Pim Opinion

Despite the shock of it all the closing of Ok Tedi gold and copper mine looks to have been a throw, albeit a telling one, in a very tough game of high stakes chicken between the government of Papua New Guinea and the mining consortium.

That the mine should be closed for good is unthinkable, and impossible. Too much of PNG’s future is tied up in that enormous complex established at such huge cost so far away in the Star Mountains, close to the West Irian border.

Nor is PNG likely to expropriate the mine, as some of the wilder minds in the Australian press corps seemed to think the closure order indicated. Any government, be it in the Third, or any other sort of, World, which tried to make off with anything so big and expensive as Ok Tedi would do itself vast and irreparable damage among international investors. And the government of PNG is far too knowledgeable and responsible to think of anything like that.

But, they have been understandably concerned about the rate of progress made by the mining consortium in development of the mine’s vital second stage the construction of a hydro-electric works, a permanent tailings dam to handle the considerable waste from the ore treatment plant, and the beginning of copper extraction.

At the same time the consortium has had its problems. Ok Tedi is in some of the wildest and most remote country in the world. Everything, from giant conduits and huge crushing rollers to cans of beans and bottles of beer, has to be laboriously barged in, or air-freighted. Costs are astronomical.

There have been mishaps and accidents. A giant landslide of about 50 million tonnes of mud wiped out the original site of the tailings dam and set the program back months. There was a drought which made the Ok Ma river too shallow for freight barges. There was a leakage of cyanide, and a barge carrying hundreds of drums of the stuff capsized in deep water off the mouth of the Fly River.

But, worst of all, the bottom fell out of the world copper market as Zaire and Zambia, particularly, desperate for cash, flogged their supplies on a sluggish market for prices as low as 50 cents (U.S.) a pound. Even the official price went down to 60 cents. And Ok Tedi’s economics were based on a copper price no lower than about 85 cents, and hopefully

as high as a dollar.

The other factor, more difficult to precisely identify, seems to be that the consortium feels it may have signed a contract which, in the frosty light of a tightened world economy, looks a bit too generous. Hence, they seem to think, haste towards further development should be made slowly.

There are some other factors, too, among them some corporate changes inside Amoco Minerals Ltd., the Amer ican partner, which is part of Standard Oil of Indiana, who appear to have had enough of mining and seek to hive off that side of their business into a separate company. Amoco officials in Australia say this will not affect Ok Tedi, because of contractual committments, but it gives point to the observation that of all those involved in the enormously expensive business of exploiting the fabulously rich Ok Tedi deposits only Australia’s BHP is a true mining company, with a full understanding of the long-haul, hill-and-dale, nature of the business.

The caution of the mining consortium, and the fact that development of stage two, due to cost another $1 billion or so, is now more than a year behind schedule, does not enthuse the government of Papua New Guinea, which has its own immutable timetable. This is dictated by two main factors. First, Bougainville Copper, which has been a great prop to the PNG economy, is now beginning to run down.

Second, under the independence agreement with Can berra, aid from Australia, currently running at more than $3OO million a year, is being cut back by five per cent per annum and, probably, will become more and more tied to specific projects and direct purchasing from Australia. PNG needs Ok Tedi, and perhaps some other similar deve lopments, to bolster its budget.

That Ok Tedi should be mothballed for any length of time is unthinkable. That the consortium would leave nearly $1.5 billion dollars to rust away in the jungles is beyond imagination.

The dispute is, in fact, a straight-forward, but high-stakes commercial tough-out, and, as such, will be solved.

Ok Tedi will go on. It must go on for the good of Papua New Guinea and the stability of the region which, one must carefully point out, has more than its share of ill omens and opportunists hanging about. And the sooner the parties come to a mutually-acceptable arrangement the better for the whole of the southern Pacific.