Ok Tedi Mining Limited (OTML) works with Local & Regional Suppliers, Non-Community Mine Continuation Agreement (CMCA) Trusts and the Tax Credit Scheme (TCS) program to oversee participation in OTML business spin off opportunities, the administration of compensation payments paid by OTML to affected communities and the implementation of infrastructure development in the area on behalf of the Papua New Guinea government.
Local and Regional Suppliers (L&RS)
OTML is obligated to support local business development as mandated under Clause 32 of the Mining (Ok Tedi Agreement) Act. OTML facilitates business interests of local landowners, promotes and encourages good corporate governance and provides assistance in investing sustainably for life after mine closure. OTML also assists to manage the L&RS expectations and statutory compliances.
During OTML’s temporary shutdown of operations in 2015, many L&RS contractors were affected and unable to sustain their operations.
OTML is now challenged to develop and implement a new L&RS strategy. This is in line with the changing operating environment, which will see a significant and continued reduction in L&RS contractor numbers currently engaged across the business.
Non-CMCA Trust – Western Province General Compensation Trust
The Restated Eighth Supplemental Agreement between OTML and the State of PNG established a general compensation regime for people along the Ok Tedi/Fly River system. It also provided for a 10 per cent shareholding to be acquired by the State for the benefit of the people of the Western Province.
The money paid by OTML is held in the Western Province General Compensation Trust and is administered by a trustee in Heduru Limited.
Heduru Limited has seven board members: two from the National Government (including the chairman), three from the Local Government and two from OTML.
Payments comprised PGK10 million for 1984-1993 and PGK4 million for 1994. Amounts thereafter have been adjusted for inflation and mine production.
Compensation payment in 2015 was PGK14 million. This was for the 2014 period. In 2016, OTML paid PGK15 million for the period 1st January 2015 to 31st December 2015. Payments are made directly to over 15, 000 clan accounts.
Non-CMCA Trust – Lamin Trust
The Lease for Mining Purpose (LMP #1) was created in 1981and a considerate portion of the LMP #1 was to be used for construction and occupation of the Ok Ma Tailings Dam. Upon granting of the lease, a lease compensation package was extended to the traditional landowners.
The package consisted of five (5) components being: the occupation fee, restraint of access fee, used land fee and cleared land fee which are paid to landowners annually. The Non-Renewable Resources fund component was to be paid into a Trust called the Lamin Trust Fund to eventually benefit the beneficiaries. The Lamin Trust Fund was established in 1985.
The Trust is represented by Trustees who are the department secretaries of Minerals & Energy, Finance, National Planning & Development and Provincial Affairs of the State. It also has an Investment Advisory Committee (consisting of representatives of the Department of Treasury, Mineral Resources Authority, Bank South Pacific, the Ok Tedi Landowners and OTML) who is responsible for managing and making investment decisions for the Trust.
Tax Credit Scheme
The Tax Credit Scheme (TCS), established by the National Government in 1996, is a program in which OTML plans and constructs government facilities, and claims back the cost against tax due to the National Government under company income tax rules.
All projects must obtain full approval of the scope and cost from the Provincial Administration and the Department of National Planning and Monitoring (DNPM).
OTML's participation in the Tax Credit Scheme has resulted in the development of infrastructure services such as schools, hospitals, police barracks, jetties, water and sewerage treatment plants and air strips in Kiunga, Tabubil, Ningerum and other regions of the Western Province, the Telefomin district in the Sandaun Province and PNG in general.
Since 1997, a total of PGK270 million has been spent on the priority sectors of health, education, transport and road infrastructure.
A total of PGK128.56 million (2014 to 2015) has been approved for high impact projects, currently scheduled for re-commencement in 2016, due to OTML stand down of operations in mid-2015.
It is estimated that more than half of the Western Province population benefit from the services provided by the TCS program.