FALLING metal prices, mechanical faults and unfavourable weather conditions have resulted in Ok Tedi Mining Limited (OTML) reporting a significant decrease in profit after tax for the 2013 financial year.
The Ok Tedi copper and gold mine in Papua New Guinea, which was last year taken over by the government, recorded a profit of US$17 million for the year ending December 2013, down from the 2012 figure of US$472 million.
As a result of the weaker profit, the company has decided against declaring a dividend for the year.
OTML said falling metal prices and lower concentrate shipments resulted in a 34 per cent drop in gross revenue against budget while lower production and a build-up of inventories towards the end of the year, due to low river levels and high fluorine content in the copper concentrate, resulted in concentrate shipments being down 18% on budget. Additionally, copper and gold prices were 8% and 16% below budget respectively.
Operating costs were over budget by 2% due to employee redundancy payments amounting to US$80 million in December. Excluding this, operating costs were US$70 million below budget, reflecting an increased company-wide focus on cost management in the changing economic environment.
OTML provided a list of reasons which impacted on the mines performance which all helped contribute to an overall realised fall in profit.
They included a decline in gold, copper and silver prices; a major failure of the SAG 2 Mill shell in the processing plant which impacted copper concentrate production; major flooding of the pit as a result of an unusually high rainfall event and sporadic dry weather events and low river levels impacted shipping movements.
“Shipment of concentrate to OTML’s largest customer, Pasar, in the Philippines was affected due to the typhoon in November 2013 causing extensive damage to its facilities which are still under repair,” OTML said.
Other issues experienced included an in-pit crusher failure and high fluorine levels in the copper concentrate.
Throughout 2013, OTML began to focus on transitioning the business to a smaller operation in preparation for mine life extension (MLE) through the launch of the OT2025 project.
The project involved a rationalisation of the whole workforce, upgrade of the camp accommodation, new shift rosters and a review of companywide operating cost structures.
Since the project started, 713 employees have ceased employment, both voluntarily and involuntarily, with OTML as of December 2013. Out of this number, OTML said the resulting reduction in the permanent workforce was 239.
In 2013 the community endorsed a proposal to extend the operation’s mine life to 2025, enabling OTML to start planning the MLE project.
“OTML looks forward to a viable future under MLE, and beyond, with pride and optimism with the aim of becoming a truly commercial State Owned Enterprise that will continue to generate benefits for its stakeholders and develop the human capital of Papua New Guinea,” OTML said.