K’000
Opening balance 482,584 462,214 482,584 462,214
Payment - 14,484 - 14,484
Portfolio return - current year (4,976) 14,126 (4,976) 14,126
Exchange variance 99,209 (8,240) 99,209 (8,240)
Closing balance 576,817 482,584 576,817 482,584
Without considering the Ok Tedi Financial Assurance Fund and the Restoration and rehabilitation liability, the Company Financial Position would be:
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
Total Assets 3,482,268 3,244,337 3,633,326 3,289,565
Total Liabilities 680,812 643,878 833,913 692,319
26. FINANCIAL RISK MANAGEMENT
(A) FINANCIAL RISK FACTORS
The Group’s activities expose it to a variety of financial risks including market risk (consists of currency, price and interest rate risk), credit risk, liquidity risk and fair value risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by the Group’s treasury section under policies approved by the Board of Directors.
The Company and the Group hold the following financial instruments:
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
FINANCIAL ASSETS:
Cash and cash equivalents 423,470 447,924 570,902 490,110
Trade and other receivables 295,164 211,761 298,158 213,822
Financial assurance fund 576,817 482,584 576,817 482,584
1,295,451 1,142,269 1,145,877 1,186,516
FINANCIAL LIABILITIES:
Trade and other payables 361,778 156,490 367,874 164,456
Derivative financial instruments 26(b)(ii) - 17,452 - 17,452
361,778 173,942 367,874 181,908
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
120 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
(B) MARKET RISKS FACTORS
(i) Foreign Exchange Risks
The Company operates internationally and is exposed to foreign exchange risks arising from various currency exposures, primarily with respect to the US Dollar and the Australian Dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.
The Company’s revenues are in US dollars and a significant proportion of costs are in US dollars and Australian dollars. Therefore the Company’s operations are exposed to substantial foreign exchange risk. It is not the Company’s policy to hedge foreign exchange risk.
At 31 December 2013, if the Kina had moved by 5% against the US dollar with all other variables held constant, the net profit after tax (NPAT) for the year would have an effect of K68.7 million (31 December 2012: K58.3 million) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US dollar denominated provision for restoration & rehabilitation, trade receivables and cash at bank.
Monetary assets and liabilities denominated in foreign currencies, at balance date, are as follows:
COMPANY CONSOLIDATED
2013K’000
2012K’000
2013K’000
2012K’000
ASSETS:
Cash – US Dollars 310,749 258,425 332,351 293,821
– Australian Dollars 54,129 105,770 55,666 106,710
Receivables – US Dollars 277,051 198,026 277,079 197,981
Financial Assurance Fund receivable – US Dollars 576,817 482,584 576,817 482,584
LIABILITIES:
Payables – US Dollars 68,289 18,196 68,289 18,212
– Australian Dollars 21,101 44,195 21,477 44,103
Provision-Shares in Success – US Dollars 19,404 53,461 40,998 71,155
Provision-Restoration & Rehabilitation – US Dollars 577,144 476,221 577,144 476,221
Derivative Financial Instruments – US Dollars - 17,452 - 17,452
(ii) Price Risks
The final settlement price received by the Company for the sale of its copper/gold concentrate is usually specified in sales contracts as being based on the average London Metal Exchange (LME) price for a defined future period generally three to five months after arrival of shipments at the customers’ facilities (refer note 1(d)).
At 31 December 2013, a fluctuation of USD110 per tonne (USD0.05/pound) in the price of copper would have an effect of K20.4 million (USD8.1 million) on the NPAT. A fluctuation of USD10/ounce in the price of gold would have an effect of K6.1 million (USD2.4 million) on NPAT. These sensitivities assume all other variables remain constant.
The Company completed hedging of gold in June 2013.
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
Current Liabilities
Forward contracts 19 - 17,452 - 17,452
Non-current Liabilities
Forward contracts - - - -
Net Derivative Financial Instruments - 17,452 - 17,452
SECURING OUR FUTURE 121
Hedging is undertaken in order to avoid or minimise possible adverse financial or cash flow effects of movements in commodity prices.
The gold forward contracts, which were entered into with ANZ Bank in March 2007, were completed/closed in June 2013 and no outstanding hedge at balance date.
All commodity contracts are settled other than by physical delivery of the underlying commodity. On maturity, the contracted price is compared to the spot price on that date and the price differential is applied to the contracted quantity. A net amount is paid or received by the Company.
No future derivative financial instrument gross income is expected as the hedge was completed/closed during the year (2012: K18 million).
Included in operating profit for the year is derivative financial instrument income (losses) of:
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
Gold hedging - Realised gain/(loss) (14,148) (35,754) (14,148) (35,754)
- Unrealised gain/(loss) - (7,695) - (7,695)
Total Hedging Gain/(Loss) 3(a) (14,148) (43,449) (14,148) (43,449)
The Ok Tedi Financial Assurance Fund (note 26) is not expose to price risks as such is contributed/denominated in USD currency and the same currency being held offshore.
(iii) Interest Rate Risks Exposures
For the year ended 31 December 2013, the Company had an average of USD190 million (2012: USD238 million) cash at any given time. On average 70% (USD133 million) of these funds were invested in Short-Term Deposits (1 to 90 days) and earned an average of 0.3% per annum. The Company had no borrowings during 2013.
At 31 December 2013, if interest rates had changed by 100 basis points from the year-end rates with all other variables held constant, NPAT for the year would have been USD0.2 million lower/higher, mainly as a result of higher/lower interest incomes from cash and cash equivalents.
(C) CREDIT RISKS EXPOSURES
The credit risk on financial assets of the Company which have been recognised on the balance sheet is generally the carrying amount, net of any provisions for doubtful debts.
For derivatives, credit risk arises from the potential failure of counter parties to meet their obligations under the respective contracts. With respect to commodity contracts outlined above, the Company has an exposure to loss in the event counter parties fail to settle on contracts which are favourable to the Company.
For trade receivables and financial commitments, the Company only deals with counter parties with a credit rating of BBB - or better. Since trade sales are spread over a number of customers the Company believes that no significant concentration of credit risks exists and it is not the Company’s policy to hedge credit risk.
The Company has policies in place to ensure that sales are made to customers with an appropriate credit history and requires letters of credit from the majority of its buyers. Management does not expect any losses from non-performance by counterparties.
(D) LIQUIDITY RISKS EXPOSURES
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Company manages liquidity risk by maintaining sufficient bank balances to fund its operations and the availability of funding through a committed credit facility.
Management monitors rolling forecasts of the liquidity reserve on the basis of expected cash flows.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
122 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
26. FINANCIAL RISK MANAGEMENT (CONTINUED)
(D) LIQUIDITY RISKS EXPOSURES (CONTINUED)
Forecast liquidity reserve as of 31 December 2013 is as follows:
2014 K’000
2013K’000
Opening balance for the year 418,706 447,924
Operating proceeds 2,466,095 4,111,336
Operating cash outflows (1,492,291) (2,490,667)
Investing outflows (708,191) (1,437,955)
Financing outflows - -
Foreign exchange movements - -
Closing Balance For The Year 684,319 630,638
The table below analyses the Company’s financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
1 YEAR AND 2 YEARS AND 5 YEARS 5 YEARS
K’000 K’000 K’000 K’000
At 31 December 2013
Derivative Financial Instruments - - - -
Trade and other payables 361,778 - - -
At 31 December 2012
Derivative Financial Instruments 17,452 - - -
Trade and other payables 156,470 - - -
The table below analyses the Company’s derivative financial instruments, which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contract maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
LESS THAN 1 YEAR
BETWEEN 1 AND 2 YEARS
BETWEEN 2 AND 5 YEARS OVER 5 YEARS
K’000 K’000 K’000 K’000
At 31 December 2013
Forward sale contracts – inflow/(outflow) Gold - - - -
At 31 December 2012
Forward sale contracts – inflow/(outflow) Gold (17,258) - - -
(E) FAIR VALUE ESTIMATION
The fair value of derivative financial instruments is determined by an independent external party based on dealer quotes and market conditions existing at each balance sheet date. Quoted market prices or dealer quotes are used for long-term debt.
The fair value contract prices by settlement date used by the Company in respect of its hedges of copper and gold were as follows:
GOLDLESS THAN
1 YEARBETWEEN 1
AND 2 YEARSBETWEEN 2
AND 3 YEARS OVER 3 YEARS
$US/OUNCE $US/OUNCE $US/OUNCE $US/OUNCE
At 31 December 2013 N/A N/A N/A N/A
At 31 December 2012 1,688 N/A N/A N/A
SECURING OUR FUTURE 123
27. RELATED PARTY TRANSACTIONS
(A) OWNERSHIP
Shareholders and their respective shareholdings are as follows:
ORDINARY SHARES % HOLDING
Independent State of Papua New Guinea 169,200,000 87.8
Minerals Resources Ok Tedi No. 2 Limited 23,500,000 12.2
192,700,000 100
On September 19, 2013, the PNG Parliament have passed the 10th Supplemental Agreement cancelling the 122,200,000 shares of PNGSDP and issuing a 122,200,000 new share to the State, making the Company a 100% State Owned Enterprise (SOE).
Transactions with the Independent State of Papua New Guinea predominantly comprise the payment of taxes and other statutory payments. The following related party transactions were between the Company and PNGSDP:
Amounts receivable from related party
Total amounts receivable at 31 December 2013 totalled K84,600 (2012: K K40,600).
(B) TRANSACTIONS DURING THE YEAR
The total reimbursement made by PNGSDP to OTML to-date for the Frontier Exploration programme costs amounts to K51.6 million (equivalent to USD24.0 million)
(C) KEY MANAGEMENT COMPENSATION
2013K’000
2012K’000
Salaries and short-term employment benefits 13,709 16,193
Post employment benefits 192 227
Total Compensation 13,901 16,420
Key management comprise the Managing Director, General Managers and Managers.
28. EMPLOYEE BENEFITSThe average number of people employed by the Company during the year was 2,049 (2012: 2,176).
COMPANY CONSOLIDATED
NOTE2013
K’0002012
K’0002013
K’0002012
K’000
Staff costs comprise of the following:
Salaries and wages 235,856 221,318 237,002 221,318
Redundancy costs 224,150 - 224,150 -
Contribution to retirement benefit funds 20,152 13,837 20,152 13,837
Other employee on-costs 80,218 43,548 80,582 43,548
Shares in Success (b) 22,536 53,297 22,536 53,297
Total Staff Costs 3(a) 582,912 332,000 584,422 332,000
124 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
28. EMPLOYEE BENEFITS (CONTINUED)
(a) The Company terminated all employee contracts as at 31 December 2013 and paid out all entitlements to annual leave, sick leave and long service leave together with the approved redundancies payments. Certain employees were then offered new contracts with the Company on new terms and contracts.
(b) The Shares in Success incentive scheme (note 24 (b)) is a mechanism established to enable the Company to attract and retain employees by allowing them to share in the financial success of the Company.
In accordance with the Deed of Settlement, OTML is required to pay the Scheme an annual amount of 5.2% of its Available Cash Flow (denominated in US dollars and translated at the month end exchange rate), which is held on trust for the benefit of OTML employees.
The Scheme is required to maintain separate funds for Part A and Part B scheme employees, with criteria for employee eligibility and benefits payable from the Part A and Part B schemes set out in the Scheme Rules. Prior to 3 March 2009, the Scheme was required to allocate 40% of its Net Cash Inflow to each of the Part A and Part B Employment Funds, and 10% to each of the Part A and Part B End of Mine Life (EML) Bonus Funds. Amounts credited to the Part A Employment Funds are paid out in the following year to permanent employees of OTML at the end of each year, however for Part B, the amounts were spread over the Employment Contract Period of the employees. The amounts credited to Part A and Part B EML Bonus Funds were accumulated to be paid out to remaining employees during the final years of mine life.
The Deed of Settlement was revised effective 3 March 2009 in respect of contributions during the 2008 fiscal year and subsequent years. The Scheme is now required to allocate 50% (of the 5.2% of OTML’s Available Cash Flow) each to the Part A and Part B Employment Funds.
In respect to the Part B Employee Fund, the amounts will no longer be vested over the Employment Contract Period of the respective employee, rather the full amount will be paid out each year, similar to the Part A Employee Fund. No further contributions will be made to the EML Bonus Funds. The Part A and Part B EML Bonus Funds prior to the change will be retained and paid out to employees as at 31 December 2008 who are still with OTML during the final few years of mine life.
The Board has declared 2013 as the End of Mine Life for SISS purposes, and amendments to the SISS rules were approved by the majority of the members of Part A that allows eligible employees of Part A as at 31 December 2008 to receive their entitlements in full from Part A EML Bonus Fund if their employment ceases prior to 31 December 2013.
The scheme ceased at 31 December 2013 with final entitlements to be paid in early 2014.
29. INCORPORATION AND REGISTERED OFFICEThe Company is incorporated in Papua New Guinea. The Registered Office and Address for Service of Notices is 1 Dakon Road, Tabubil, Western Province, Papua New Guinea.
30. POST BALANCE DATE EVENTSOn 24 January 2014, in a court action brought by parties outside of the CMCA agreement, the High Court issued an ex parte injunctive order for the Company to stop riverine dumping of mine waste and tailings, which would effectively shut the mine. An application for a stay of these orders was granted by the National Court on 28 February 2014. The mine continues to operate normally and management are confident that the plaintiffs have no arguable case against the Company and that the orders will be dissolved.
OK TEDI MINING LIMITED AND ITS SUBSIDIARIES
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED
SECURING OUR FUTURE 125
GENERAL STANDARD DISCLOSURESGENERAL STANDARD DISCLOSURES GRI DESCRIPTION REPORT SECTION - PAGE NUMBER/S
STRATEGY AND ANALYSIS
G4-1 Statement from the CEO MD/ CEO report - pp 8, Chairman reports, pp 12
G4-2 Key impacts, risks and opportunitiesMD report - pp 8-11, Materiality - pp 28, Governance - pp 21 and 2013 Performance and Targets - pp 22-25
ORGANISATIONAL PROFILE
G4-3 Name of organisation Company profile - pp 4
G4-4 Primary brands, products, and services Company profile - pp 4
G4-5 Location of organisation’s headquarters Company profile - pp 4
G4-6 Number of countries where the organisation operates Company profile - pp 4
G4-7 Nature of ownership and legal form Business - pp 26
G4-8 Markets served Business - pp 26
G4-9 Scale of the organisation Business - pp 26
G4-10 Total number of employees People - pp 46-47
G4-11 Percentage of total employees covered by collective bargaining agreements People - pp 46
G4-12 Organisation’s supply chain. Describe the organisation’s supply chain Business - pp 27
G4-13 Significant changes during the reporting periodGovernance - pp 18, Supply - pp 27, Mine Continuation Studies - pp 30
G4-14 How the precautionary approach or principle is addressed by the organisation Governance - pp 20
G4-15 Externally developed principles or initiatives to which the organisation subscribes Governance - pp 30, People - pp 46
G4-16 Memberships of associations & national or international advocacy organisations Governance - pp 30
IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES
G4-17 Entities included in the organisations consolidated financial statements PWC statements - pp 91-124
G4-18 Process for defining the report content and the Aspect Boundaries Company profile - pp 5
G4-19 List all material aspects identified in the process for defining report content Materiality - pp 28
G4-20 For each material aspect, report the aspect boundary within the organisation Materiality - pp 29
G4-21 For each material aspect, report the aspect boundary outside the organisation Materiality - pp 29
G4-22 Report the effect of any restatements of information provided in previous reports Company profile - pp 5
G4-23Report significant changes from previous reporting periods in the Scope & Aspect Boundaries
Company profile - pp 5
STAKEHOLDER ENGAGEMENT
G4-24 List of stakeholder groups Materiality - pp 28
G4-25 Basis for identification and selection of stakeholders Materiality - pp 28
G4-26 Approaches to stakeholder engagementMateriality - pp 28, Mine Continuation Studies - pp 30, Social Responsibility - pp 68-70
G4-27 Key stakeholder topics and concerns Social Responsibility - pp 70, Materiality - pp 29
GLOBAL REPORTING INITIATIVE
126 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
GLOBAL REPORTING INITIATIVE CONTINUED
GENERAL STANDARD DISCLOSURESGENERAL STANDARD DISCLOSURES GRI DESCRIPTION REPORT SECTION - PAGE NUMBER/S
REPORT PROFILE
G4-28 Reporting period Company Profile - pp 5
G4-29 Date of most recent previous report Company Profile - pp 5
G4-30 Reporting cycle Company Profile - pp 5
G4-31 Contact point for the report Inside cover - pp 1
G4-32 Report the ‘In accordance’ option Company Profile - pp 4
G4-33 Organisations policy and current practice with regard to seeking external assurance Company Profile - pp 4
GOVERNANCE
G4-34 Governance structure Governance - pp 16
G4-37 Processes for consultation between stakeholders and the highest governance body Governance - pp 16, Social Responsibility - pp 68, 73
G4-45 Highest governance body’s role Governance - pp 16
G4-46Report the highest governance body’s role in reviewing the effectiveness of the organisation’s risk
Governance - pp 17, 21
G4-47Report the frequency of the highest governance body’s review of economic environmental and social impacts risks and opportunities
Governance - pp 16, 21
G4-48Highest committee or position that formally reviews and approves the organisation’s sustainability report
Governance - pp 17
G4-49 Process for communicating critical concerns to the highest governance body Governance - pp 17
G4-50Nature and total number of critical concerns that were communicated to the highest govt. body
Governance - pp 18
ETHICS AND INTEGRITY
G4-56 Mission and values statement, codes of conduct and principles. Governance - pp 19, Vision and Mission - pp 6-7
SECURING OUR FUTURE 127
SPECIFIC STANDARD DISCLOSURES INCLUDING MINING AND METALS SUPPLEMENTDMA ANDINDICATORS GRI DESCRIPTION PAGE NUMBER/S
CATEGORY: ECONOMIC
MATERIAL ASPECT: ECONOMIC PERFORMANCE
G4-DMA Generic Disclosures on Management Approach Materiality - pp 28-29
G4-EC1 Direct economic value generated and distributedSocial Responsibility - pp 81 Finance - pp 86
G4-EC4 Financial assistance received from government Social responsibility - pp 86
MATERIAL ASPECT: MARKET PRESENCE
G4-EC5Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
People - pp 46
G4-EC6 Proportion of senior management hired from the local community at significant locations of operation People - pp 46
MATERIAL ASPECT: INDIRECT ECONOMIC IMPACTS
G4-EC7 Development and impact of infrastructure investments and services supported Social Responsibility - pp 80-84
G4-EC8 Significant indirect economic impacts, including the extent of impacts Social Responsibility - pp 68-85
MATERIAL ASPECT: PROCUREMENT PRACTICES
G4-EC9 Proportion of spending on local suppliers at significant locations of operation Social Responsibility - pp 84
CATEGORY: ENVIRONMENTAL
MATERIAL ASPECT: ENERGY
G4-EN2 Percentage of Materials used that are Recycled Input Materials Environment - pp 61-65
G4-EN3 Energy consumption within the organisation Environment - pp 61
G4-EN4 Energy consumption outside of the organisation Environment - pp 61-62
G4-EN5 Energy intensity Environment - pp 61-62
G4-EN6 Reduction of energy consumption Environment - pp 61-62
MATERIAL ASPECT: WATER
G4-EN8 Total water withdrawal by source Environment - pp 61-62
G4-EN9 Water sources significantly affected by withdrawal of water Environment - pp 61
G4-EN10 Percentage and total volume of water recycled and reused Environment - pp 61-62
MATERIAL ASPECT: BIODIVERSITY
G4-EN11Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas
Environment - pp 60
G4-EN12Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas
Environment - pp 60
G4-EN13 Habitats protected or restored Environment - pp 60
G4-MM1 Amount of land disturbed or rehabilitated Environment - pp 62
G4-MM2 Number & % of total sites identified as requiring biodiversity management plans Environment - pp 60
MATERIAL ASPECT: EMISSIONS
G4-EN15 Direct greenhouse gas (GHG) emissions (Scope 1) Environment - pp 61-62
G4-EN21 NOX, SOX, and other significant air emissions Not reported - no data
128 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
SPECIFIC STANDARD DISCLOSURES INCLUDING MINING AND METALS SUPPLEMENTDMA ANDINDICATORS GRI DESCRIPTION PAGE NUMBER/S
MATERIAL ASPECT: EFFLUENTS AND WASTE
G4-EN22 Total water discharge by quality and destination Environment - pp 61-62
G4-EN23 Total weight of waste by type and disposal methodEnvironment - pp 65 (some data only)
G4-EN24 Total number and volume of significant spills Environment - pp 62, 65
G4-EN25Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally
Environment - pp 65
G4-EN26Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the organisation’s discharges of water and runoff
Environment - pp 60
G4-MM3 Total amounts of overburden, rock, tailing, and sludge and their associated risks Environment - pp 62
MATERIAL ASPECT: COMPLIANCE
G4-EN29Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
Environment - pp 57
MATERIAL ASPECT: TRANSPORT
G4-EN30Significant environmental impacts of transporting products and other goods and materials for the organisation’s operations, and transporting members of the workforce
Environment - pp 61
MATERIAL ASPECT: OVERALL
G4-EN31 Total environmental protection expenditures and investments by type Environment - pp 56, 64-65
MATERIAL ASPECT: ENVIRONMENTAL GRIEVANCE MECHANISMS
G4-EN34Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms
Environment - pp 65
CATEGORY: SOCIAL
SUB-CATEGORY: LABOR PRACTICES AND DECENT WORK
MATERIAL ASPECT: EMPLOYMENT
G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region People - pp 44-47
MATERIAL ASPECT: OCCUPATIONAL HEALTH AND SAFETY
G4-LA5Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programmes
OHS&W - pp 51
G4-LA6Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender
OHS&W - pp 51
G4-LA7 Workers with high incidence or high risk of diseases related to their occupation OHS&W - pp 52-54
G4-LA8 Health and safety topics covered in formal agreements with trade unions OHS&W – Not formalised
MATERIAL ASPECT: TRAINING AND EDUCATION
G4-LA9 Average hours of training per year per employee by gender, and by employee category People - pp 48
G4-LA10Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings
People - pp 44, 48
G4-LA11Percentage of employees receiving regular performance and career development reviews, by gender and by employee category
People - pp 47
GLOBAL REPORTING INITIATIVE CONTINUED
SECURING OUR FUTURE 129
SPECIFIC STANDARD DISCLOSURES INCLUDING MINING AND METALS SUPPLEMENTDMA ANDINDICATORS GRI DESCRIPTION PAGE NUMBER/S
MATERIAL ASPECT: DIVERSITY AND EQUAL OPPORTUNITY
G4-LA12Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity
People - pp 47
MATERIAL ASPECT: EQUAL REMUNERATION FOR WOMEN AND MEN
G4-LA13Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation
People - pp 46
MATERIAL ASPECT: LABOR PRACTICES GRIEVANCE MECHANISMS
G4-LA16Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms
People - pp 46
G4-MM4 Number of Strikes and lockouts exceeding one week duration People - pp 46
SUB-CATEGORY: SOCIETY
MATERIAL ASPECT: ARTISANAL AND SMALL SCALE MINING
G4-MM8 Number & % of company operating sites where artisanal & small scale mining takes place Social Responsibility - pp 72
MATERIAL ASPECT: RESETTLEMENT
G4-MM9 Sites where resettlement took place Social Responsibility - pp 72
MATERIAL ASPECT: CLOSURE PLANNING
G4-MM10 Number and % of operations with closure plans Environment - pp 64
SUB-CATEGORY: PRODUCT RESPONSIBILITY
MATERIAL ASPECT: MATERIALS STEWARDSHIP
G4-MM11 Programmes relating to materials stewardship Finance - pp 87
SUB-CATEGORY: HUMAN RIGHTS
MATERIAL ASPECT: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
G4-HR4Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and measures taken to support these rights
People - pp 46
MATERIAL ASPECT: SECURITY PRACTICES
G4-HR7Percentage of security personnel trained in the organisation’s human rights policies or procedures that are relevant to operations
OHS&W - pp 54
MATERIAL ASPECT: INDIGENOUS RIGHTS
G4-MM5 Total number of operations taking place in or adjacent to Indigenous People’s Territories Social Responsibility - pp 68
MATERIAL ASPECT: LOCAL COMMUNITIES
G4-SO1Percentage of operations with implemented local community engagement, impact assessments, and development programmes
Social Responsibility - pp 68
G4-SO2 Operations with significant actual and potential negative impacts on local communities Social Responsibility - pp 68-73
G4-MM6 Number & description of significant disputes relating to land use, customary rights Social Responsibility - pp 72
G4-MM7 Extent to which grievance mechanisms were used to resolve disputes relating to land use Social Responsibility - pp 72-73
MATERIAL ASPECT: COMPLIANCE
G4-SO8Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations
Governance - pp 20 Environment - pp 57
130 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
ABBREVIATIONS
% Percent
APD Asset Protection Department
AER Annual Environmental Report
Ag Silver
AGI Algal Growth Inhibition
AIDS Acquired Immune Deficiency Syndrome
ANC Acid Neutralising Capacity
ANZECC Australian and New Zealand Environment and Conservation Council
ANZFA Australian and New Zealand Food Authority
ARD Acid Rock Drainage
ASL Above Sea Level
AS Australian Standard
Au Gold
AUD Australian Dollar
AusAID Australian Agency for International Development
BAHA PNG Business Coalition Against HIV/AIDS
BGI Bacterial Growth Inhibition
CEO Chief Executive Officer
Cd Cadmium
CGM Community Grievance Mechanism
CHS Catholic Health Services
CMCA Community Mine Continuation Agreement
CODE Centre of Distance Education
CO2-e Carbon dioxide equivalent
CRD Community Relations Department
CSR Corporate Social Responsibility
Cu Copper
dCu Dissolved copper
DEC PNG Department of Environment and Conservation
DLIR Department of Labour and Industrial Relations
DMA Disclosure of Management Approach
DMCP Detailed Mine Closure Plan
DMT Dry Metric Tonnes
DPhL Diwai Pharmaceuticals Limited
DWU Divine Word University
EAP Environment Action Plan
EBIT Earnings Before Interest and Taxes
ECPNG Evangelical Church Papua New Guinea
EHWP Employee Health and Wellness Programme
EIA Environmental Impact Assessment
EITI Extractive Industries Transparency Initiative
EMS Environmental Management System
ERT Emergency Response Teams
FAF Financial Assurance Fund
Fe Iron
FIFO Fly-In-Fly-Out
FPIC Free Prior Informed Consent
FRPG Fly River Provincial Government
g/t Grams per tonne
GDP Gross Domestic Product
GDS Graduate Development Scheme
GHG Greenhouse Gas Emissions
GIS Geographical Information System
GRI Global Reporting Initiative
GWh Gigawatt hour
ha Hectare
HEO Health Extension Officer
HIV Human Immunodeficiency Virus
HSE Health, Safety and Environment
IBC Intermediate Bulk Container
ICAM Incident Cause and Analysis Method
ICDMS Integrated Community Development Management System
ICMM International Council for Metals and Mining
IFC International Finance Corporation
IFRS International Financial Reporting Standards
ILO International Labour Organisation
IMIU International Mining Industry Underwriters
IPBC Act Independent Public Business Corporation Act
IRR Internal Rate of Return
JORC Joint Ore Reserves Committee
km2 Square kilometres
kt Kilotonnes
SECURING OUR FUTURE 131
LTIFR Lost Time Injury Frequency Rate
m Metre
M Million
m3 Cubic metres
m3/t Cubic metres per tonne
Ma Million years
MCH Maternal and Child Health
MD Managing Director
MDGs Millennium Development Goal (United Nations)
ML Megalitres
MOA Memorandum of Agreement
Moz Million ounces
MPA Maximum Potential Acidity
MRA Mineral Resources Authority
Mt Million tonnes
Mtpa Million tonnes per annum
MWh Megawatt hour
MWTP Mine Waste Tailings Project
NAF Non Acid Forming
NAPP Net Acid Production Potential
NDoH PNG National Department of Health
NEC National Executive Council
NFDHA North Fly District Health Administration
NFHSDP North Fly Health Services Development Programme
NGO Non-Government Organisation
NPV Net Present Value
NRMH Net Revenue per Mill operating Hour
NSR Net Smelter Return
OHS Occupational Health and Safety
OHS&E Occupational, Health, Safety and Environment
OHSW Occupational, Health, Safety and Wellness
OHSW&T Occupational Health, Safety, Welfare and Training
OTDF Ok Tedi Development Foundation Limited
OTFRDP Ok Tedi Fly River Development Programme
OTML Ok Tedi Mining Limited
oz Ounces
PAD Preferred Area of Development
PAF Potentially Acid Forming
Pb Lead
PCon Pyrite concentrate
PGK Papua New Guinea Kina
PJ Petajoule
PNG Papua New Guinea
PNGSDP Papua New Guinea Sustainable Development Programme Limited
PPE Personal Protective Equipment
QA/QC Quality Assurance/Quality Control
R and R Restoration and Rehabilitation
RAM Rotarians Against Malaria
SAG Semi Autogenous Grinding
SAP Systems Applications & Products
SHEAP Safety, Health and Environment Action Plan
SIFR Significant Injury Frequency Rate
SISS Shares In Success Scheme
SOE State Owned Enterprise
SR Social Responsibility
S&TC Safety and Technical Committee
STI Sexually Transmitted Infections
t tonnes
TB Tuberculosis
TCS Tax Credit Scheme
TPP Tailings Processing Plant
TRI Total Recordable Injuries
TRIFR Total Recordable Injury Frequency Rate
TSF Tailings Storage Facility
TSS Total Suspended Solids
ug/L Microgram per litre
USD United States Dollar
VDO Voluntary Departure Offer
VPC Village Planning Committee
WHO World Health Organisation
WPPDTF Western Province People’s Dividend Trust Fund
Zn Zinc
132 OK TEDI MINING LIMITED ANNUAL REVIEW 2013
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATIONCertain information contained in this Annual Review 2013, including any information as to the Company’s strategy, projects, plans, future financial or operating performance and other statements that express management’s expectations or estimates of future performance, constitute “forward-looking statements”. All statements, other than statements of historical fact, are forward-looking statements. The words “aim”, “believe”, “expect”, “will”, “should”, “anticipate”, “contemplate”, “target”, “plan”, “project”, “continue”, “budget”, “may”, “intend”, “estimate” and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Company, that may cause the actual financial results, performance or achievements of the Company to be materially different from the Company’s estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows, changes in the worldwide price of gold, copper or certain other commodities (such as silver, fuel and electricity), possible variations of ore grade or recovery rates, failure of plant equipment or processes to operate as anticipated, ability to profitably produce and transport the Company’s product, demand for the Company’s product, fluctuations in foreign currency markets, risks arising from holding derivative instruments ability to successfully complete announced transactions and integrate acquired assets, legislative, political or economic developments in the jurisdictions in which the Company carries on business including increases in taxes, operating or technical difficulties in connection with mining or development activities, employee relations, availability and costs associated with mining inputs and labour, the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves, changes in costs and estimates associated with the Company’s projects and the risks involved in the exploration, development and mining business. There can be no assurance that forward-looking statements and information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements and information due to inherent uncertainty. All forward looking statements and information made herein are qualified by this cautionary statement and speak only as at the date of issue of this Annual Review 2013. The Company disclaims any intention or obligation to publicly update, revise or review any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable laws or regulations.
CONTACT
ANZ BANKING GROUP LIMITEDANZ Building, Harbour City
Poreporena Freeway
Port Moresby, NCD
Papua New Guinea
BANK OF SOUTH PACIFIC LIMITEDDakon Road
Tabubil, Western Province
Papua New Guinea
INTERNAL AUDITORDeloitte Touche Tohmatsu
Riverside Centre
Level 25
123 Eagle Street
Brisbane, Queensland
Australia
EXTERNAL AUDITOR/ TAX CONSULTANTPricewaterhouseCoopers
Level 6
Credit Corp Building
Cuthbertson Road,
Port Moresby, NCD
Papua New Guinea
LAWYERSAllens Linklaters
Level 6
Mogoru Moto Building
Champion Parade
Port Moresby, NCD
Papua New Guinea
OK TEDI MINING LIMITEDPO Box 1
Dakon Road, Tabubil
Western Province
Papua New Guinea
Phone: +67 5 649 3000 or
+67 5 649 3311
Fax : +67 5 649 9199
OK TEDI MINING LIMITEDPO Box 93
Hoawaginai Drive, Kiunga
Western Province
Papua New Guinea
Phone: +67 5 649 3724
Fax: +67 5 649 1046
OK TEDI MINING LIMITEDPO Box 506
Musgrave Street
Port Moresby, NCD
Papua New Guinea
Phone: +67 5 321 3522
Fax: +67 5 320 1308
OK TEDI AUSTRALIA PTY LIMITEDPO Box 535
Hamilton Central QLD 4007
936 Nudgee Road
Northgate, Queensland
Australia
Phone: +61 7 3363 9900
Fax: +61 7 3363 9999
WWW.OKTEDI.COM
This 2013 Annual Review has been printed on environmentally friendly paper stocks. The cover has been printed on Sovereign Offset, which is FSC certified and considered to be one of the most environmentally adapted products on the market. Containing fibre sourced only from responsible forestry practices, this sheet is ISO 14001 EMS accredited and made with elemental chlorine-free pulps. The text pages have been printed on Sun Offset, which is FSC certified and made with elemental chlorine-free pulps.
WWW.OKTEDI.COM