PNG MINING COMPANY REVISES LANDOWNER AGREEMENT

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By Dominic Krau

PORT MORESBY, Papua New Guinea (The National, Nov. 2) - Royalties for Ok Tedi landowners will now be managed and controlled by Ok Tedi Mining Ltd. (OTML) under a revised deal signed on Friday by the landowners, Fly River Provincial Government (FPG) and the State.

Under the new agreement, the landowners and FPG will each have 2.5 percent equity in the copper mining project.

The Ok Tedi mine started operations in Papua New Guinea1984. It is the largest business contributor to the economy of both the Western Province and PNG. In 2000, export sales were about K1 billion (US$319.9 million), some 18 per cent of PNG's foreign exchange earnings.

The transfer of the equity to the landowners and FPG from the National Government is defined under two different heads of agreements executed in 1997 and 1999 and has since been managed by Mineral Resources Development Company. Ever since the agreement was signed in 1991, the distribution of royalty payments gave 70 percent to the FPG and 30 percent to the landowners.

When the agreements were revised in 1998 and 1999, the FPG agreed to give an extra 20 percent royalty to the Ok Tedi landowners, meaning the FPG and landowners will now receive 50 percent each.

In the break up of the extra 20 percent, 19.5 percent will be paid to the Ok Tedi landowners’ royalty trust to be managed by OTML, with the trust instrument created by the Minister for Treasury.

One-half per cent shall be retained by OTML on behalf of the landowners for the administration of this agreement.

Mining Minster Sam Akoitai said due to the non-execution of the revised agreement in 1999 as a result of landowner disputes, the landowners have been denied the extra 20 percent royalty and have already lost over K23 million (US$7.2 million) to date.

Also under the revised agreement, the Government will set up two committees for local business development and training and localization.

Landowner representatives in these committees will be funded by the 0.5 percent royalty payment set aside for the administrative costs incurred.

Mr Akoitai said the Government would also ensure that OTML honors every environmental undertaking as agreed to and any other understanding reached through various community consultations for mine continuation and mine closure.

He said the Government would also investigate the possibility of connecting telephones to selected rural villages.

The agreement recognizes that the Government has funded the construction of additional aid posts within the Tabubil area of the North Fly district.

Meanwhile, Western Province Governor Bob Danaya recently said K100 million (US$31.4 million) will be used for infrastructure and sustainable development projects in the province.

Danaya said the money represents the provincial government’s equity in Ok Tedi Mining Limited.

The other co-owners in the mine are Broken Hill Proprieties Ltd (22 percent), Inmet Canada (18 percent) and the PNG government (30 percent).

Dr Danaya said the funding would be directed to priority areas such as infrastructure development, which one of the important concerns in his government.

He said his government would make sure that roads, wharfs and bridges are built.

He said good road systems are needed to ensure the easy movement of people between various points in the province.

A small portion of the funds would be put for future generations in terms of economic activities such as rubber, oil palm, fishing he said.

November 3, 2004

The National: www.thenational.com.pg/

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