01 Dec 2021
OK TEDI Mining Limited Chief Executive Officer and Managing Director, Musje Werror, says Ok Tedi is more than a mining company.
“It is the mining flagship of our country, of which the people of the Western Province and the country should rightly be proud.”
Mr. Werror, who delivered the first of the Mining Project Updates at the 2021 PNG Mining and Petroleum Conference and Exhibition, spoke of what OTML had been through in the past two years, saying they had been the most challenging of his 30 years with the company.
“We have endured lawsuits, earthquakes, prolonged dry weather events, catastrophic failure of the pit wall, extensive community consultations, but none compare with the current health pandemic. “We literally became a Public Health company during this period as we managed the pandemic and the surge in COVID cases affecting the workforce, town residents, and nearby communities,” Mr. Werror said.
Ok Tedi and COVID-19
When the first COVID case was reported in PNG in February last year, OTML activated its Incident Management Response Plan and implemented measures to safeguard the health and safety of its workforce, the Tabubil town residents, communities, and to minimize disruptions to operations.
“The first case was reported in August last year and which put our plan to the test. Our response was decisive and quick. We took the immediate decision to suspend operations for 6 weeks and locked down the camps and the township and restricted movement to minimize the spread of the virus,” Mr. Werror told the conference.
While the company lost approximately US$100m in revenue, the lockdown contained the number of positive cases to 205, with no COVID-related deaths. It was a clear example of the company prioritizing the safety of its workforce and its impact community, as it waited for more to be known about the virus and for protections such as a vaccine to be developed and rolled out.
“We had to quickly establish a testing and monitoring system, isolation and quarantine facilities and ensure the 30-bed Tabubil Hospital was prepared to admit seriously ill patients. We had to deal with communities protesting the lockdown and manage a large number of school children who were living outside and attending schools in town, making it difficult to maintain our COVID-safe ‘bubbles’.
The company conducted over 20,000 tests and had its chartered aircraft fly three times a week to Cairns, Australia, delivering swab samples to QML Pathology for analysis while its onsite laboratory was being set up.
Learning from experience
Despite having to suspend operations for two weeks when the second COVID wave hit in February this year, the company had learned from the first wave, and were better prepared with testing facilities and control measures in place. And in August, the third wave emerged, along with the Delta Variant.
“A total of 50,000 tests were conducted with over 2,000 positive cases and 18 COVID-related deaths recorded. Sadly, four OTML and four contractor employees, 7 who were unvaccinated, and 1 partially vaccinated, succumbed to the virus.”
The company continues to maintain a voluntary vaccination policy, and vaccination rates have slowed in recent weeks.
“Our vaccination coverage for the combined workforce is at 50%, while OTML’s coverage is 64%. Those unvaccinated are mainly from the local area where hesitancy remains high due to religious beliefs and fear,” Mr. Werror said, adding that managing COVID, has come at a high cost.
“The cost of managing COVID and the associated protocols has also been significant, with around US$30 million spent this year. A large share of the cost has gone to airlines and to hotels in Port Moresby where we had established our Entry Point Centres.”
Exciting times ahead
But despite the setbacks, Ok Tedi has benefitted from strengthening metal prices. The higher than budget prices have cushioned the impact on this year’s revenue. This in turn is expected to enable a final dividend to be declared this month, to supplement the PGK150M interim dividend paid in September to shareholders.
“The 2021 Strategic Business Plan has confirmed an uplift in value by another US$475M to US$3.7 billion with mine life extended by a further 3 years from 2029 to 2032. This was further increase in value from the 2020 plan, which had extended mine life from 2026 to 2029.”
Looking forward, the next 12 months will see OTML complete the transition from current lower grade ore to high grade ore sources.
“While we had hoped this transition would start to be evident by the final quarter of 2022, the impact of COVID on material movement in the mine over the last 15 months has pushed this into 2023,” Mr. Werror said.
The next three years
So what do the next three years look like for OTML? Forecast revenues will progressively strengthen from approximately US$1 billion per annum where they are now, up to about US$1.4 billion.
This in turn will see a progressive increase in dividends up to PGK1billion per annum over the next several years, before increasing even further thereafter.
This, of course, is subject to fluctuation in metal prices, and assumes copper price will be in the range US$3.70 to US$4.80 per pound over the three-year period, and a gold price that will trend down from US$1,800 per ounce towards US$1,500 per ounce.
Overall, the Company expects to generate around PGK30 billion in benefits over the next 10 years.
“The future looks very promising from a social and economic perspective for the country and the extension of mine life provides additional time for the company to explore and develop new ore resources,” Mr. Werror Said.