Frieda’s Ok Tedi connection: exclusive

OK TEDI mine owner PNG Sustainable Development Program might consider buying a considerable stake of the Xstrata Copper-led Frieda River project in Papua New Guinea, going by its favourable views of the project. Driving a truck at the Ok Tedi mine is challenging work. Star Mountains project map courtesy of Highlands Pacific. The Frieda River office was recently overburdened with media calls after Xstrata signalled it was assessing the interest of other potential investors for its major stake in the $US5.3 billion project. “No decision has been taken yet and this could result in a full divestment of our 81.82% interest in the Frieda River project, a partial divestment or no divestment at all,” the Frieda River spokesperson told PNGIndustryNews.net last week. PNGSDP, the parent company of Ok Tedi Mining Limited, appears to be a likely investor candidate. It recently agreed to buy up a 13.04% stake of Frieda River partner Highlands Pacific through a yet to be finalised capital raising. The decision comes as PNGSDP considers other revenue-making opportunities this decade as the Ok Tedi mine is due to scale down production in 2016-2020. With the Frieda River project located about 75km northeast of Ok Tedi, there is even the prospect the project may provide opportunities for the Ok Tedi mining town of Tabubil. “Frieda is one of the world’s great copper-gold prospects,” an OTML spokesperson told PNGIndustryNews.net. “If developed, there are many potential synergies with Ok Tedi Mining Limited and with PNGSDP's development efforts in the North Fly. “The latter include use of power from the gas-based generation that we are planning for the North Fly region in our joint venture with Origin Energy; the use of Tabubil town facilities; the use of some infrastructure; and the use of the education and training facilities at the Star Mountains Institute of Technology.” SMIT is funded by PNGSDP, while Highlands’ Star Mountains copper-gold project, located just 20km northeast of Ok Tedi, was another drawcard for PNGSDP investment. “Highlands’ Star Mountains exploration prospects look very promising,” the OTML spokesperson said. “The natural pattern of their development would rely heavily on access to Tabubil township, the amenities it provides, as well as the facilities and infrastructure at the Ok Tedi mine.” It’s not yet clear if PNGSDP will consider running another mine through its subsidiary OTML to maintain Ok Tedi-scale revenues in future years. “Any decision on OTML having a role in operating a mine other than the existing one will be a joint decision of its two major shareholders, PNGSDP and the independent state of PNG, and not for PNGSDP alone,” the spokesperson said. “We do not have a firm view on the matter at this stage. “PNGSDP's long-term fund will remain a portfolio investor in a range of activities within and outside of PNG, with an overall low-risk profile.” But PNGSDP is keenly aware of the importance of mining for PNG’s development goals. “The social and economic contributions of the mineral industry to the PNG economy are significant,” the spokesperson said. “It provides direct and secondary benefits to society through the creation and provision of jobs, the purchase of goods and services, the delivery of sustainable development initiatives, and the payment of taxes and royalties. “We support socially responsible investment and the advancement of projects that are properly structured such that environmental effects are managed and benefits reach local people.” Xstrata remains committed to the 2012 work schedule and to finishing off the Frieda River feasibility study in December. The Frieda River prefeasibility study was based on a 20-year mine life. The open cut project is targeting 930,000 tonnes per annum of concentrate containing 246,000t copper and 379,000oz of gold in the first eight years of its life at C1 cash operating costs of 43c per pound or $1.12 a pound without gold credits. There is also plenty of drilling ahead for the Star Mountains project. The last hole of the campaign at the Olgal deposit struck a 586m intersection grading 0.61% copper and 0.85 grams per tonne gold. Only two out of 14 holes drilled for the Olgal drilling program missed copper and gold mineralisation and rigs are moving to target two other prospects in the project area. Highlands owns 18.18% of Frieda River and 100% of the Star Mountains project. PNGSDP owns 63.4% of Ok Tedi while the PNG government owns the remaining stake (36.6%).