The goose and the golden egg
Published by MAC on 2006-02-09
The goose and the golden egg
by Jesse Riseborough, PNG Industry News
9th February 2006
THE giant Ok Tedi copper-gold mine has been likened to the goose that lays golden eggs in terms of its impact on the development of PNG. But what happens when the goose laying those golden eggs is not as healthy as it should be?
Now that is a very crude metaphor in terms of describing the role of the greatest contributor to PNG's economy, but in broad terms this was the issue discussed at length in Port Moresby earlier this week.
A round table full of NGO's, Ok Tedi representatives, AusAid, and others, gathered to hear a comprehensive presentation from Ok Tedi senior management that encompassed both the increasing environmental impact of the mine as well as its impact on communities along the massive Ok Tedi and Fly rivers that stretch more than 800km across the island to the Timor Sea.
Delegates at the meeting were told the mine would only continue to operate as long as the economic benefits of its operations were deemed to outweigh its environmental impact. Or, again in crude terms, is the health of the goose a concern if the golden eggs keep popping out bigger and or better than last year's?
And this year's golden egg, a net profit of $US339 million, was the best ever.
However the goose's health is continuing to deteriorate as result of the 90 million tonnes of rock waste and tailings being deposited into the river each year.
Ok Tedi's river management expert Jesse Pilae explained that his scientific research teams had only completed environmental impact projections up until 2060 and there was every possibility the impact of the mine could be felt by villagers well into the next century.
And evidence of this impact is increasing with the loss of fish species, longer and more intense periods of flooding along the river every year and vegetation dieback.
It was this mounting evidence and the growing concern being voiced by communities along the Fly river that recently prompted Ok Tedi to circumvent any potential regional unrest by beginning a process of reviewing the Community Mine Continuation Agreements (CMCA) signed in 2001 by representatives of the 152 villages affected by the mine.
A total of 14 CMCA's were signed in 2001, resulting in financial compensation for those villages affected, giving Ok Tedi clearance to mine through until 2010. But now in face of mounting environmental damage Ok Tedi will renegotiate those agreements and potentially disperse a more substantial compensation package.
But the review of the CMCAs is massive exercise in logistics with more than 500 meetings to be held over the next 12 months. Independent facilitators, including the US-based NGO, the Keystone Centre, and an independent observer, ex PNG chief justice Sir Arnold Abare, will head the intensive review process.
Ok Tedi managing director Keith Faulkner told PNGIndustryNews.nethe had to be cautious about predicting any outcome from the CMCA review process but essentially he hoped it would achieve a more durable outcome for Ok Tedi.
"The process we have at the moment is difficult because it is such a large river system and the expectations of what can be delivered have got too high," he said.
"So we need to have a process that isn't so much of a burden on Ok Tedi's resources to deliver [because] people get a bit disappointed when expectations aren't met.
"If I try and second-guess what the outcome is then I am sort of betraying the whole process from the start. We need to have an outcome which is fair transparent, durable, deliverable and that people can have faith in into the future.
"They are values rather than numbers but that is all I can really give you at the moment."
Faulkner explained the review of the CMCAs was prompted by the emergence of acid rock drainage as a significant environmental issue at OK Tedi.
"Under the current CMCA any environmental change requires the parties to sit down and negotiate a new outcome. What we are trying to do is two things at once really which is to negotiate that outcome and change the way we do business with the people down there because we think we can have a more productive outcome for them."
Pilae said this was caused by the exposure of the sulphide ore in the tailings to both water and air.
To counteract its effects large quantities of limestone rock are now being added to the waste dumped from the mine at a cost to the company of around $US40 million annually.
The company also continues to dredge around 10 million cubic metres of the riverbed annually to assist in the process - and costing around $US35 million per annum.
But according to Faulkner, the short-term effects of ARD are limited.
"We don't see an acute problem in the short term. Our research and our reports to the government say right at the moment there isn't a threat to human health," he said.
"But we tried to show through the presentation today and the data provided to the government in our annual report, is that the risk to the river system into the future is that it could have a profound effect on aquatic biota as a result of ARD."
"That could be a long term effect and under certain climatic circumstances you might have an acute event."
Faulkner stressed the point that more research is needed to better understand the longer term effects of ARD on the river system, adding, that the most significant impact of ARD may not be felt until well after the mine is closed.
"The major issue is the availability of aquatic species and their edibility. At the amount that is okay and the edibility is likely to stay fine but the pressure on the system says the availability of the aquatic foods and the fish, in the future, is put at risk," he said.
"The land-based resources, things like forest species for building materials and so on, there is a bit of a risk with those due to the potential for prolonged flooding".
"It is not an acute one right now but unless we really understand the system and approach mitigation of those risks then the system will be under even more stress." Click here to read the rest of today's news stories.
Better profit distribution: Ok Tedi MD Jesse Riseborough
Thursday, February 09, 2006
OK TEDI managing director Keith Faulkner has called for a greater distribution of the vast wealth generated being by the massive PNG mine in light of the ongoing suffering of villages affected by the mine's dumping of waste and tailings into the river system.
The Ok Tedi copper mine makes up 10% of the PNG economy and 20% of its exports.
Speaking at a presentation to NGO's in Port Moresby this week, Faulkner said the distribution of profits, dividends and royalties was a complex process given the number of stakeholders involved.
The Ok Tedi Sustainable Development Fund holds the majority shareholding of 52% while federal and provincial governments as well as landholder groups hold an additional 30%. Canadian company Inmet holds an 18% stake.
"That is the dilemma that we all face. As managing director of the company I don't want to handball the problems to everybody else because I own it too, but it is a shared problem for this country and its people," he said.
Ok Tedi produced the largest annual profit in PNG corporate history last year of $US339 million and some $K70 million was delivered back to the local government and landholder groups.
"I have got to tell you that not seeing that wealth properly applied certainly gives me the creeps when you start to question whether or not you should be doing the whole thing," he said.
"Our big challenge this year, and for the years to come, is how we structure all this so that we can assure that the people down the system don't continue to suffer the way they have - they are entitled to the benefits."
The mood amongst the NGO representatives at the briefing appeared to be that the PNG Government, provincial stakeholders and landowners, who jointly hold a substantial 30% interest in the mine, were not redistributing enough of the profits made by the mine back into sustainable development schemes.
"Will the funds be used wisely? That is the big question not just for the individual landowner, it is a question for my shareholders, it is a question for government - will the funds be used wisely? I guess that is for the people of PNG to judge," he said.
Faulkner said that within the immediate mining lease about 3000 people received almost K$50 million last year.
Ok Tedi's general manager of business support communications, David Masani, delivered a brutally honest presentation and conceded that not enough had been done in the past and the company was now attempting to right previous wrongs.
Masani said a number of sustainable development initiatives were already in place including rebuilding of schools, course in rice, sago, and banana farming, medical and immunisation programs as well as aquaculture programs. Expansion of these programs is set to continue in the coming years as the mine heads towards a scheduled closure in 2012.
Faulkner hoped the whole CMCA process would start to see a better outcome for those villages within close proximity to the mine. He said the company would prefer to see the funds being channelled into trusts but for OK Tedi to be seen to be taking control of this process created another dilemma.
"I think the lesson learnt in many parts of the world about cash is that it can also be corrosive to sustainability. We prefer to see the funds going into the future generations funds or development funds," he said.
"We have supported having trusts and transparent processes in order that those funds are used as wisely as we can possible see them used. Of course that leads us to another problem - we are then seen to be managing that process and there is not sufficient self-determination by the people themselves.
"That is another dilemma we have to face through this new process of being responsible but letting go of the reins a little bit so that people have a great deal more self-determination throughout the system."