A NEW DAWN€¦ · RESTRUCTURING OF ITS WORKFORCE AND CHANGE IN COMPANY OWNERSHIP TO THE STATE AS...

OK TEDI MINING LIMITED ANNUAL REVIEW 2013

A NEW DAWN SECURING OUR FUTURE

REGIONAL MAPLEGENDCMCA TRUST AREAS Mine Area Nupmo Tutuwe Wai-Tri and Alice River Middle Fry Suki Fly Gogo Dudi - South Bank Manawete - North Bank Kiwaba

LLG BOUNDARY AND LAND FEATURES LLG Boundary River Proposed Road Provincial Road Main Highway (Tabubil to Mill) Major OTML Environmental

Monitoring Stations Mine Project Site Sub-District

PORT MORESBY

TABUBIL

KIUNGA

OK TEDI MINING LIMITED ANNUAL REVIEW 2013

Highlights 2

Company Profile 4

Vision and Mission 6

Managing Director/Chief Executive Officer’s Report 8

Chairman’s Report 12

Governance 16

Performance for 2013 and Targets for 2014 22

Business 26

Materiality 28

Mine Continuation Studies 30

Geology 32

Future Improvement Projects 42

People 44

Occupational Health, Safety and Wellness 50

Environment 56

Social Responsibility 68

Finance 86

Financial Statements 90

Audited Financial Statements 94

Global Reporting Initiative 125

Abbreviations 130

Contact 132

TO LEARN MORE ABOUT OTML AND THIS ANNUAL REVIEW,

GO TO: WWW.OKTEDI.COM OR CONTACT:

[email protected]

SECURING OUR FUTURE 1

OUR COMMUNITY

OUR COMPANY

PGK 181 M (USD 17m) after tax profit. No dividend declared in 2013.

47% DECREASE in the Total Recordable Injury Frequency Rate compared to 2012.

24% INCREASE in material mined from 50.6Mt in 2012 to 62.8Mt in 2013.

68% INCREASE in expenditure on training to PGK 23.3 million (USD 10.3 million) compared to 2012.

OK TEDI MINING LIMITED BECAME A

STATE OWNED ENTERPRISE.

4.4 COPPERGOLDSILVER

13.628.3

MILLIONTONNES

MILLIONOUNCES

MILLIONOUNCES

PGK 2,670 M (USD 1,176m) gross revenue.

394,622 TONNES COPPER CONCENTRATE SHIPPED.

SINCE THE START OF OPERATIONS IN 1981 OTML HAS PRODUCED

HIGHLIGHTS 2013

2 OK TEDI MINING LIMITED ANNUAL REVIEW 2013

OUR COMMUNITY

PAPUA NEW G

UIN

EA

OUR COMPANY

PGK 29.8 M

95%

7%

84%

PGK 1,540 M

PGK 890 M

>10,000 IMMUNISED

MEN, WOMEN AND CHILDREN

against infection in clinics provided by OTML and health partners.

(USD 664 million) total contribution to local community and PNG economy.

(USD 364 million) cumulative net royalties paid since 1982. (PGK 49 million (USD 22 million).

(USD 13.1 million) provided for community development through the Ok Tedi Development Foundation.

of the workforce are Papua New Guinean citizens.

of PNG’s GDP is attributable to OTML’s contribution.

of contracts for goods and services

used were issued to PNG businesses

representing PGK 735 MILLION (USD 324 million) total value.



OK TEDI MINING LIMITED (OTML OR THE COMPANY) IS A PRIVATELY HELD COMPANY THAT OPERATES AN OPEN-PIT COPPER, GOLD AND SILVER MINE LOCATED IN THE STAR MOUNTAINS OF THE WESTERN PROVINCE, PAPUA NEW GUINEA (PNG). THE COMPANY HOLDS A LARGE PORTFOLIO OF EXPLORATION LEASES IN THE VICINITY OF ITS MT FUBILAN MINING OPERATIONS AND IS ACTIVELY UNDERTAKING NEAR MINE EXPLORATION. THE COMPANY’S REGISTERED OFFICE IS LOCATED IN TABUBIL, WESTERN PROVINCE, PNG. IT ALSO HAS A REPRESENTATIVE OFFICE IN PORT MORESBY, PNG AND A MARKETING AND LOGISTICS FACILITY IN BRISBANE, AUSTRALIA.

The Company’s senior management team

is located at Tabubil. This team provides

day-to-day management of the Mt Fubilan

mining, processing and associated

infrastructure and support operations.

In September 2013, The State of Papua

New Guinea (the State) increased its direct

ownership in the Company to 87.8% and all

of the financial benefits from the mine are

directed (as dividend streams) to Western

Province, Community Mine Continuation

Agreement (CMCA) communities, Mine Area

Villages, the Fly River Provincial Government

(FRPG) and the State.

Mineral exploitation has environmental

and social impacts. As OTML has been

operating in the region for 32 years it is

acknowledged that its operations have

contributed to sediment aggradation in the

Ok Tedi and Fly River systems. This impact

has been well documented and is part of

ongoing monitoring, research and reporting

programmes mandated in OTML’s Licence

to Operate. In fact, the Mine’s continued

operation is dependent upon consent by

the CMCA communities and the State. In

summary, OTML’s success is measured

on its economic performance, human

resources development, social development

programmes, zero harm safety performance,

and the management and mitigation of its

environmental impacts.

This 2013 Annual Review presents the

integrated financial and non-financial

results of the OTML mining operation at

Mt Fubilan. This report, the Company’s first

in adopting the Global Reporting Initiative

(GRI) G4 reporting guidelines for disclosure

of non-financial material information, follows,

the Mining and Metals Sector Supplement

and specific standard disclosures based

on the material aspects of the Company.

Although the non-financial GRI reporting

has not been externally verified, the financial

statements were prepared in accordance with

the Papua New Guinea Companies Act of

1997 and comply with International Financial

Reporting Standards (IFRS) and other generally

accepted accounting practises in PNG.

The Company’s financial statements were

externally verified by PricewaterhouseCoopers

PNG, whose verification statements are

included in this Annual Review.

COMPANY PROFILE


AMENDMENTS FROM 2012 ANNUAL REVIEWIn the 2012 Annual Review, some

data presented in the table:

“OTML’s CONTRIBUTIONS TO

LOCAL COMMUNITIES AND

THE PNG ECONOMY IN 2012”

(page 59) were incorrect. The

revised numbers are below:

• Total contribution in 2009

PGK 2,800.3 million (USD

1,022.4 million);


PGK 3,800.1 million (USD

1,390.2 million);

• Goods purchased in PNG

in 2011 PGK 286.8 million

(USD 121.1 million);


PGK 3,078.9 million

(USD 1,324.4 million);

• Goods purchased in PNG

in 2012 PGK 313.3 million

(USD 150.9 million); and


PGK 2,251.2 million

(USD 1,086.5 million).

REPORT PARAMETERSThis Annual Review relates to the material

activities of the Ok Tedi Mining operations

comprising the mining and processing

of ore from the Mt Fubilan deposit, the

transportation of slurry concentrate to Kiunga

and shipment to the silo/transfer vessel in

Port Moresby. Included within the boundaries

of this report are the transportation of

sulphide concentrate slurry from the

processing plant to Bige for placement

in engineered containment cells and the

dredging of sands and sediment at Bige

from the Ok Tedi River. These materials are

contained in engineered landforms that are

currently in the process of being rehabilitated.

This report does not cover the concentrate

after transfer from the Company’s silo vessel

onto export vessels, nor does it cover the

activities of the Company’s representative

office in Port Moresby or its marketing and

logistics facility in Brisbane.

This Annual Review is for the 2013

calendar year. Where available, comparable

five-year data, covering the periods 2009 to

2013 is included. The Annual Review also

includes commentary and forward looking

information for 2014.

OTML remits an Annual Environmental

Report (AER) to the PNG Department of

Environment and Conservation (DEC) and the

Mineral Resources Authority (MRA). The AER

presents the results of compliance monitoring

and research from the period 1 July 2012 to

30 June 2013. To maintain consistency with

data presented to the State in the AER and in

this Annual Review, environmental monitoring

data reported covers the one-year period

ending 30 June 2013.

OTML’s performance data is presented in the

metric system. Unless otherwise stated, all

monetary amounts are in PGK (Papua New

Guinea Kina) and USD (United States Dollar).

Mr Teatutai Sione, Senior Geologist field mapping mineralisation in the Mt Fubilan pit.


THE COMPANY’S VISION IS TO OPERATE THE BUSINESS IN A SAFE AND SUSTAINABLE MANNER WHILST MAXIMISING THE BENEFITS TO THE STAKEHOLDERS AND SHAREHOLDERS. DURING 2013, OTML WENT THROUGH SIGNIFICANT CHANGE TO PREPARE FOR FUTURE OPERATIONS, WITH RESTRUCTURING OF ITS WORKFORCE AND CHANGE IN COMPANY OWNERSHIP TO THE STATE AS THE MAJOR SHAREHOLDER. BY APPLYING THE COMPANY CORE VALUES AND PRINCIPLES, OTML WORKED THROUGH THESE CHALLENGES AND POSITIONED THE COMPANY FOR THE FUTURE.

In 2012, the Company submitted to the

State an application to continue operations

until 2025 rather than closing in 2015. After

2016 production is planned to reduce from

23Mtpa to 15Mtpa in order to achieve

an acceptable environmental outcome.

Associated with this lower processing

production, mining and removal of waste

rock will be increased, averaging 50Mtpa,

which will increase costs. In order to

maintain profitability under these conditions,

base costs need to decrease by 30%.

In 2013, work commenced on reducing

these costs, through restructuring,

reviewing of all contracts and contractors

and adopting the productivity initiatives

recommended in the mine continuation

studies. Looking to the future, OTML will be

a leaner business. The Company will need

to adopt modern technology and systems

through a replacement programme to

improve productivity.

Planning for the future has included the

management team redefining what the new

business should strive to be through a series

of workshops. Output from the workshops

has defined a new Vision and Mission for

OTML and also five strategic goals to meet

the Vision and Mission objectives.

The new OTML Vision is:

“ WE ARE A SUSTAINABLE, EFFICIENT, AND WELL REGARDED OPERATING COMPANY THAT DELIVERS VALUE TO ALL OUR STAKEHOLDERS”.

The new Mission is:

“ WE MINE GOLD, SILVER, AND COPPER FROM PNG RESERVES”.

The five major strategic goals to deliver

against the Vision are:

ZERO HARM;

ZERO WASTE;

ONE BUSINESS;

FOCUS ON CORE OPERATIONAL ACTIVITIES; AND

BE A PNG MODEL MINING AND EXPLORATION COMPANY (MIMEX).

Against each strategic goal, the business has

mapped the people and business processes

that must be implemented to achieve each

goal. This important planning will enable

the Company to focus on core business,

productivity, and costs.

To support the business processes, OTML

will invest in new integrated enterprise

business software from SAP. Current software

applications are at the end of their useable

life, with limited external support and

generally operating independently. SAP will

provide a seamless integrated solution that

will cover all of the major business processes

that OTML will require into the future. The

philosophy is to change OTML business

processes to fit the SAP proven operating

environment, ensuring a fast transition to the

new system. First phase implementation is

due for completion by Q1-2015.

VISION AND MISSION

MISSION

VISION

WE MINE AND EXTRACT GOLD, SILVER AND COPPER FROM PNG RESERVES

WE ARE A SUSTAINABLE, EFFICIENT AND WELL REGARDED OPERATING COMPANY THAT DELIVERS VALUE TO ALL OUR STAKEHOLDERS

ZERO HARM

ZERO WASTE

ONE BUSINESS

FOCUS ON CORE OPERATIONAL ACTIVITIES

PNG MODEL MINING AND EXPLORATION COMPANY

Embedded in everything we do and how we think

Efficient and transparent operations, accuracy in meeting specifications, conformance

No ‘work-arounds’, own the outcome, ‘engineering to purpose’

Integrated thinking, planning, communication and management end-to-end, Keep it Simple, no silos, ‘do your own job’

Sustainable use of SAP and key systems

Outsource non-core but report and have governance on selected business critical data, seed future service providers

Best Practice Reporting

Mining and exploration in a box, take systems to new businesses, business flexibility, operator of choice



OTML’S PURPOSE IS TO FULLY EXPLORE THE MINERAL RESOURCE POTENTIAL OF MT FUBILAN AND NEARBY EXPLORATION TARGETS; TO MANAGE ITS BUSINESS, COMMUNITY AND ENVIRONMENTAL RESPONSIBILITIES AND TO BE THE BEST EMPLOYER IN PNG BY ENHANCING THE SKILLS AND DEVELOPMENT OF ITS EMPLOYEE’S CAREERS WHILST PROVIDING HIGH QUALITY WORKING CONDITIONS, FACILITIES AND SERVICES TO ITS STAKEHOLDERS.

In this Annual Review transparent and

thorough information about the safety,

economic, environmental and social

performance of the Company is presented.

It has been a challenging year, with confronting

operational issues, shareholder re-alignment

and world market dynamics that have

negatively impacted financial performance.

The health, safety and wellness of the

workforce, their families, CMCA communities

and the general community at large, have

remained core to the business. Strong

health, safety and wellness policies and

procedures implemented across the

operations with daily safety talks and on-

going training programmes, have contributed

to improved outcomes toward the Company’s

commitment to achieve Zero Harm.

This commitment is communicated to

all operational stakeholders, through the

following documents:

• OTML’s Health & Safety Policy;

• the Leaders’ Vision Statement; and

• the Employee and Contractors’

Vision Statement.

These documents articulate the organisation’s

commitment to legislative compliance and the

pursuit of continuous improvement in injury

prevention, a healthy work environment and

employee wellness.

In 2013 the Company achieved a Total

Recordable Injury Frequency Rate (TRIFR)

of 1.49, which is a 47% improvement

on the 2012 performance. This result

is commendable given the variety and

complexity of the associated risks in 2013.

OTML maintains its position as a premier

safety leader, not only in PNG, but also

within the global mining industry.

2013 was a year of operational challenges

through a combination of environmental and

aging plant and equipment factors. In May,

a failure of the SAG Mill No. 2 shell occurred

after 30 years of continuous operation.

During the months of June and July the

mine pit was flooded following a series

of extreme rain events. The in-pit primary

crusher failed and required a major rebuild

during November and power services were

also impacted by the failure of aging power

generating and distribution infrastructure.

The Company’s logistical operations were

also impacted by landslides, which blocked

main arterial roads, caused bridge instability

and produced variability in the navigable

water levels of the Fly River.

Financial performance was impacted by

volatility in world metals prices, instability in

major international economies, production

issues, and variability in exchange rates.

Notwithstanding these issues, OTML

remained profitable and generated positive

operating cash flows. Specifically, sales

revenue amounted to PGK 2,670 million

(USD 1,176 million), and while no dividends

were declared, total taxes paid to the PNG

Government were in the order of PGK 261.5

million (USD 114.6 million).

MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER’S REPORT

Copper concentrate sales were 394,622

tonnes (t), which was 14% lower than 2012.

Metal contained in concentrates totalled

100,212t copper, 352,050 ounces (oz) of

gold and 929,380oz of silver. Despite the

challenges the Company reported a net

profit after tax of PGK 180.7 million

(USD 16.8 million), which was down 80%

on the result reported in 2012. OTML’s cash

operating costs in 2013 were PGK 1,526

million (USD 772 million) an increase of 4%

or PGK 58 million (USD 25.4) over 2012. A

major contributor to increased cost included

the impact of a strong Australian Dollar to

the PNG Kina for most of the year. When

normalised to take such external factors into

account costs decreased by PGK 15 million

(USD 7 million).

World market dynamics have not only

impacted OTML but also global mining

operations in general. Although the year

ending 2013 did not present the same level

of impact experienced in 2012, it reinforced

the need for sustainable cost reduction

initiatives. A significant challenge to emerge

was that costs remained high despite

fluctuating metal prices that seemingly had

no traditional empirical basis. As could be

expected, this led to further uncertainty

around commodity pricing driving fear,

increasing perceived risk and making

forecasting and planning difficult. Given

the situation, OTML focussed on cash

management and sustainable cost reduction

initiatives which were also driven by the

move to continue mining to 2025 with a

reduced copper concentrate output.



MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED

The Company’s balance sheet with no debt

or leasing liabilities was well positioned to

weather the downturn in the mining sector.

However, as a mature business there were

still opportunities to re-dress cost structures.

Two years ago, the decision was made to

purchase and run an OTML shipping fleet

and mining equipment that have and will

generate operational cost improvements that

will be fully realised in 2014 and beyond.

In 2013, major cost initiatives revolved

around optimising “Project Ok Tedi – 2025”

to ensure the Company’s cost structures

adapted to lower projected metal output

to both preserve operating margins and

provide resilience to further fluctuations

in metal prices. These initiatives included

a restructuring of the workforce and

engagement with contractor partners and

CMCA communities.

The global mining industry is very competitive

and in previous years there has been a skills

shortage due to growth in existing mines

and the development of new ventures.

Whilst 2013 saw a change to this situation

the business continued to lose some key

professional and trades employees to other

mining companies with operations in PNG,

Australia, Asia and Africa. The training of the

workforce driven by the Company’s social

responsibility and the necessity to attract

and retain a competent, highly skilled work

force remains a priority. Training programmes

are an ongoing strategic initiative to develop

the technical skills among all employees to

ensure that they are qualified to international

standards. In 2013, the business invested

PGK 23.3 million (USD 10.3 million) towards

employee training programmes.

One of OTML’s major continuing concerns is

the environmental effects of our operations.

The waste and tailings deposition into the

riverine system has had a major impact

on the Ok Tedi and Fly River systems and

associated eco-systems, which in turn has

impacted the livelihood of the communities

who live along the river corridor. The

Company continues to employ a team of

scientists to monitor and manage the effects

of our mining activity, past and present, over

the total mining footprint. During the year,

management approved a detailed review

of the possibility of constructing a tailings

storage facility and the OTML Board has

agreed that a formal study be undertaken to

assess the technical feasibility of the options

identified in the review. In addition, work in

relation to controlling waste rock discharges

to the river system has been advanced as

part of the mine continuation activities.

During 2013 saw the Company transition into

a fully owned State Owned Enterprise (SOE)

with the departure of the PNG Sustainable

Development Program Limited (PNGSDP) a

63.4% shareholder from the share register

via a government legislative process. The

resulting shareholder structure is now such

that the Company is a 100% SOE, with the

State directly holding 87.8% and the people

of the Western Province holding a beneficial

12.2% interest. The wealth generated by

the Company therefore benefits the people

of PNG, especially those from the Western

Province. The State has also commenced

discussions with the CMCA communities

for an equitable redistribution of the 100%

shareholding targeted to be effected by

30 June 2014.


The Company recognises its social

responsibility as a core requirement to

success in contemporary mining practice.

It has also recognised that a marker of

success is how the benefits generated from

mining activities are used for the benefit of

the mine associated communities and the

rest of the Western Province, both directly

by the Company through the Ok Tedi

Development Foundation Limited (OTDF)

and the backflow of benefits from the State

through the transparent use of taxation and

other revenues.

In regards to the State benefits, the Company

recognises its importance to PNG and has

actively engaged with the State for many

years in delivering projects worth up to

PGK 287.7 million (USD 126.6 million) to

the Western Province and the Telefomin

District in the Sandaun Province, through the

government funded Tax Credit Scheme (TCS).

This contribution has largely gone unnoticed

and recognising this, the Company is for the

first time, reporting on its TCS activities.

OTML has continued to work with our

communities to effectively mobilise their

compensation benefits in the form of cash

payments and funding for sustainable

development projects. In 2013, the

communities received compensation

payments of PGK 72.8 million (USD 32.0

million) directly from OTML, with a further

PGK 54.8 million (USD 24.1 million) as CMCA

trust fund payments. Project delivery to

remote parts of the Western Province remains

an ongoing logistical challenge, however

during 2013, many Trust and TCS projects

were completed including the PGK 36 million

(USD 16 million) Balimo Hospital project.

The principal emerging enabler for mobilising

community funds is the OTDF, where

OTML currently retains 75% of the equity

and the PNGSDP, the remaining 25%. The

OTDF was established in 2001 as part of

the BHP Billiton Limited (BHP Billiton) exit,

to manage the trust funds set-up for the

156 CMCA villages under the CMCA. The

OTDF mobilised PGK680 million (USD 308

million) of community trust funds for projects

during 2013. Of particular importance was

the securing of a passenger vessel for the

Fly River, a cargo and a research vessel

and two Twin Otter aeroplanes that came

into operation in 2013. OTDF’s enabling

legislation requires OTML to relinquish its

OTDF shares before or at mine closure to

four reputable development organisations.

The role of women in the partnership

between the Company and the CMCA

communities has been a unique and

pioneering experience, particularly in

negotiating benefit streams for their

communities. This draws lessons for

development policy making, planning and

programme implementation that have

become an important component of the

Company’s method of operation. These

lessons are relevant, both for PNG and

for other countries attempting to make

policy decisions about translating mineral

wealth into inclusive and sustainable

development for local communities. Over

the past twelve years there have been

world-leading developments in the inter-

relationships between OTML, the male

dominated communities, and the women

leaders from those communities. This inter-

relationship was the subject of an intense

World Bank study held during the 2006/2007

CMCA review and the 2009/2012 mine

continuation consultations providing a better

understanding of the need to engage women

when negotiating benefits and what they

consider important for themselves and their

children. The World Bank report’s

overall conclusion stated that significant

strides have been made in securing

women’s access to voice, representation

and rights of participation.

Moving forward, faced with

the volatility of metal prices,

international economic instability,

and the challenge of operating

an ageing plant there will be

an ongoing need to focus

on maximising productivity,

minimising costs, realigning our

procurement strategy and strict

management of contracts against

terms and deliverables, to ensure

that OTML can continue to deliver

benefits for the North Fly region,

the Western Province, and PNG.

2014 will test and challenge

OTML’s management, employees,

business partners and our

communities through the transition

to a smaller operation. However

with the available resources and

a stable, creative and well trained

workforce, we stand ready to

deliver on our commitments.

NIGEL PARKERManaging Director and

Chief Executive Officer


CHAIRMAN’S REPORT Despite the huge challenges presented by

its remoteness and environmental legacies,

the Mine is well managed and has been a

very profitable operation since BHP Billiton’s

exit. Profitability is the foundation for its

significant contributions to the development

of the Western Province and PNG, as well as

for management of the mine’s environmental

legacy. Ok Tedi’s unique history and

ownership structure requires it to focus on its

wider Corporate Social Responsibility (CSR),

its contributions to development and the

usual issues a large mining company has to

manage in a broader society.

OTML became 100% PNG owned for the

benefit of PNG in 2011, from a share buyback

of the then Canadian shareholder Inmet

Mining Incorporated (18% equity holder).

The buyback increased proportionately the

ownership by PNGSDP, the State and the

beneficial interests of the Western Province.

During September 2013 the PNG Government

took the additional step of legislating

to directly assume the shareholding of

PNGSDP. Full equity of OTML as a SOE

now allows OTML to concentrate its efforts

unambiguously on increasing its contribution

to the development of the Country and

particularly the Western Province. The new

Company focus is to adopt a long-term

development strategy to keep the mine

operating for as long as possible to ensure

the communities of the Western Province

have a sustainable future.

2013 has presented further significant

challenges; not only with the change in

shareholding, the decrease in world metal

prices and operational issues, but also in

the transition towards mine continuation

as a smaller company. Most notable in the

transition was the notional closure of the

Mine (as BHP Billiton left it), on 31 December

2013 and the resulting re-alignment of the

workforce. This included the termination of

all employment contracts on that date and

the issue of new employment contracts with

revised terms and conditions to a reduced

workforce, commencing 1 January 2014.

To those employees who left the Company,

heartfelt thanks are extended to them for their

contributions. To the continuing employees,

the challenges are extended to them to take

the Company to new levels of success.

In 2011, the Company made a conscious

decision to commence reporting its annual

activities in line with the principles of

Corporate Social Responsibility (CSR), with

a plan to be auditable within the terms of

the International Finance Corporation (IFC)

guidelines for the 2014 year of review.

The Company elected to join the Extractive

Industries Transparency Initiative (EITI) as a

supporting company in 2012, however, with

the Company now being a SOE, the OTML

Board of Directors (the Board) has decided it

is inappropriate to be an independent mining

company member and the Company has not

renewed its Company membership.

The EITI mining industry representatives

made significant contributions to the

development of the EITI Standard, launched

at EITI’s Global Conference held in May

2013 in Sydney. The Company will continue

to support this Initiative as a demonstration

of its corporate leadership in disclosure

practices in a contemporary global context.

THE COMPANY WAS FORMED 32 YEARS AGO BY THREE FOREIGN MINING COMPANIES AS FOUNDATION SHAREHOLDERS, WITH THE AIM TO BUILD A COPPER AND GOLD MINE, ALBEIT IN ONE OF THE WORLD’S MOST CHALLENGING AND REMOTE LOCATIONS. IN FEBRUARY 2014 IT WILL BE 12 YEARS SINCE THE FORMER OPERATOR AND MAJORITY SHAREHOLDER, BHP BILLITON, VESTED ITS SHARES IN THE MINE TO THE SPECIAL PURPOSE COMPANY, PNGSDP. THE OVERRIDING CONDITION OF THAT VESTING WAS THAT ALL DIVIDENDS FROM THE BHP BILLITON VESTED EQUITY WERE TO BE APPLIED TO THE BENEFIT OF PNG. THE MAJORITY OF THE DIVIDENDS WERE TO BE PLACED INTO A LONG-TERM FUND TO BE ACCESSED FOLLOWING MINE CLOSURE TO SUPPORT THE CMCA COMMUNITIES, THE REST OF WESTERN PROVINCE AND PNG.

The format of this Annual Review continues

to be prepared in accordance with the

International Finance Corporation principles

and the Company has used the Global

Reporting Initiative G4 format that, in this form

is believed, to be a first for a PNG Company.

The operations of the Company and the

Mine, the management of its environmental

impact, its contributions to National,

Provincial and North Fly District development

and work that is underway to maintain the

Company’s contributions to development,

while responsibly managing its environmental

legacy, are reported on in this Annual Review.

The Company and the structure of the Board

changed with the departure of PNGSDP

from the share register in September 2013.

Following this change, the National Executive

Council made the following appointments:

• Mr. Dairi Vele was appointed as ex-officio

Director representing Treasury and as

interim Chairman;

• Mr. Nigel Parker was appointed as

ex-officio Managing Director (MD) and

Chief Executive Officer (CEO);

• Dr. Modowa Gumoi was appointed as

ex-officio Director representing the

Western Province; and

• Dr. Jakob Weiss was appointed

representing Financial and

Risk Management.

It is anticipated there will be three other

independent directors, one to be an

Independent Chairman and the remaining

two having operational experience specific

to mining and processing. These positions

will be progressively filled with appropriately

qualified professionals.



The Safety and Technical Advisory Committee

(STAC) continues to report regularly to the

Board on issues with an array of technical

dimensions. Members of the Committee bring

a wide range of technical experience and

expertise. The MD and CEO chairs the STAC

with the committee consisting of Mr. Robert

Burns, Mr. Martin Whitham and Ms. Pamela

Ruppin. The STAC has contributed towards

presenting valuable perspectives to senior

management and Board deliberations.

The management team has continued to

perform well under the MD and CEO’s

leadership throughout 2013. Complex

issues related to shareholding, engineering,

environmental and community decisions on

the future of the mine have been managed

with skill and sensitivity while the Mine’s

profitability has remained positive throughout

a difficult year.

The Board continues to place high priority on

the implementation of safety standards and

despite an improved overall performance,

the Company remains focused on

strengthening its safety management and

associated programmes.

Ok Tedi retains an environmental legacy.

The Mine disposes of waste and tailings into

nearby creeks, eventually flowing into the

Ok Tedi and then the Fly River. The result is

a rising Fly River bed, causing flooding over

the river’s levee banks and dieback to trees

adjacent to parts of the river. Even when

mining ceases, the legacy of accumulated

material will continue to cause flooding and

dieback in the Middle Fly region for many

decades into the future. In addition, the iron

sulphide (pyrite) in the tailings introduces

a risk of acid formation that could, if not

managed, lead to the formation of increased

levels of chemical pollutants.

Over the past decade, important initiatives,

at a total cost in excess of PGK 3,000 million

(USD 1,000 million) have been taken to

mitigate these effects.

In 1998, under BHP Billiton management,

dredging from the Ok Tedi River at Bige

commenced. The dredging has removed a

high proportion of sand and sediment, which

has been stored in engineered stockpiles

adjacent to the river. This activity has been

effective in some areas by easing the risk of

flooding and forest dieback and stopping the

situation from getting worse in other areas.

However, these activities will not remove

the historical legacy of the flooding that will

gradually extend into the lower reaches of

the Middle Fly River system.

The second significant environmental issue

is the acid rock drainage risk, which has

been addressed in several ways. Acid-

neutralising limestone continues to be

added to the materials going into the river.

More importantly, a secondary flotation plant

PGK 1,220 million (USD 466 million) has

been installed to remove acid-forming pyrite

materials from the tailing, with the pyrite

material then being transported by pipeline

to Bige where it is stored in engineered

structures safely under water and a non-acid

forming sediment cover system.

The reduction in the quantity of pyrite

materials flowing down the river has reduced

the environmental risk related to previous

mining activities.

The environmental impacts of the Mine

are monitored by an exemplary team of

environmental scientists who provide

dedicated commitment to their professional

roles in the scientific and environmental

management work undertaken to secure the

objective of minimising damage from the

mining legacy whilst continuing mining and

processing operations.

The Company makes significant contributions

to services and infrastructure development in

areas affected by the Mine through its social

responsibility programme.

CHAIRMAN’S REPORT CONTINUED


The Tabubil Hospital is the major referral

hospital in the North Fly District with the

majority of patients coming from the

surrounding communities. During the year, the

Company provided a number of community

and employee medical evacuations and

assisted with 41 patient referrals by the

Company’s charter flights for specialist

medical care in Port Moresby, Lae, Cairns,

Townsville, Singapore, and the Philippines.

The Company’s Public Health team has

contributed to a marked reduction in malaria

cases since 2006 and together with the

treatment of life-style related diseases, is now

a central focus of the Company’s health and

wellness programmes.

OTML introduced the North Fly Health Service

Development Programme (NFHSDP) in 2009

under the management of health consultants,

Abt JTA. The programme has improved levels

of immunisation, delivery of medical supplies

and skills of health workers. The Tabubil

Urban Clinic was opened in 2010 to provide

clinical services to North Fly communities

and the NFHSDP continues to assist the

Provincial Government to improve the Kiunga

District Hospital’s standards by upgrading the

facilities, engaging specialist Medical Officers

and providing essential equipment. A similar

five year project was approved for the Middle

and South Fly districts and the initial baseline

review of 65 villages is complete. This

initiative will see improved medical service

delivery to these communities.

An important step towards an independent

future for the town of Tabubil was taken

during 2011 with the execution of an

agreement with the Madang based,

Divine Word University (DWU), to assume

management control of the Tabubil Hospital

from 1 January 2014. In addition to managing

hospital services to a high standard, DWU

will be establishing a Rural Health Science

Programme in Tabubil, using the hospital

as a teaching facility. This will be only the

second programme for educating doctors

in PNG, but the first with a primary focus

on rural health. The necessary teaching

facilities and staff/student accommodation

are currently under construction within the

hospital precinct supported by the PNG

Government through the TCS.

OTML continues to support OTDF as a stand-

alone entity directed by the mine-associated

communities as a vehicle for delivering

projects and services funded by contributions

made to the CMCA Trusts by OTML and other

sources. It has become increasingly effective

in service delivery in recent times. Transport

infrastructure, income-generating village

activities, housing, and community services

were delivered in 2013.

The OTML Board of Directors tasked

management to define a mine continuation

opportunity that would yield economic

value for the shareholders, maintain and

extend the Company’s contribution to

local, provincial and national development,

while having a socially and environmentally

acceptable risk profile. Assessing the

options from the feasibility study has been

a major focus of the Board of Directors

through 2012 and 2013. A promising mine

continuation opportunity emerged that

identified a cutback on one wall of the

existing pit and it has been proposed that

waste generated by the opportunity can

be safely stored in a geotechnically stable

waste dump near the Mine. The Company is

engaged in additional scientific testing and

in the process facilitated an independent

expert review of the environmental impact

of the preferred mine continuation proposal

for the Department of Environment and

Conservation. The resulting information

will form the basis for a final government

approval expected in 2014.

Every year brings its challenges

at OTML and 2013 was no

exception. The Company has

managed the challenges of 2013

effectively and has emerged

from a year of transition as a

sustainable, productive and

focused company. The Board

thank the professional and

committed management team for

their continued high performance

under great pressure throughout

a difficult year. It looks forward

to working with the management

team through the year ahead,

in which large transitioning

programmes affecting the

future of the Company and its

stakeholders will come to fruition.

DAIRI VELEChairman


OTML IS A LEGAL ENTITY INCORPORATED UNDER THE PNG COMPANIES ACT 1997 AND IS COMMITTED TO MAINTAINING ROBUST CORPORATE GOVERNANCE PRACTISES.

OK TEDI BOARD OF DIRECTORSOTML is a legal entity incorporated under the

PNG Companies Act 1997 and is committed

to maintaining robust corporate governance

practises. This includes monitoring and

adopting as appropriate, contemporary

international practices such as the guidance

principles of the Australian Stock Exchange

Corporate Governance Council as follows:

• majority of the Directors are independent;

• the Chairman is independent;

• the positions of Chairman and MD are

held by different persons;

• the Board has a number of standing

committees, for example, Nomination and

Remuneration Committee and a Safety

and Technical Advisory Committee; and

• Non-executive Directors do not receive

any short or long-term incentives, equity

based remuneration or retirement/

termination benefits.

The OTML Board holds the highest level of

responsibility for the Company. However, as

a SOE, certain other governance provisions

come into effect by application of provisions

of the Independent Public Business

Corporation Act (IPBC Act) and the powers

of the National Executive Council (NEC),

particularly in the appointment of members

of the Board. With the effected change in

ownership of OTML, whereby the State

now holds, directly to its own account, a

shareholding of 87.8%, there has been a

restructuring of the Board, Chairman and

Director’s positions in the latter part of 2013,

as sanctioned by the NEC and duly gazetted.

It is anticipated the profile of the Board will

be as follows:

• Chairman: to be independent;

• Director ex-officio representing the State

– Secretary of Treasury;

• Director ex-officio representing the

Fly River Provincial Government –

Provincial Administrator;

• Managing Director ex-officio being

the CEO;

• Director representing Audit and Risk:

to be independent;

• Director representing Mining: to be

independent; and

• Director representing Processing:

to be independent.

Three independent Board positions were

vacant as at 31 December 2013, with

discussions currently in progress for suitable

candidates. Finalisation of these positions

will bring the Board to full operating capacity

in 2014 with the Chairman and six Directors.

The Board regularly reviews its composition

to ensure Directors provide the relevant

expertise required by the Company. OTML

has recently updated the Board Charter and

an introduction package which is used to

familiarise new Directors with their expected

roles and responsibilities. In accordance

with good governance and the requirements

of the PNG Companies Act 1997, Directors

are required to declare any interests that

may result in a conflict of interest. Should a

conflict of interest arise at a Board meeting,

the relevant Director must be absent from the

discussion of interest and abstain from voting.

GOVERNANCE


During 2013, the OTML Board met three

times (February, October and November) in

Tabubil and held three phone conference

calls. In addition there were three circulating

resolutions. As is contemporary corporate

practice, the Directors receive board

papers, standing committee papers and

meeting minutes, with sufficient time before

Board meetings to allow the information

to be properly reviewed and appropriate

interrogation of management to occur.

Profiles of each Director, the Charter of the

Board and standing committees are available

on the Company’s website: www.oktedi.com.

THE NOMINATION AND REMUNERATION COMMITTEEThe Nomination and Remuneration

Committee comprises two Non-Executive

Directors and is responsible for evaluating

and reviewing remuneration packages

and bonuses and nomination of Executive

and Non-Executive positions. OTML’s

remuneration for Directors and senior

executive personnel reflect the complexity

of the business and this structure is in

line with similar global mining operations.

OTML continues to attract, motivate and

retain highly experienced professionals as

Directors or senior executives.

Ok Tedi Board of Directors as at 31 December 2013

BOARD MEMBER POSITION STATUS DATE APPOINTED COMMITTEE FUNCTION

Mr Dairi Vele Chairman Ex-Officio 23 September 2013 Chairman - Remuneration

Mr Nigel Parker CEO and MD Ex-Officio 1 January 2011Chairman Safety and Technical

Dr Modowa Gumoi Director Ex-Officio 23 September 2013

Dr Jakob Weiss Director Independent 23 September 2013 Remuneration

Supporting the Board are two standing committees, the Nomination and Remuneration

Committee and the Safety and Technical Advisory Committee.

Ok Tedi Board of Directors, from left to right: Dr Jakob Weiss, Dr Modowa Gumoi, Mr Nigel Parker, Mr Dairi Vele.

THE SAFETY AND TECHNICAL ADVISORY COMMITTEEThe Safety and Technical Advisory

Committee comprises three Non-

Executive Independent members,

a Chairperson, and an Executive

Board member. This Committee

comprises members who have

extensive mining industry

experience across operations

in risk, safety and health. The

Committee is responsible for

reviewing major projects and

commitments and making

recommendations for OTML

management to submit to the

Board. The Committee receives

regular briefings on OTML major

risks, material operational issues

and safety initiatives that may have

strategic implications for OTML or

its shareholders. The Committee

played a major role in guiding

the Company through the mine

continuation feasibility project over

the past three years. The current

Safety and Technical Advisory

Committee members are:

• Mr Nigel Parker – Chairman;

• Mr Martin Whitham – Member;

• Mr Robert Burns – Member; and

• Ms Pamela Ruppin – Member.

OK TEDI MINING LIMITED(TOTAL SHARES = 192,700,000)

MROT NO.2 LTD 12.2%(23,500,000 SHARES)

Dividends by DirectionNEC decision 29/11/06

Memo - MD of MRA 2/08/07

6.1% Western Province

CMCA Region Peoples

Dividend Account (WPPDTA-CMCA)

6.1% Western Province Non CMCA

Region Peoples Dividends Trust Account

(WPPDTA-Non CMCA)

STATE OF PNG 87.8%(169,200,000 SHARES)

Dividends by DirectionMOA - 9/01/91 State of PNG

& Fly River Prov Government

3.05% MROT No.2 Ltd

(Fly River Provincial Government)

3.05% MRSM Ltd

(Mine Village Landowners)


COMPANY CHANGESThe Mine has been operating for 32 years and in late 2012, applied to the State for a mine

continuation from 2015 to 2025. As a SOE, 100% of the benefits from its operations are

distributed to the people of Western Province and to the State. OTML operates within its

own statutory framework and is governed by the Mining (Ok Tedi Agreement) Act 1976 (as

amended and supplemented from time to time). In September 2013, with the passing of the

Mining (Ok Tedi Tenth Supplemental Agreement) Act 2013 by Parliament, the PNGSDP’s

shares were cancelled and new shares issued to the State.

On 19 Sept 2013, PNGSDP shares were cancelled and new 122,200,000 shares were issued

to The State

GOVERNANCE CONTINUED

BOARD MAIN ISSUESDuring 2013, the Board and

Standing Committees addressed a

number of major issues including:

1. Occupational Health,

Safety and Wellness;

2. Tailing Storage Facility

pre-feasibility study;

3. Mine continuation capital

equipment expenditures;

4. Mine Information System

upgrade to SAP business

software;

5. Tolukuma Mine, peer review;

6. Staff redundancy

and restructuring;

7. Changes in Directors;

8. Changes in Nomination and

Remuneration Standing

Committee members; and

9. Composition of the Safety and

Technical Advisory Standing

Committee members.


Australian Standard (AS) 8001

– 2008 Fraud and Corruption

Control and AS 8004 – 2003

Whistle Blower Protection provide

comprehensive and relevant

guidelines for the construction

of policy and procedures which

are assisting OTML in identifying

the risks described above and

achieving positive outcomes to

its commitment.

INTERNAL POLICY AND STANDARDSIn 2013, the Occupational Health & Safety

(OHS) and Environment Policies were

reviewed, updated and endorsed by the

executive leadership team. Other supporting

documents updated included the Ok Tedi

Charter, the Ok Tedi Standards of Business

Conduct and the Ok Tedi Management

Standards of Conduct.

CODE OF CONDUCTIn October 2013, OTML revised the Code

of Corporate Conduct and Business Ethics

(the Code). The Code provides guidance for

Directors, employees and stakeholders on

adhering to the highest standards of business

conduct and compliance with the law and

best practise. It recognises that as a leading

PNG company, OTML must apply the highest

ethical standards to its operations, the

business community at large, its employees

and their families. In so doing OTML will:

• ensure the Company maintains its

reputation for fair and responsible

dealings with all stakeholders;

• clearly define the high standards

of behaviour expected throughout

the organisation;

• transparently provide all employees with a

clear idea of what the Company goals are

and how it will achieve them;

• hold all persons covered by the Code to

full account for the performance of their

duties; and

• take all steps to ensure staff can

be proud of their association with

the Company.

The Code clearly provides information on

personal accountabilities and outlines the

process for dealing with employee concerns.

The Code covers use of company resources

and information, fraud, confidentiality and

proprietary information, conflict of interest,

privacy, diversity, health, safety and the

environment, human resources, financial

inducements, gifts and entertainment and

political contributions.

OTML is committed to preventing incidences

of corrupt and illegal practices and all

behaviour that is contrary to the Code, by

people at all levels within the organisation.

In order to fulfil this commitment the MD and

CEO has directed management to address

the following potential risks:

• identify all areas in the business most

prone to potential bribery and to

implement systems or plans to address

bribery risks;

• implement systematic procedures to

ensure business relationships are being

entered into only with reputable and

qualified third parties and to monitor

third-party relationships;

• establish education programmes to

ensure people are fully aware of bribery

risks, how to address them and how such

programmes are being tailored to the

specific risks faced and the obligations of

different employees;

• implement systematic procedures for

the human resources team and line

departments to take bribery risks into

account when hiring and monitoring

employees in high risk roles;

• establish communication channels for

employees or others to report concerns

and to formulate methods for protecting

whistle-blowers; and

• implement robust, fair and reasonable

disciplinary procedures to address

violations or suspected violations.


EXTERNAL STANDARDS, INITIATIVES AND GUIDELINESOTML measures its performance

against national and international

standards, initiatives and

guidelines. In 2013, independent

audits were completed against

OTML’s progress towards

ISO14001 and OHSAS 18001

systems development. OTML

uses the following standards and

guidelines in continual improvement

of its operating systems:

• ISO14001:2004, the

International Standard

for Environmental

Management Systems;

• OHSAS 18001:2007,

the International Safety

Management Standard;

• AS/NZS ISO31000:2009,

Risk Management, Principles

and Guidelines;

• The International Finance

Corporation Performance

Standards on Social and

Environmental Sustainability for

operating projects. www.ifc.org;

• The Global Reporting Initiative

sustainability reporting

framework and guidelines.

www.globalreporting.org;

• Papua New Guinea

Companies Act, 1997; and

• International Financial

Reporting Standards (IFRS).

The Company was in compliance

with its various licences and

permits during 2013 and no fines

or sanctions were issued to OTML

by the regulatory authorities.

BUSINESS COALITION AGAINST HIV/AIDS (BAHA)OTML is a proud foundation platinum

member of the PNG BAHA, which was setup

to spearhead the awareness of HIV/AIDS

in the business community. The Company

contributes PGK 100,000 (USD 43,900) per

annum and since 2007, total contributions

have exceeded PGK 1.3 million (USD 570,000).

OTML is proactively promoting the awareness

of HIV/AIDS through employee and

contractor Health and Safety and Wellness

programmes. OTML’s partners in the

Hospital and Rural Health programmes also

provide education and support throughout

the North Fly District and Western Province.

The programme meets one of the Millennium

Development Goals’ requirements.

THE EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (EITI)In 2012, OTML became a supporter of the

EITI, which aims to strengthen governance

by improving private sector transparency

and accountability in the extractive sector.

In late 2013, OTML was invited to renew its

annual membership with EITI, however due

to changes in the Company’s structure with

87.8% being majority owned by the State,

the Board felt it was a potential conflict

of interest and withdrew its membership.

However, OTML will continue to publish its

payments to all stakeholders in line with EITI

and GRI reporting requirements, through the

Annual Review process.

UNITED NATIONS MILLENNIUM DEVELOPMENT GOALSThe PNG Government is a signatory to the

United Nations Millennium Development

Goals (MDGs). The MDGs range from halving

extreme poverty rates to halting the spread

of HIV/AIDS and providing universal primary

education by the target date of 2015, from a

blueprint agreed to by all member countries

and leading development institutions. The

MDGs have galvanised unprecedented

efforts to meet the needs of the world’s

poorest. The MDGs eight key goals are to:

1. Eradicate extreme poverty and hunger;

2. Achieve universal primary education;

3. Promote gender equality and

empowerment of women;

4. Reduce child mortality;

5. Improve maternal health;

6. Combat HIV/AIDS, malaria and

other diseases;

7. Ensure environmental sustainability; and

8. Promote global partnerships

for development.

Through private sector and public institution

partnerships, improvement against each goal

can be measured and reported. In the Western

Province, OTML is a significant contributor

to programmes that have made an impact

against each of the MDGs. Progress on the

MDGs is reported in this Annual Review.

PRECAUTIONARY PRINCIPLEOTML uses a risk-based approach to guide

the Company through its decision-making

processes. Enterprise Risk Management

is used when evaluating economic,

environmental, or social aspects of mining

projects and major changes to the business.

The potential impacts and proposed

management plans to mitigate any major

risk are presented to the OTML Board

for approval. The precautionary principle

GOVERNANCE CONTINUED


is applied where there may be a lack of

evidence to assist in the development of the

management plans. For major expansions

such as the mine continuation project,

the Company has undertaken extensive

environmental studies and applied sound

risk based methodology using PNG and

international consultants and advisers.

OTML has also taken a precautionary

approach to future management of health

services in the region. As a non-core

business, but an essential community

service, OTML has outsourced the operation

of the Tabubil Hospital to health care

specialists, Diwai Pharmaceuticals Limited

(DPhL), a subsidiary of the Divine World

University. Likewise, the regional health care

programmes in the North, Middle, and South

Fly districts have been outsourced to Abt JTA

specialist health consultants.

REPORTINGThis Annual Review provides a

comprehensive overview of the Company’s

activities and financial outcomes. The

financial statutory accounts of the report

are audited by PricewaterhouseCoopers

PNG against the IFRS and other generally

accepted accounting practices in PNG.

This Annual Review has been developed

using the GRI G4 guidelines and includes

the Mining and Metals Supplement

requirements so that it follows GRI reporting

requirements. The specific Disclosure on

Management Approach (DMA) and indicator

summary is listed in the appendices of this

Review. Note, however, the Annual Review

has not been externally audited against the

GRI G4 requirements.

RISK MANAGEMENTThe Company is focused on identification

of major hazards and risks in the workplace

and any external sources that could impact

the business. OTML’s risk management

system is based on AS/NZS 31000:2009.

OTML continues to focus on integrating

risk management into each operating

department’s processes and projects. Each

department has a comprehensive risk register

and control action plan. Significant or material

business risks are regularly reviewed by the

Safety and Technical Advisory Committee,

and the top 10 risks are reviewed by the

Board. Major risk areas are addressed

by management through the annual

strategic and tactical planning process at a

departmental level. Each General Manager

has responsibility for departmental or project

risk registers and action plans.

In 2014 the process of consolidating

departmental risk registers into a single

system using the SAP Enterprise Software

risk module will commence.

AUDITINGInsurance AuditInternational Mining Industry Underwriters

(IMIU) conducted OTML’s operational

risk audit during February 2013. The

audit identified that OTML risk exposure

continued to be rated in the low range and is

considered to be better than the average for

the mining industry globally.

IMIU has determined a Risk Exposure rating

of 32 for OTML, which is better than the IMIU

global average of 49. Therefore OTML has

a better than average level of attractiveness

for insurers. The report recommended a

number of areas for improvement which were

completed in 2013.

FinancialThe financial statements

of the Company for the

year ending 31 December

2013 have been audited by

PricewaterhouseCoopers PNG

and the Independent Auditor’s

Report is included in this Annual

Review. The auditors found the

Company financial statements:

1. comply with International

Financial Reporting Standards

and other generally accepted

accounting practices in Papua

New Guinea; and

2. give a true and fair view of

the financial position of the

Company and the Group as at

31 December 2013 and their

financial performance and

cash flows for the period.

Health, Safety and EnvironmentIntegrated Environmental

Systems Pty Ltd externally

audited the Company’s

Occupational Health & Safety

and Environmental management

systems in June 2013. The audit

was undertaken against the

requirements of all elements

of the international OHSAS

18001:2007 Standard and

ISO14001:2004 Standard.

This audit was the third annual

Occupational Health and Safety

(OHS) and fourth Environmental

Management System (EMS)

annual audit. The findings

indicate an 8.0% improvement

in OHS, a 4.4% improvement in

EMS and a 16.5 % improvement

in geology and exploration in

Health, Safety and Environment

(HSE) management systems

compared to 2012.


CSR AREAS KEY FOCUS AREAS WHAT WE SAID WE WILL DO OUR PROGRESS IN 2013 OBJECTIVES FOR 2014

GOVERNANCE

Demonstrating strong and transparent Governance

Update Business Code of Conduct.

Revitalise Board and Board Committee Charters.

Completed in October.

Final Board Charter drafts to be approved.

Appoint remaining Board members, finalise Board committees and implement revised Board Charter.

Finalise the Mission, Values and the 2014 to 2018 strategic and implementation plan.

Implement auditing and continue seeking year-on-year improvements in performance and transparency reporting.

Auditing of financial, OHS, environment and insurance outcomes completed in 2013.

Complete external financial and insurance audits.

External audited GRI G4 Annual Review.

Continued implementation of risk assessments and audits. Move to align with ISO14001:2004; the International Standard for Environmental Management Systems, OHSAS 18001:2007; the International Safety Management Standard, ISO31000:2009; the International Risk Management Standard through development of an Enterprise Risk Management System.

Specific targets were established in 2011 for 2015, providing the Company with time to adjust and improve practices and behaviours. In 2013, a third external audit will be completed to review environmental and OHS systems.

OHS and EMS audits completed. Improvement of 8% in OHS, 4.4% EMS and 16.5% for geology and exploration HSE systems.

(Note OHS and EMS to move to SAP structure in 2014, which will assist with the integration and compliance with ISO).

Risk registers held at each department and reviewed quarterly and annually. SAP module will enable a true ERM system to be implemented in 2014

ISO14001 and OHSAS 180001 Audits.

Complete Safety, Health and Environmental Action Plan (SHEAP) activity implementation and external reviews.

Implement SAP risk module as company ERM tool.

Embed CSR into operating practises.

Integrate OTML CSR Principles into planning processes to further support safe work practices and healthy communities; continue managing environmental effects; continue contributing to sustainable social and economic development. Measure and report progress in OTML Annual Review

Yes to all the criteria, as OTML maintained social licence to operate. Progressed mine continuation with community consent. Best year ever OHS performance based on lag indicators. Ok Tedi Development Foundation (OTDF) project delivery.

Vision and Mission implementation planning as lead in to SAP implementation.

Continue to deliver social development programmes in region.

BUSINESS

Prudent management of business transition programme to mitigate the effects of a projected decline in tonnes mined and milled during transition to the mine continuation.

Complete business transition plan to carry the Company forward into 2014 in preparation for execution of the proposed mine continuation to 2025.

Planning sessions initiated for new Mission/Vision strategic planning.

Move to new Integrated Business operating system with SAP.

Meet or exceed 2014 budgeted production and cost metrics.

Complete mine continuation transition.

Implement SAP, as the standardised data management operating system by Q1 – 2015.

Commission the final haul truck and mining shovel fleet and assume 100% owner operator of pit operations by June 2014.

Renegotiate a revised Eleventh Supplementary Agreement with the State and other stakeholders and include mine continuation conditions and any further environmental monitoring requirements.

Complete the pre-feasibility studies on a potential second cutback on the East Wall of the open pit.

Complete pre-feasibility studies on Tailings Storage Facility options.

Positioning OTML to realise growth opportunities beyond the Mt. Fubilan Mine thereby generating continued value for OTML shareholders and CMCA communities.

In-pit and near-mine exploration and drilling programme to progress.

Delineate two new resources in the coming three calendar months.

Exploration at Mt Fubilan completed and commencement of mine continuation-2 (East wall and Gold Coast resource pre-feasibility studies).

Townsville deposit in-fill drilling success.

Drill 35,000m at Mt Fubilan Pit extension and nearby zones and convert 50% of Inferred Resources to Indicated or Measured status according to JORC Code guidelines.

Drill 7,500m at Townsville prospect and delineate and define a new Mineral Resource to Inferred and Indicated level according to JORC Code guidelines.

PERFORMANCE FOR 2013 AND TARGETS FOR 2014



GOVERNANCE

Demonstrating strong and transparent Governance

Update Business Code of Conduct.

Revitalise Board and Board Committee Charters.

Completed in October.

Final Board Charter drafts to be approved.

Appoint remaining Board members, finalise Board committees and implement revised Board Charter.

Finalise the Mission, Values and the 2014 to 2018 strategic and implementation plan.

Implement auditing and continue seeking year-on-year improvements in performance and transparency reporting.

Auditing of financial, OHS, environment and insurance outcomes completed in 2013.

Complete external financial and insurance audits.

External audited GRI G4 Annual Review.

Continued implementation of risk assessments and audits. Move to align with ISO14001:2004; the International Standard for Environmental Management Systems, OHSAS 18001:2007; the International Safety Management Standard, ISO31000:2009; the International Risk Management Standard through development of an Enterprise Risk Management System.

Specific targets were established in 2011 for 2015, providing the Company with time to adjust and improve practices and behaviours. In 2013, a third external audit will be completed to review environmental and OHS systems.

OHS and EMS audits completed. Improvement of 8% in OHS, 4.4% EMS and 16.5% for geology and exploration HSE systems.

(Note OHS and EMS to move to SAP structure in 2014, which will assist with the integration and compliance with ISO).

Risk registers held at each department and reviewed quarterly and annually. SAP module will enable a true ERM system to be implemented in 2014

ISO14001 and OHSAS 180001 Audits.

Complete Safety, Health and Environmental Action Plan (SHEAP) activity implementation and external reviews.

Implement SAP risk module as company ERM tool.

Embed CSR into operating practises.

Integrate OTML CSR Principles into planning processes to further support safe work practices and healthy communities; continue managing environmental effects; continue contributing to sustainable social and economic development. Measure and report progress in OTML Annual Review

Yes to all the criteria, as OTML maintained social licence to operate. Progressed mine continuation with community consent. Best year ever OHS performance based on lag indicators. Ok Tedi Development Foundation (OTDF) project delivery.

Vision and Mission implementation planning as lead in to SAP implementation.

Continue to deliver social development programmes in region.

BUSINESS

Prudent management of business transition programme to mitigate the effects of a projected decline in tonnes mined and milled during transition to the mine continuation.

Complete business transition plan to carry the Company forward into 2014 in preparation for execution of the proposed mine continuation to 2025.

Planning sessions initiated for new Mission/Vision strategic planning.

Move to new Integrated Business operating system with SAP.

Meet or exceed 2014 budgeted production and cost metrics.

Complete mine continuation transition.

Implement SAP, as the standardised data management operating system by Q1 – 2015.

Commission the final haul truck and mining shovel fleet and assume 100% owner operator of pit operations by June 2014.

Renegotiate a revised Eleventh Supplementary Agreement with the State and other stakeholders and include mine continuation conditions and any further environmental monitoring requirements.

Complete the pre-feasibility studies on a potential second cutback on the East Wall of the open pit.

Complete pre-feasibility studies on Tailings Storage Facility options.

Positioning OTML to realise growth opportunities beyond the Mt. Fubilan Mine thereby generating continued value for OTML shareholders and CMCA communities.

In-pit and near-mine exploration and drilling programme to progress.

Delineate two new resources in the coming three calendar months.

Exploration at Mt Fubilan completed and commencement of mine continuation-2 (East wall and Gold Coast resource pre-feasibility studies).

Townsville deposit in-fill drilling success.

Drill 35,000m at Mt Fubilan Pit extension and nearby zones and convert 50% of Inferred Resources to Indicated or Measured status according to JORC Code guidelines.

Drill 7,500m at Townsville prospect and delineate and define a new Mineral Resource to Inferred and Indicated level according to JORC Code guidelines.



PEOPLE

Conduct open, timely and transparent discussions with stakeholders.

Road test the OTML Grievance Mechanism and reorganise the Community Relations department such that systems and processes are aligned with best practices for stakeholder consultation, social management planning, and community development.

Implemented and migration of data underway. New grievances being put into the database.

Complete annual CMCA village consultation tours.

Continue to use the Grievance System, follow-up and resolve grievances in a timely manner.

Engage and develop OTML’s employees.

Review skill-sets required and possible roster changes to meet human resources needs for the mine’s continued operations.

Recruit and train Papua New Guineans. Support development of current employees to take on more responsibilities and ever-challenging roles.

Launch PNG nationwide and global recruitment campaign to fill specialised roles required for the mine’s continued operation.

Restructuring of OTML workforce. Release of 745 employees through voluntary redundancy.

Recruitment of new employees with required skills for continued mine operations commenced.

Specialised roles recruitment underway.

PNG and international recruitment programme to attract experienced PNG staff to OTML.

Implement a new roster and employment agreements for all employees and fill vacant positions with high quality candidates.

Identify training needs for employees in new positions with new position descriptions and develop training programmes to meet the “right person, right job” vision.

Support community development projects that foster economic empowerment and sustainability.

OTML will mature and implement a development strategy that transitions services currently provided by the Company to local agencies and service providers.

Engagement with multi-sectoral stakeholders to roll out health programmes similar to those undertaken by the NFHSDP, in the Middle and South Fly.

DWU engaged to run Tabubil hospital.

DWU draft MOU to operate International School.

Abt JTA to manage North/Middle/South FLY districts rural health programmes.

Complete the MOU with DWU for the Tabubil International School operational transfer to DWU.

Health – North Fly, Middle Fly and South Fly Regions with Abt JTA deployment.

Accelerate the Ok Tedi Development Foundation programme delivery.

Advance the public private partnership business model to divest OTML of town infrastructure to Government or private infrastructure providers as part of the Tabubil Futures programme.

OCCUPATIONAL HEALTH, SAFETY

& WELLNESS

Maintaining a safe workplace – Zero Harm is the goal

Implement a comprehensive OHS plan concentrating on training, supervision, behaviour and competencies.

Implement an occupational health programme.

Work on plan continued. Focus on “felt leadership” through the 2013 employee transitions.

Completed with a focus on dust, noise and, fatigue in 2013.

Lagging indicator performance outstanding:

TRIFR – 45% improvement

LTIFR – 69% improvement

SIFR- 45% improvement

Visible leadership programme rolled out including JSO, task observation and layered audits.

80% of the actions from investigations, audits and inspections are closed out by target date.

90% of workplace inspections and JSO’s completed as planned. Task observations and layered audits on high risk tasks and projects.

High and Significant risks reviewed by HSELT at least quarterly.

Complete 6 monthly contractor audits against contractor’s 12 top risks and their OHS systems.

Improve lag indicators by 10% compared to 2013 results.

10% reduction in light vehicle incidents compared to 2013.

Fatigue management programme implemented.

Align OHS practices and systems with OHSAS 18001:2007 by 2015.

OTML has set a site-wide improvement of 10% per annum, year-on-year to achieve compliance with OHSAS 18001:2007 by 2015.

8% improvement in the OHS system compared to 2012.

OHS information management system migrated across to phase 1 SAP project in 2014. Progress development of OHS systems towards meeting certification requirements of OHSAS 18001 by 2016.

Findings from annual external OHSAS 18001 audits to be compiled into SHEAP and 80% of actions closed out in 2014.

Continue to hold quarterly assessment meetings to adjust plans and ensure safeguards are in place and 100% effective.

Completed. OHS management review meetings conducted quarterly.

ENVIRONMENT

Align Environmental Management Systems with ISO14001:2004 by 2015.

Continue to improve the SHEAP audited score to reach the established target of 80%.

On track. Actions closed out 81% Progress development of environmental systems towards meeting certification requirements

of ISO 14001 by 2016.

Complete 80% of actions identified in SHEAP.

Continuously improve environmental performance at OTML.

Achieve compliance for all nine compliance monitoring stations. Continue to reduce waste and meet or exceed ANC/MPA target of 1.5:1 at Bige.

In compliance for 2013, average ANC/MPA ratio was 1.98:1.

Continue to remain in compliance with environmental conditions as per license conditions “Regime”.

ANC/MPA target of Bige cover material to exceed 1.5:1.

Commence waste rock management plan through development of stable waste dump.

PERFORMANCE FOR 2013 AND TARGETS FOR 2014 CONTINUED



PEOPLE

Conduct open, timely and transparent discussions with stakeholders.

Road test the OTML Grievance Mechanism and reorganise the Community Relations department such that systems and processes are aligned with best practices for stakeholder consultation, social management planning, and community development.

Implemented and migration of data underway. New grievances being put into the database.

Complete annual CMCA village consultation tours.

Continue to use the Grievance System, follow-up and resolve grievances in a timely manner.

Engage and develop OTML’s employees.

Review skill-sets required and possible roster changes to meet human resources needs for the mine’s continued operations.

Recruit and train Papua New Guineans. Support development of current employees to take on more responsibilities and ever-challenging roles.

Launch PNG nationwide and global recruitment campaign to fill specialised roles required for the mine’s continued operation.

Restructuring of OTML workforce. Release of 745 employees through voluntary redundancy.

Recruitment of new employees with required skills for continued mine operations commenced.

Specialised roles recruitment underway.

PNG and international recruitment programme to attract experienced PNG staff to OTML.

Implement a new roster and employment agreements for all employees and fill vacant positions with high quality candidates.

Identify training needs for employees in new positions with new position descriptions and develop training programmes to meet the “right person, right job” vision.

Support community development projects that foster economic empowerment and sustainability.

OTML will mature and implement a development strategy that transitions services currently provided by the Company to local agencies and service providers.

Engagement with multi-sectoral stakeholders to roll out health programmes similar to those undertaken by the NFHSDP, in the Middle and South Fly.

DWU engaged to run Tabubil hospital.

DWU draft MOU to operate International School.

Abt JTA to manage North/Middle/South FLY districts rural health programmes.

Complete the MOU with DWU for the Tabubil International School operational transfer to DWU.

Health – North Fly, Middle Fly and South Fly Regions with Abt JTA deployment.

Accelerate the Ok Tedi Development Foundation programme delivery.

Advance the public private partnership business model to divest OTML of town infrastructure to Government or private infrastructure providers as part of the Tabubil Futures programme.

OCCUPATIONAL HEALTH, SAFETY

& WELLNESS

Maintaining a safe workplace – Zero Harm is the goal

Implement a comprehensive OHS plan concentrating on training, supervision, behaviour and competencies.

Implement an occupational health programme.

Work on plan continued. Focus on “felt leadership” through the 2013 employee transitions.

Completed with a focus on dust, noise and, fatigue in 2013.

Lagging indicator performance outstanding:

TRIFR – 45% improvement

LTIFR – 69% improvement

SIFR- 45% improvement

Visible leadership programme rolled out including JSO, task observation and layered audits.

80% of the actions from investigations, audits and inspections are closed out by target date.

90% of workplace inspections and JSO’s completed as planned. Task observations and layered audits on high risk tasks and projects.

High and Significant risks reviewed by HSELT at least quarterly.

Complete 6 monthly contractor audits against contractor’s 12 top risks and their OHS systems.

Improve lag indicators by 10% compared to 2013 results.

10% reduction in light vehicle incidents compared to 2013.

Fatigue management programme implemented.

Align OHS practices and systems with OHSAS 18001:2007 by 2015.

OTML has set a site-wide improvement of 10% per annum, year-on-year to achieve compliance with OHSAS 18001:2007 by 2015.

8% improvement in the OHS system compared to 2012.

OHS information management system migrated across to phase 1 SAP project in 2014. Progress development of OHS systems towards meeting certification requirements of OHSAS 18001 by 2016.

Findings from annual external OHSAS 18001 audits to be compiled into SHEAP and 80% of actions closed out in 2014.

Continue to hold quarterly assessment meetings to adjust plans and ensure safeguards are in place and 100% effective.

Completed. OHS management review meetings conducted quarterly.

ENVIRONMENT

Align Environmental Management Systems with ISO14001:2004 by 2015.

Continue to improve the SHEAP audited score to reach the established target of 80%.

On track. Actions closed out 81% Progress development of environmental systems towards meeting certification requirements

of ISO 14001 by 2016.

Complete 80% of actions identified in SHEAP.

Continuously improve environmental performance at OTML.

Achieve compliance for all nine compliance monitoring stations. Continue to reduce waste and meet or exceed ANC/MPA target of 1.5:1 at Bige.

In compliance for 2013, average ANC/MPA ratio was 1.98:1.

Continue to remain in compliance with environmental conditions as per license conditions “Regime”.

ANC/MPA target of Bige cover material to exceed 1.5:1.

Commence waste rock management plan through development of stable waste dump.


OTML OPERATES THE LONGEST RUNNING OPEN-PIT COPPER, GOLD AND SILVER MINE IN PNG. THE OPERATIONS INCLUDE THE MT FUBILAN DEPOSIT AND PROCESSING PLANT, THE BIGE RIVERINE DREDGING AND PYRITE CONCENTRATE STORAGE FACILITY (125 KILOMETRES FROM THE MINE ALONG THE PYRITE CONCENTRATE (PCON) PIPELINE), RIVER PORT, CONCENTRATE DRYING AND STORAGE FACILITIES AT KIUNGA (156 KILOMETRES BY ROAD SOUTH OF THE MINE) AND THE TABUBIL TOWNSHIP, APPROXIMATELY 20 KILOMETRES SOUTHEAST OF THE MINE. THE CONCENTRATE SILO AND TRANSFER VESSEL (MV KUMUL ARROW) IS LOCATED IN PORT MORESBY HARBOUR AND REPRESENTATIVE CORPORATE AND LOGISTIC OFFICES ARE ALSO LOCATED IN PORT MORESBY AND BRISBANE RESPECTIVELY.

In 2013, the OTML workforce comprised

2,310 employees and 5,147 contractors.

Over 95% of OTML’s employees are PNG

nationals. In 2013, the Company mined

62.8Mt of ore and waste rock. Over 19.6Mt

of ore was processed resulting in 415,713t of

concentrate containing 105,523t of copper,

364,782oz of gold and 960,502oz of silver.

The total sales of copper, gold and silver

concentrate totalled PGK 2.7 billion (USD

1.2 billion) and the Company contributed

PGK 1.9 billion (USD 0.9 billion) to the PNG

economy. The concentrate is shipped to

customers in Germany, India, Philippines,

Japan and South Korea where it is refined

into copper, gold and silver.

MININGMining of the Mt Fubilan deposit is carried

out with the majority of the ore sourced from

the base of a large conical shaped pit. The

deeper ore reserves are contained within

areas of significant sulphide mineralisation.

Other smaller sections containing ore

reserves are located within the pit resource

boundary and the ore is blended upon

delivery to the primary crusher. In 2013,

the mining focus was on developing the

West Wall pit cutback to expose future

ore reserves. This upper pit wall material

contains large quantities of limestone and

oxidised rock collectively classified as waste

material, which will be removed before

exposing the ore. In 2013, mine production

was 65.7Mt of combined ore and waste

material, with a total of 69.1Mt moved, which

included material rehandling. The overall strip

ratio of waste to ore was approximately 2:4.

BUSINESS


in PNG. Supplies are generally

shipped to Kiunga and then

transported by road to the

mine or Tabubil, with some

items transported by air. Major

changes to the supply chain

included the following:

• a 75mm grinding steel ball

contract was awarded to

Vega, replacing Maggoteaux;

• the large tyre contract

for the Caterpillar 793F

trucks was awarded to

Coba tyres in China;

• two new Series 400 Twin Otter

aeroplanes were leased, the

existing two Bombardier Dash

8 aircraft were upgraded and

an additional Dash 8 was

added to the fleet;

• two new replacement ships

were added to the marine fleet

(“MV Fly Alliance” and “MV

Kumul Arrow”); and

• seven new Volvo Prime

Mover trucks were added

to the transport fleet as

part of a planned

replacement programme.

The Contracts and Procurement

department completes commercial

reference checks for potential

suppliers for financial solvency,

reliability of supply, and health

and safety performance. The

department is yet to implement

environmental and human rights

checks against suppliers.

Mining uses conventional drill and blast

techniques with excavator and shovels

loading a mixed fleet of Caterpillar haul

trucks. In 2013, mining fleet replacement

commenced and by mid-2014, it is expected

that 36 Caterpillar 793F trucks will be

operational. Six new Caterpillar 6030 loading

units were also commissioned, replacing

older contractor operated O&K RH200

shovels and excavators. The Mine uses the

Modular PTX Dispatch fleet management

system to optimise fleet movements.

PROCESSINGThe ore from the mine is crushed in a

primary crusher at a nominal 8,000tph

and conveyed to a primary ore stockpile.

The primary ore is ground in two SAG mill

circuits each with two associated five-metre

diameter ball mills. The final product is less

than 180 micron. The finely ground material

is treated in two mineral floatation circuits

to extract the copper, gold and silver as

a copper concentrate. The concentrate is

piped as slurry to Kiunga where it is dried

and the final product shipped to export

markets. The residue material following

metal product removal is retreated in a

separate floatation plant to extract pyrite

(iron disulphide). The pyrite slurry is piped

to Bige for burial in subaqueous storage

facilities and the residual sand is disposed

of as tailings to the river system.

SUPPLY CHAINOTML has an established, reliable supply

chain for the purchase of goods and services.

The Contracts and Procurement department

manages contracts for the supply of major

consumables like fuel, tyres, grinding media,

explosives, mining spare parts and short

term contracts or purchase orders for smaller

orders. In 2013, a total of 25,370 contracts

and purchase orders were raised with 1,128

suppliers or contractors. Wherever possible,

goods are sourced from within Western

Province or PNG. In 2013 goods worth PGK

294 million (USD 130 million) were purchased

Ok Tedi processing plant grinding circuit.


OTML HAS BEEN GUIDED BY THE GRI G4 PROCESS FOR DETERMINING MATERIAL ISSUES WHICH ARE THOSE ASPECTS OF THE BUSINESS OR ITS OPERATING ENVIRONMENT THAT CAN SIGNIFICANTLY IMPACT THE COMPANY AND ITS STAKEHOLDERS IN A POSITIVE OR NEGATIVE WAY AND THUS AFFECT THE BUSINESS PERFORMANCE, REPUTATION AND INFLUENCE STAKEHOLDER DECISIONS. MATERIAL ASPECTS OFTEN HAVE A FINANCIAL IMPACT OR CREATE VALUE IN THE LONG OR SHORT TERM. THE COMPANY’S MATERIALITY PROCESS IS INCLUDED IN A SET OF STEPS AS OUTLINED.

Identification of key stakeholders was

completed through a review of who

is impacted or could be impacted by

the Company’s activities. OTML has a

comprehensive stakeholder database

that includes all levels of government,

CMCA communities, various institutions

representing broader societal interests,

supply and customer partners, employees,

community groups and individuals.

Consultation with key stakeholders is an

ongoing process. Each stakeholder was

ranked depending on the type of impact

they have on OTML using: responsibility,

influence, proximity, dependency and

representation as criteria.

Key issues of significance were collated

from discussions with key stakeholders,

the community grievance database,

OTML risk register and strategic business

plans. The extensive Mine continuation

community consultation process with the

156 CMCA villages assisted in confirming

key community issues. The process was

monitored by independent observers and the

World Bank to ensure Free Prior Informed

Consent (FPIC) processes were followed.

The issues were analysed to identify the

extent of the impact or opportunity within the

OTML boundary of influence or if the impact

extended beyond OTML’s boundary.

To identify the Company’s material issues,

the information was ranked on its level of

importance and influence on stakeholders

and impact on OTML’s ability to meet its

goals. Issues considered to be material were

ranked both high to external stakeholders and

to OTML. These issues were then discussed

in an internal forum to fully understand their

impacts and boundaries. This process has

enabled OTML to collate a list of primary

material issues and secondary issues.

This Annual Review focuses on the material

issues and others that are of importance

to OTML and its stakeholders. The GRI

Mining and Metals Supplement also require

reporting against issues of importance to

the mining industry and OTML has reported

against these. More information on the

progress towards dealing with these issues

is presented in the following report sections.

OTML’s primary material issues for 2013 and

beyond are in the materiality table.

MATERIALITY


MATERIAL ISSUE DESCRIPTIONKEY STAKEHOLDERS

REPORT SECTION

GRI ASPECT

Delivery of the Mine continuation project as planned

The long-term profitability of the Company impacts on all stakeholders. With the consent of the community to continue mining to 2025, focus on controlling costs through the initial high cost years of overburden stripping and meeting or exceeding the mine plan will be critical to meet forecast revenue streams for direct and indirect economic returns.

OTML employees, government, CMCA communities, suppliers

Business, Financial

Economic Performance

Management of mining waste rock and tailings

Previous mine waste has impacted the riverine environment causing bed aggradation, elevated sediment loads, decreased water quality, overbank flooding in the Middle Fly River region and reduced aquatic biomass. Continued mining is dependent on OTML maintaining the existing suite of waste mitigation programmes implemented over the last 16 years.

Downstream CMCA communities, government, OTML

EnvironmentalEffluents and waste, water, biodiversity

Energy efficiency

Due to the remoteness, all goods and product has to be shipped and road transported to the mine and town. Use of diesel as a primary energy source is a significant operating cost. Mine continuation identified energy efficiency opportunities.

OTML, NGO’sEconomic; Environmental

Energy, emissions

Improving community health service delivery

High quality community health care is sought after by the community. The focus has been on delivery of improved regional infrastructure and recent partnerships are now targeting rural health delivery in the CMCA regions.

Community, employees and families, government

Social responsibility

Local communities

Improving education services

The community see education as way for future generations to engage in broader development of PNG and provide for their elders. There is a need for improved universal primary and secondary education facilities and resourcing.

Community, employees and families, government


Local communities

Community development project delivery and funding

The community have seen OTML, PNGSDP, OTDF and the TCS as the financial providers for improved community development projects. Project planning, governance and timely project delivery is a material issue raised by all CMCA’s.

Community, employees and families, governments, OTML


Local communities

Women and children’s’ participation

Recognition of women’s’ involvement in CMCA village committees has assisted in balancing gender representation. The commitment to create the Women and Children’s’ Trust Fund has generated opportunities for women to participate and manage start-up projects. This initiative has broad community support and interest from the World Bank.

Community, institutions, government


Local communities

Transparent consultation and information sharing with communities

The community value the high level of consultation where OTML complete bi-annual patrols to all 156 villages. The process enables honest two-way exchange of information where communities can raise issues of concern and OTML can respond or facilitate action to address the issues. The dialogue around mine continuation commenced in June 2009 and finished after the fourth meeting in 2013, with the result that nine CMCA regions consented to the mine continuing operations.

Communities, institutions, government


Local communities

Zero harm to employees and contractors

Achieving zero injury to employees and contractors is the key focus for OTML management. Whilst there was improvement in 2013 through the reduction of incidents by applying OHS systems, other contributing casual factors like fatigue have been identified.

Employees, MRA, OTML

OHS&WOccupational Health and Safety

Restructuring and new employment contractual arrangements

During 2013 major restructuring of the OTML workforce was completed with long-term employee retirements, voluntary redundancies, and a payout of all accrued benefits and selected re-employment under new workplace contracts, including rosters, point of hire and other benefits. The restructuring was required for mining to continue with reduced costs as production will decrease up to 30%.

Employees and community, OTML

PeopleEmployment, Labour


THE ORIGINAL OK TEDI MINE PLAN WAS TO COMPLETE MINING IN 2014 AND CLOSE OPERATIONS DURING 2015 LEAVING A REMNANT MINERAL RESOURCE OF 704MT GRADING AT 0.55% CU AND 0.65G/T AU. CONSULTATION WITH VARIOUS STAKEHOLDERS INCLUDING THE STATE, THE FLY RIVER PROVINCE GOVERNMENT AND THE CMCA COMMUNITIES, REQUESTED THAT OTML SHOULD UNDERTAKE AN INVESTIGATION INTO VARIOUS OPTIONS TO CONTINUE THE MINE’S OPERATING LIFE.

Studies commenced in 2009 and culminated

in November 2012 with a mine continuation

feasibility study submitted to the State for

approval. The study findings showed that

mining could continue to 2025 whilst still

meeting the economic criteria set by the

Board with an acceptable environmental

impact comparable with closure of the

current operation in 2015, validated using a

series of complex models to predict future

environmental impacts.

Mine continuation will see OTML processing

18Mt of ore averaging 0.63% Cu and 0.77g/t

Au to produce 1Mt Cu and 3.3Moz Au in

concentrate over a 10 year period from 2015.

The ore will be predominately sourced from

the resources along the western wall of the

Mt Fubilan pit. The project requires waste

rock stripping of approximately 50Mtpa

between the years 2014 to 2021.

In order to achieve an acceptable

environmental risk profile based on existing

mitigation processes the ore milling rate will

continue at 23Mtpa till 2016 and then reduce

to an average throughput of 15Mtpa.

Existing infrastructure, services and logistics

(road, river and air) will be adequate for

continued mining with ongoing maintenance

and sustaining capital expenditure.

During the mine continuation studies

extensive community consultation was

conducted over a three year period. The 156

CMCA villages gave consent to the mine

continuing operations which will result in

new compensation packages from OTML

and the State.

Approval for mine continuation is dependent

upon the State’s review of the feasibility study,

the environmental study, independent review

findings and community consent. The final

step in 2014 will require the PNG Parliament

to pass the enabling legislation (Mining (Ok

Tedi Eleventh Supplemental Agreement) Act

2014)) that will give the force of law to the

CMCA Extension Agreements.

BENEFITS OF CONTINUED MINING OTML is currently valued in terms of Net

Present Value (NPV) at a 7.5% discount rate.

The incremental NPV is PGK 1,012 million

(USD 425 million) with an Internal Rate of

Return (IRR) of 13.2%, based on after tax

incremental cash flows.

Whilst continuing mining operations requires

significant capital expenditure of PGK 1,938

million (USD 814 million) in 2013 to 2015

for new mining equipment the social and

economic benefits to PNG are significant

compared to the closure option 2015.

Summary of continuing total social and

economic benefits to PNG with continuing

mining operations

STAKEHOLDER PGK MILLION USD MILLION

PNG State* 5,795 2,434

PNG Communities 2,302 967

Fly River Provincial Government

690 290

Total 8,787 3,691

* Total taxes (Dividends, Company and Payroll) payable to PNG includes PGK 5,438 million (USD 2,284 million), which is an incremental PGK 2,229 million (USD 936 million) compared to a 2015 closure.

MINE CONTINUATION STUDIES

Recovered Cu in Conc. (ktpa)Recovered Au in Conc. (kozpa)

0

100

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

200

300

400

500

Mine Cont Waste (Mtpa) Total Truck Fleet (No)

Current Pit (Mtpa) Mine Cont. Ore (Mtpa)

Annual Mining Rates & Truck Fleet Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Current Pit Mtpa 27 24 8.3 8.1 4.9 6.2 2.7 Mine Cont Ore Mtpa 0.8 1.8 12 18 14 9 12 13 12 13 14 14 15

Mine Cont Waste Mtpa 50 52 52 46 45 45 57 56 50 18 8 4.9 1.2Total Truck Fleet No 17 30 40 40 40 37 40 37 33 13 9 9 9

0

10

20

30

40

50

60

70

80

Material Mined (Mtpa)

0

5

10

15

20

25

30

35

40

Cat 793F Truck Fleet

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

CASE STUDY


OWNER OPERATOR MININGOTML mining operations currently use the services of Starwest Constructions

Limited (Starwest) to carry out excavation activities, whilst the haul trucks are

owned and operated by OTML. Mine continuation studies conducted by OTML

identified an opportunity for OTML to take on all mining excavation and haul

services as an owner operator. The studies identified potential NPV savings

of PGK 98.9 million (USD 44.5 million). Additional benefits include OTML

maintaining control of core operations, common Occupational Health, Safety

and Wellness (OHS&W) systems across mining operations, improved operational

controls and equipment productivity reducing the cost per unit tonne mined.

Following the Board’s approval, OTML has commenced the process of moving

to an owner/operator model and has purchased 36 Caterpillar 793F haul trucks

and six excavator/shovels to replace an aging fleet. This new equipment will

increase availability and productivity whilst reducing maintenance costs.

A six month transition period has been negotiated with Starwest till June 2014.

The transition will enable OTML to acquire support for maintenance and recruit

competent supervisors, trainers, equipment simulators and operators. It is expected

that a number of Starwest operators will transfer across as OTML employees.

Image: New Caterpillar 793F truck hauling ore from Mt Fubilan pit.

MINE CONTINUATION COPPER AND GOLD PRODUCTION

ANNUAL MINING RATES & TRUCK FLEET

H

P'nyang 2/ST1

#

EL 1595Bulago

500000 520000 540000 560000 580000 600000

9400

000

9400

000

9420

000

9420

000

9440

000

9440

000

9460

000

9460

000

9480

000

9480

000

OTML ExplorationNear Mine Tenements

Port Moresby

Locality Map: Papua New Guinea

F0 5 10 15 20

km

GCS_Australian_1966Datum: D_Australian_1966

Scale:

Petroleum Licence)È Oil and Gas Discovery(% Oil and Gas shows

Lead

Gas/Condensate Field

Petroleum Retention Licence

Licence Boundary

Key to Map Features:Prospects/Project SitesOTML TSF Sites

OTML Special Mining Licence

OTML Mining Leases/LMP'sOTML EL

Competitor LicencesHighlands Pacific Res. LtdLava Resources

Frieda Leases

OK TEDI MINING LIMITED

Ok Tedi Mining Near Mine Exploration Licenses

Owner/Title:

Drawn by:

Checked by:

Revision Date:

Map doc. name:

24 - April - 2014

D.Hastings

Nigel Andy

Near Mine Tenements & Prospects

D.Hastings - Geology Manager

Near Mine Projects_DH 20140409.mxd

revised by NDA

LMP-88

OK LAN

LMP-24

LMP-18

SPL (Portion 3)OK MENGA

P’NYANG

TELEFOMIN

FRIEDA COPPER PROJECT

Tabubil

Tifalmin

LMP-87

EL 2256

Lukwi

W E S T S E P I K P R O V I N C E

W E S T E R N P R O V I N C E

Mianmin

Dorongo

MINESML

EL 1677

EL2156

EL 2276

EL 2289

IND

ON

ESIA

PAP

UA

NEW

GU

INEA

LOCALITY MAP

Port Moresby


KEY TO MAP FEATURES

Prospects/Project Sites

OTML TSF Sites

OTML Special Mining Licence

OTML Mining Leases/LMP’s

OTML EL

COMPETITOR LICENCES

Highlands Pacific Res. Ltd

Lava Resources

Frieda Leases

PETROLEUM LICENCE

Oil and Gas Discovery

Oil and Gas shows

Lead

Gas/Condensate Field

Petroleum Retention Licence

Licence Boundary

IN 2013, OTML CONTINUED PURSUING ITS FOCUS ON INCREASING THE MINE’S POTENTIAL OPERATING LIFE BY INVESTING PGK 38 MILLION (USD 17 MILLION) IN EXPLORATION IN THE FORM OF MINERAL RESOURCE DEVELOPMENT DRILLING PROGRAMMES AND IDENTIFYING ADDITIONAL DRILLING TARGETS FROM WITHIN THE COMPANY’S SUITE OF “GREENFIELD” PROSPECTS ACROSS THE EXPLORATION LICENCES. OTML WILL CONTINUE WITH NEAR MINE EXPLORATION ACTIVITIES OVER THE NEXT FEW YEARS COMMENCING WITH THE MT FUBILAN DRILLING PROGRAMME, TO FURTHER DEFINE THE EXTENT OF MINERALISATION AT OK TEDI. THE OBJECTIVE IS TO INCREASE THE LIFE OF MINING AND PRODUCTION CAPACITY INTO THE FUTURE.

GEOLOGYOK TEDI EXPLORATION TENEMENTS


In terms of regional exploration

the main focus for the Geology

team in 2014 will be the drilling

of currently identified targets.

The Townsville project is the

most advanced where the

expectation is to estimate an

indicated mineral resource.

The Geology team will also

embark on a review of historical

exploration data, an exercise with

the catch phrase “mining our

data”, which will provide a better

understanding of the controls

on regional and prospect scale

mineralisation and enhance the

length of the mine life at Ok Tedi.

MINERAL RESOURCE AND ORE RESERVE STATEMENTThe focus for the Geology team

on the primary Mt Fubilan pit is to

increase the mineral resources and

hence ore reserves by undertaking

pit wall cutbacks and even

exploring the potential to convert

to an underground operation.

During 2013 over 17,000m of

Mineral Resource development

and delineation drilling was

completed and this effort has

contributed to the revised and

current Mineral Resource and

Ore Reserve Statement as at

31 December 2013. During 2013,

Ok Tedi’s Mineral Resource

estimate decreased from

881.7Mt to 871.4Mt, largely due

to mining depletion (17.7Mt),

resource block model and shell

changes increasing by 45.8Mt

and a reduction of 38.3Mt due to

changes in assumptions. The net

effect was the Mineral Resource

reduction of 10.3Mt.

NEAR MINE CORRIDOR PROGRAMMEProject/Target and Ranking

1 Townsville

2 New York East

3 Moscow East, Marakesh

4 Gilor/Geochem Team

5 Mount Ian

• defining a new Mineral Resource for the

Townsville prospect; and

• continuing with exploration activities to

identify new targets and develop long term

prospects towards future new ore bodies.

The current OTML exploration programme

is centred on five exploration licences

covering 3,450km2. In 2013, the exploration

tenement portfolio increased due to the

granting of three additional tenements

(EL 2256, EL 2289 and EL 2276).

In line with a re-invigorated exploration

strategy that is focussed on the near-mine

environment where the mineralisation potential

is highest and easily accessible, the majority of

the exploration licences are located along the

prospective “Ok Tedi Corridor”. This corridor

is a deep-seated geologic feature that trends

north-northeast through the Ok Tedi deposit

into the West Sepik province where currently,

all known copper and gold mineralisation in the

region is located.

The Mt Fubilan open-pit deposit is one

of the key future expansion opportunities

for OTML and is the main focus for the

Mineral Resource development team.

During 2013, an extensive drilling campaign

continued in and around the Mt Fubilan pit

to upgrade the mineral resources according

to the guidelines of the 2012 Joint Ore

Reserves Committee (JORC) Code. As at

31 December 2013, the Mt. Fubilan Mineral

Resource estimate was 871Mt at 0.44% Cu

and 0.54 g/t Au using a cut-off based on

‘net smelter return’ which is a composite

parameter, simulating the return after

processing. The cut-off used was USD 10

Net Smelter Return (NSR) per tonne.

The OTML Geology team started focussing

on geometallurgy in 2013, led by specialist

consultants JK Tech Consultants, based in

Brisbane. This strategy relates to combining

geology and geostatistics with extractive

metallurgy, to create a geologically based

predictive model for the processing plant.

OTML’s Geology team focusses on four

areas of investigation:-

• mine geology support, providing a day

to day service to the mine production

department and improving ore recovery

through improved knowledge of

deposit metallurgy;

• Mineral Resource development, to

increase the near-term and future life of

the mine with particular emphasis placed

on defining and expanding the Mt Fubilan

open pit deposit;

OK TEDI CORRIDOR


The change reflected in the Mineral Resource Statements of 2012 and 2013 are shown below.

MINERAL RESOURCE AND ORE RESERVE STATEMENT AS AT 31 DECEMBER 2012, USING A USD 10 NSR CUT-OFF PER TONNE

CLASSIFICATIONTONNAGE

(Mt)CU

(%)AU

(g/t) CLASSIFICATIONTONNAGE

(Mt)CU

(%)AU

(g/t)

RESERVE/RESOURCE

RATIO

Measured 390 0.51 0.57 Proven 171 0.57 0.68 44%

Indicated 351 0.43 0.54 Probable 48 0.80 0.98 14%

Inferred 141 0.41 0.56

Total 882 0.46 0.55 Total 219 0.62 0.75 25%

MINERAL RESOURCE AND ORE RESERVE STATEMENT AS AT 31 DECEMBER 2013, USING A USD 10 NSR CUT-OFF PER TONNE

CLASSIFICATIONTONNAGE

(Mt)CU

(%)AU

(g/t) CLASSIFICATIONTONNAGE

(Mt)CU

(%)AU

(g/t)

RESERVE/RESOURCE

RATIO

Measured 344 0.52 0.58 Proven 156 0.59 0.69 45%

Indicated 417 0.39 0.51 Probable 58 0.71 0.93 14%

Inferred 110 0.41 0.57

Total 871 0.44 0.54 Total 215 0.62 0.76 25%

GEOLOGY CONTINUED

In addition, during 2013, the Ok

Tedi Ore Reserve also decreased

from 219Mt to 215Mt, again due

to mining depletion (19.0Mt),

an increase of 21.1Mt from Ore

Reserve model and mine design

changes, but a decrease of 6.4Mt

due to assumption changes.

Examples of the assumption

changes were density calculations,

different pit measuring methods

and adjustments in ore/waste

allocation from smaller grade

control blocks. The net effect was

an Ore Reserve decrease of 4.4Mt.

Because of these changes the

recoverable copper metal tonnes

decreased from 1.19Mt to 1.16Mt

(2.3%) and gold fell from 3.9Moz

to 3.87Moz (0.8%).


The information in the tables above relates to

Mineral Resources and Ore Reserves based

on information compiled by Isaka Bisansaba

(Mineral Resource) and Stephen Kable (Ore

Reserve) who are members of the South

African Institute of Mining and Metallurgy

and Australasian Institute of Mining and

Metallurgy respectively.

Mr Bisansaba and Mr Kable are full-time

employees of OTML and have sufficient

experience that is relevant to the style of

mineralisation and type of deposit under

consideration and to the activity being

undertaken to qualify as “Competent

Persons” as defined in the 2012 Edition

of the Australasian Code for Reporting of

Exploration Results, Mineral Resources and

Ore Reserves.

Isaka Bisansaba and Stephen Kable

consent to the inclusion of the above tables,

which have been based on their information

in the OTML Mineral Resource and Ore

Reserve Statement, in the form and context

in which it appears.

Signed on 21 March, 2014

ISAKA BISANSABASAIMM 703638

Superintendent,

Resource Geology

STEPHEN KABLEAusIMM 211690

Senior Engineer

Long Term Planning

Mt Fubilan open cut pit and processing plant.

CENTRE PIT

HARVEY CREEK DUMP

MONZODIORITESOUTH

PARIS

BERLIN

EDINBURGH

VANCOUVER

TARANAKI

NEW YORK

MOSCOW

GOLD COAST

WESTWALL

SILTSTONERIDGE

SECTION B

CENTRE PIT

HARVEY CREEK DUMP

MONZODIORITESOUTH

PARIS

BERLIN

EDINBURGH

VANCOUVER

TARANAKI

NEW YORK

MOSCOW

GOLD COAST

WESTWALL

SILTSTONERIDGE

SECTION B

Section A

DDH1260

DDH1255

DDH1236

DDH1261

DDH1259A

DDH1251

DDH1241

DDH1237

DDH1272

GDH1055A

DDH1234UDH0012DDH1270

DDH1271

DDH1273

DDH1274

UDH0014

DDH1257

DDH1247GDH1057

DDH1248

UDH0017

DDH1275

GDH1059

DDH1276

DDH1244

DDH1250

DDH1277

DDH1243DDH1243A

DDH1279

UDH0013

DDH1282

DDH1250A

DDH1262DDH1263

DDH1265

DDH1266DDH1269

DDH1264

DDH1232

UDH0018

DDH1268

DDH1278

DDH1267

DDH1230

DDH1249

DDH1288

DDH1289

DDH1284


NEAR MINE – MT FUBILAN MINERAL RESOURCE DEVELOPMENT AND EXPLORATIONMt Fubilan is a rich copper-gold-

silver deposit with several phases

of mineralisation centred on two

intrusions, a monzonite porphyry

and monzodiorite stock works with

subsequent alteration. The majority

of the contained copper and gold

is found within sulphide skarns,

located adjacent to the intrusions

along a contact with limestone and

siltstone units. These skarns have

been formed by the introduction

of mineralised fluids that have

reacted with the host rocks.

Over 21,900m were drilled from

a completed 59 drill holes. The

locations of the holes completed

in 2013 are shown on the geology

map of the Mt Fubilan mine area.

The drilling programme improved

the understanding of the deposit

and highlighted the extension

of significant mineralisation to

the North East of the current

pit (Siltstone ridge area) and

to the South-southeast of the

Pit (southern monzodiorite

extension). These findings

generated significant intercepts

improving the potential for

additional cutbacks for the

current Mt Fubilan pit. The

location of the section lines are

shown in the geology map.

GEOLOGY CONTINUED

MT FUBILAN MINE AREA

LEGEND

2013 Completed Drillholes

LITHOLOGY

Pnyang Siltstone

Limestone

Ieru Siltstone

Monzodiorite

Monzonite Porphyry

Skarn

Endoskarn

Taranaki Skarn

Parrot’s Beak Thrust

Dec 2013Pit Asbuilt

Pit design

DDH1267

DDH1283DDH1281

ResourceShell

5.001.000.750.500.250.1<0.1Cu(%)

Pit design

Dec 2013Pit Asbuilt

DDH1230

DDH1232

DDH1225

DDWPR443DD

HWPR

459

ResourceShell

5.001.000.750.500.250.1<0.1Cu(%)

SILTSTONE RIDGE -SECTION A - LOOKING NORTH

DDH1267 Significant Intercepts

63 metres @ 0.24%Cu, 0.19g/t Au and 2.54% S From 0 - 63metres.

124 metres @ 0.33%Cu, 0.18g/t Au and 1.96% S From 103 -228metres.


102 metres @ 0.37%Cu, 0.19g/t Au and 2.32% S From 220 - 322metres.

181 metres @ 0.39%Cu, 0.09g/t Au and 1.55%S From 398 -579metres; Including 13 metres

@0.65%cu, 0.09g/t Au and 2.45% S


81 metres @ 0.22%Cu, 0.20g/t Au and 2.31% S From 0- 81metres.

102 metres @ 0.47%Cu, 0.32g/t Au and 1.22%S From159 -261metres; Including 45metres

@0.75%cu, 0.47g/t Au and 1.36% S

GOLD- MOLY TARGET SECTION B - LOOKING NORTH


427.2m @ 0.51% Cu: 0.56g/t Au: 2.84% S: From 22.8m - 450m including

47.2m @ 1.73% Cu: 1.69g/t Au: 2.72% S: From 22.8m - 70m

87.0m @ 0.40% Cu: 0.78g/t Au: 2.48% S: From 291m - 378m


409.9m @ 0.78% Cu: 0.69g/t Au: 3.57% S: From 0m - 409.9m including

121m @ 1.96% Cu: 1.47g/t Au: 4.89% S: From 0m - 121m

174m @ 0.12% Cu: 0.27g/t Au: 2.79% S: From 145m - 319m

22.8m @ 2.31% Cu: 1.93g/t Au: 7.42% S: From 387.1m - 409.9m


623.1m @ 0.43% Cu: 0.71g/t Au: 2.72% S: From 14m - 638m including

66.5m @ 1.98% Cu: 1.85g/t Au: 4.21% S: From 14m - 80.5m

84.1m @ 0.34% Cu: 0.79g/t Au: 3.18% S: From 189m - 274m

234m @ 0.31% Cu: 0.88g/t Au: 2.45% S: From 344m - 578m


Information obtained from these

drill holes was used to update

the geological model, which is

then used to update the annual

Mineral Resource Statement. The

design and development of the

geological model and Mineral

Resource estimates were carried

out according to the guidelines

of the JORC Code (2012). This

estimate was completed,

validated and signed off internally

by OTML’s Competent Person.

As at 31 December 2013, the

Mt. Fubilan Mineral Resource

Estimate is 871Mt at 0.44% Cu

and 0.54 g/t Au.

The orientation of certain drill

holes and significant grade

intercepts are shown alongside

for Section A and Section B. The

locations of both Sections are

shown on the geology map of the

Mt Fubilan mine area.

Section A - Looking North; Deeper Mineralisation in

Siltstone Ridge is hosted

within Monzonite porphyry sills

and dykes characterised by

disseminated chalcopyrite in a

phyllic alteration halo.

Section B – Gold-molybdenum target. High grade gold Mineralisation

is hosted within a Monzodiorite

intrusive; elevated grade zones

are characterised by vuggy quartz,

chalcopyrite, molybdenite veins.

SECTION A SECTION B

GEOMETALLURGYIn line with company strategy and

a smaller and more efficient mine,

Mineral Resource development is

focussed on geometallurgy, with

the objective of optimising and

improving metallurgical recoveries

through effective blending

strategies. This involves state

of art core scanning techniques

to create detailed mapping of

alterations and mineralogy. In

addition, detailed testing will be

performed on various lithological/

alteration units to investigate

optimum feed scenarios for

different blends. It is expected

therefore that the project will

display effective ore classification

for optimum recoveries and

feed rates. These technological

developments are led by Brisbane

based, JK Tech Consultants and

managed by the Mineral Resource

development team. An outcome

from this work is expected to be

completed in 2015.

The main focus for the Geology

team in 2014 will be the drilling

of the currently identified targets.

Additional geo-metallurgical

studies will also be continued to

better understand the current ore

characteristics from a chemical,

rheology and impurities aspect,

with the intention on filtering

down to providing more insight

into the general impact on the

flotation/leaching circuit and how

efficiencies can be improved.

12.1% CU 10.6 G/T AU 161 G/T AG

8.93%CU 5.97 G/T AU 125 G/T AG


TOWNSVILLE PROSPECT SELECTED DEPTH INTERCEPTS AND ASSOCIATED GRADES COMPOSITES, TVLDDH081

DEPTHDOWN HOLE

INTERVAL (M) CU (%) AU (g/t) AG (g/t)

From 68m 46m 0.06 6.33 3.23

Including from 79m 20.5m 0.07 10.51 4.12

From 184m 80.7m 1.67 1.27 20.32

Including from 195m 40m 2.63 1.96 25.95

Including from 200m 11m 5.05 4.09 31.77

NEAR MINE EXPLORATION – TOWNSVILLE PROSPECTThe exploration focus in 2014 will be on

targets within a five to ten kilometre radius

of the mine and this includes the Townsville

project. This prospect is hosted within the

Pnyang Formation (Miocene age, 5 to 23

Ma), comprising of near-surface high-grade

gold hydrothermal mineralisation and fault

breccia’s grading up to 60g/t Au and deeper

copper-gold calcium-silicate skarns.

The main objective of the 2014 drilling at

Townsville is to have an Indicated Mineral

Resource estimated according to the JORC

Code guidelines and obtain additional

samples for metallurgical studies. The drilling

in late 2013, resulted in one particular hole

(TVLDDH81), returning the highest copper

grade down-hole intercept (up to 12.1%

copper) for skarn mineralisation since

drilling commenced at Townsville in 1992.

This result was 200m west from the main

resource area at “Zone 3” and will be the

subject of follow-up drilling in 2014.

GEOLOGY CONTINUED

Townsville Project drill hole (TVLDDH81) core through copper-gold skarn showing high-grade intercept.



GEOLOGY CONTINUED

REGIONAL EXPLORATIONIn addition to drilling and associated

fieldwork, the Geology team has planned

other key work for 2014, commonly phrased

as “mining our data”. A wealth of geoscientific

exploration data has been generated over the

last two decades by OTML. This important

data will be subject to an internal review and

analysis and incorporate the Geographic

Information System (GIS) technology, together

with the latest geological research findings on

porphyry copper gold systems in the Indo-

Pacific rim region.

This analysis will review data received from

the 2009 aerial (helicopter) geophysical

survey that was conducted over key

portions of the Ok Tedi corridor. The aim of

the “mining our data” project, is to obtain

a better understanding of the controls on

mineralisation from a regional scale level

down to an individual prospect scale. It

is expected that the outcomes from this

programme will greatly enhance the length

of mining operations at Ok Tedi through the

provision of a host of new targets to feed

into the exploration project pipeline.

RESOURCE DEFINITION DRILLING

RESOURCE DEVELOPMENT DRILLING

DRILL DATA APPRAISAL

TARGET EXPLORATION DRILLING

FIELD WORK

CONCEPTUAL TARGET GENERATION DATA COMPILATION AND REVIEW

2016

2015

20152016

2016 2016

2016

2015 2015

TOWNSVILLE PROJECT

PROJECT DEVELOPMENT CRITERIA ASSESSMENT

NEAR MINE/SML/ SULPHIDE CREEK

NEAR MINE/SML/ SULPHIDE CREEK

NEAR-MINE GIS AND TARGET GENERATION

OK TEDI 2009 MAGNETIC SURVEY RE-INTERPRETATION

MT. ANJU EL MIANMIN EL

DORONGO EL TOWNSVILLE REGIONAL


GEOPHYSICS REPROCESSING AND INTERPRETATION: NEW TARGETS• 2009 OTML Heli-magnetic Survey yet to be fully

interpreted and evaluated – currently underway in

conjunction with SRK.

• Key OTML dataset that will help define additional

exploration targets, including skarns and blind deposits.

• Revised interpretation will also help provide geological

framework and improve understanding of mineral

systems within OTML ELs for improved targeting.

OK TEDI EXPLORATION PROJECT PIPELINE FOR 2014 AND BEYOND

MEASURED RESOURCE

INDICATED RESOURCE

INDICATED RESOURCE

INFERRED RESOURCE

5KM

KAOWOL EL1677

MOUNT IAN INTRUSIVE COMPLEX

TOWNSVILLE

OK TEDI INTRUSIVE COMPLEX

OK TEDI MINE


OTML MANAGEMENT CONTINUES TO INVESTIGATE FUTURE OPPORTUNITIES TO IMPROVE OPERATING EFFICIENCIES AND CONTINUE THE MINE’S OPERATING LIFE THROUGH DEVELOPMENT OF EXISTING KNOWN RESOURCES OR DISCOVERY OF NEW RESOURCES. MINE CONTINUATION STUDIES IDENTIFIED A NUMBER OF OPPORTUNITIES THAT REQUIRED WORK LEADING TO FURTHER FEASIBILITY AND ECONOMIC STUDIES. THESE INCLUDE THE FOLLOWING:

FUTURE IMPROVEMENT PROJECTSFUTURE ORE FROM MT FUBILAN EAST WALLMine continuation studies investigated the

opportunity to access additional resources

dipping under the east wall of Mt Fubilan Pit

through underground mining. Results showed

that recovery of the ore was feasible however

the tonnages would be far lower than required

by the processing plant on a daily basis and

the cost per tonne of recovered ore was

far higher, compared to open cut mining

methods. As a consequence the underground

mining option was put on hold and a

recommendation was made to undertake a

feasibility study on an East Wall cutback. This

work will continue through 2014.

NEAR MINE EXPLORATION PROGRAMMEThe exploration Geology department has

identified a number of potential targets in

the near mine region and through sampling

and drilling programmes, will investigate the

opportunity to increase the Mineral Resources

through development of these targets.

PROCESSING PLANT CRUSHING AND GRINDING REVIEWIn 2013 the Sag Mill No 2 outer shell failed

requiring major repairs and ordering of a

replacement shell. The crushing and grinding

circuit has operated for over 30 years and

requires continuous repairs. With the mining

scheduled continuing until 2025, there is

a risk of future failures with the current old

plant and equipment. Since the installation

of the existing plant there have been

technological advances in the crushing and

grinding of ores. Modern equipment is more

energy efficient per tonne of ore processed.

The Processing department will lead a review

of current available technology and develop

economic justification of preferred options to

meet OTML’s future needs.

ALTERNATIVE POWER SUPPLYOTML uses both hydroelectric and diesel

thermal power generation. Thermal power

costs are significantly higher than hydroelectric

power. When river levels are high, hydroelectric

power is maximised to reduce the demand

from high cost diesel generation. A study

into the development of extra hydroelectric

capacity is planned to offset some thermal

generation. Another option under review is to

partner with the emerging gas sector searching

for natural gas resources in the Bige/Kiunga

basin. Development of a regional gas fired

power station to supply the major Western

Provincial centres is a long term option. OTML

could install a high voltage power line from a

gas fired power station to the mine to replace

onsite thermal generation. This project is

still at a conceptual planning phase and

will require lengthy engineering studies and

stakeholder engagement.

TAILINGS STORAGE FACILITY A preliminary study was completed during the

mine continuation work to identify suitable

locations for a close to mine engineered

Tailings Storage Facility (TSF) to hold future

processing waste. A TSF could potentially

store all or a portion of the tailings and also

be designed to contain future requirements.

A preliminary option study is complete which

identified three general locations. These

include two traditional sub aerial “valley fill”

impoundments at Ok Lan and Lukwi and

engineered “turkeys nest” structure in the

Ningerum area. The projects pose technical

risks, have high capital costs and require

extensive work including survey, geotechnical,

geochemical, engineering, social consultation

and environmental impact assessments.

The OTML Board approved a further staged

engineering study to evaluate the TSF

feasibility in 2014. This work will include

engineering and environmental studies to

identify the preferred location and complete

preliminary designs to definitive feasibility level.

This will include further risk assessments and

the estimate of the capital and operational

costs to construct and operate a facility.



OTML CONTINUES TO BE THE SINGLE LARGEST EMPLOYER IN THE WESTERN PROVINCE OVER THE PAST 32 YEARS OF OPERATION. THE COMPANY IS PROUD OF THE HIGH SKILL LEVELS ATTAINED BY ITS EMPLOYEES THROUGH ON THE JOB AND FORMAL TRAINING PROGRAMMES. THE COMPANY’S PREFERENCE IS TO EMPLOY PEOPLE FROM THE “PREFERRED AREA’” WHICH ENCOMPASSES THREE DISTRICTS IN THE WESTERN PROVINCE AND THE TELEFOMIN DISTRICT IN THE SANDAUN PROVINCE.

PEOPLE

In early 2013, the mine continuation project

identified that the Company would require

a restructuring of the workforce to meet

production targets at lower costs. The

Company decided to take a holistic review of

all labour positions including the permanent

workforce, contractors, casual labour and

overtime worked. The review identified that

over the years, there had been a lack of

consistency with rosters and employment

packages. The aim was to simplify the

complex roster systems and offer a series

of new rosters and employment packages

in line with industry standards that would

meet OTML’s needs into the future. The

review also identified the need to maintain or

improve certain conditions of employment

whilst reducing overall employment costs.

The review also recommended a change to

the organisational structure and this resulted

in the removal of 288 permanent positions

and also a call for voluntary redundancies.

Many of OTML’s long-term employees

have worked in excess of 20 years and

this was deemed to be an opportunity for

them to retire with respect and dignity. The

Company developed a Voluntary Departure

Offer (VDO). The VDO conditions exceeded

all previously offered redundancy packages

by other companies in PNG. This included

as a minimum; all of the normal termination

benefits, statutory redundancy requirements

under the Company’s Industrial Agreement

(2010) and enhanced separation benefits.

The enhanced separation benefits included:

balance of wages paid out till 31 December

2013, pro-rata sick leave entitlement for

all years of service, full housing employee

assistance package forgiveness of

unamortised amounts, a once off PGK

15,000 payment at the end of 2013, an

annual bonus (if eligible) and resettlement

of employee family and household effects

to point of hire. The Company also provided

counselling and professional support for

financial planning, life skills and money

management free of charge.


The VDO attracted a further 457 employees

who took the opportunity to either retire or

relocate back to their point of hire or other

preferred location. This process was highly

successful partially due to the generous

benefits on offer but also through an

extensive internal communication and change

process lead by each departmental head,

supervisor and human resource staff member.

In September 2013, with the State acquiring

full ownership of OTML, the Board

recommended that as of 31 December 2013,

all remaining employees should be fully paid

out with entitlements and sign onto new

employment packages and roster

arrangements. This has proven to be a

windfall for employees who have accumulated

generous entitlements. This process has

removed the liability from the balance sheet

and as of 1 January 2014, there were no

outstanding back entitlements.

The new fixed roster system was adopted

after consulting with roster and productivity

experts, reviewing the industry standard

and also advice from fatigue management

consultants. The new roster system

implementation commenced in February

2014 and includes the following:

Shift workers Work 14 days on and have a scheduled 14 days off;

Day staff Work 6 days on and 1 day off for 4 weeks and then have 2 weeks off; and

Residential staff Work 5 days on and 2 days off and have 7 weeks of annual leave to take during the year.

These rosters are not only simpler and easier to understand, but they align the hours

worked and general conditions of employment suited towards each type of employee and

across all pay grades to provide a more equitable workplace. The rosters also align shift crew

100%, so they are working with the same crews all the time, also intended to reduce fatigue

by minimising body clock changes and allow for more time off site with families for shift

workers and day staff.

In order to support the new

FIFO rosters, OTML leased new

aircraft to mobilise employees to

their field break locations. The

planes include three Dash 8s

and through a lease with OTDF,

two Series 400 Twin Otters. The

Company has also completed the

construction of three new single

persons’ accommodation blocks,

with two more to be completed

by June 2014. Each three level

block can house 108 persons

and have been designed to

provide modern lodgings which

are quiet, safe and comfortable.

These facilities will replace some

of the older facilities still in use.

NEW SKILLSWith the commencement of the

mine continuation, OTML has

increased the mining rate to

remove the West Wall overburden

and waste rock in the Mt Fubilan

mine. This requires an increase in

the mining operations, with new

trucks and shovels or excavators

and ancillary equipment. OTML

has also decided to move to full

owner operator status for the

mining operations. This requires

recruitment of mine operators

including experienced shovel and

excavator operators (as this was

previously contracted out) and

maintenance staff to maintain

the new equipment. Similar

arrangements have been made

for the supporting shipping fleet,

with four new ships purchased

outright by the Company in place

of existing lease arrangements

and a further two purchased

by the CMCA communities and

leased to OTML through OTDF.

Mine operators commencing pre-start vehicle checks prior to work.


EMPLOYMENT AND LABOUR RELATIONSIn 2013, OTML employed 2,310 employees

and 5,147 contractors. Ninety five

percent of all staff employees were PNG

nationals and of these, 37.3% were from

the Western Province. Women made up

11% of the workforce. These percentages

have remained constant through the

organisational structure and VDO process.

There is no seasonal variation in employment

numbers. All OTML employees in all areas

of the operations are paid in excess of

any minimum wage requirement in PNG.

This applies to all employment categories

including operators, supervisors, apprentices

and graduates. Both women and male

employees are renumerated with the

same pay grades for similar positions.

The number of “local” senior managers in

OTML’s operations is 19 from 43 positions.

“Local” refers to employees who identify

the mine associated communities as their

area of birth. Senior Management refers

to employees on fixed-term three year

renewable contracts. All employees have

annual performance reviews.

OTML supports the following International

Labour Organisation Conventions as

ratified in PNG:

• Discrimination (Employment and

Occupation, No. 11);

• Freedom of Association (No. 87);

• Abolition of Forced Labour (No. 105);

• Worst Forms of Child Labour (No. 182);

• Maternity Protection (No. 103); and

• Equality of Treatment Accident

Compensation (No. 19).

In 2013, 78% of the OTML workforce

was covered by a registered industrial

agreement. All OTML employees are

supervised by Company supervisors and

none are supervised by contractors. All OTML

employees are free to form Union collective

agreements. The Company does not stipulate

if there are or are not collective agreements

in place. OTML holds regular meetings with

registered Union officials. All meetings are

minuted and actions followed through. In the

reporting period there were 12 labour related

issues raised between employees, the union

and management. These were all addressed

and successfully resolved and did not result in

work stoppages.

During 2013 there were four illegal work

stoppages over various issues that required

mediation and intervention or advice from

PNG Department of Labour and Industrial

Relations. Three of the issues were resolved

through the internal resolution process and

one issue required external intervention.

PEOPLE CONTINUED

One group of staff specifically

targeted for recruitment are

experienced PNG nationals.

Over the years, OTML’s training

and development and study

assistance support has produced

a range of high calibre PNG

professionals in the fields

of engineering, chemistry,

metallurgy and finance. During

the mining boom in Australasia

(2000 – 2012), experienced

PNG professionals left PNG and

gained employment overseas

in often senior mining roles. At

OTML this resulted in a 40%

loss of senior national staff that

had been targeted for leadership

roles. Many of these staff gained

Australian residency and in

late 2012, OTML commenced

communications with the expat

PNG community and networked

to bring them “back home”.

A remuneration policy was

developed for these staff to

match their expectations and

acknowledge their broader global

experience. To date three have

been attracted back to Ok Tedi

with a further eight professionals

showing interest in returning.

These highly experienced

professionals are respected

by their work colleagues and

are strong role models for the

workforce and are potential

future senior managers.


TRAINING AND DEVELOPMENTOTML has implemented a

comprehensive training and

development programme across

all levels of the Company. This

is underpinned by promoting on

the job training and ongoing skills

development for employees. A

succession plan is in place for

key roles and employees are

encouraged to improve their

skills and competencies through

internal and external learning and

development programmes.

OTML supports opportunities for

employees to up-skill and seek

promotion into more senior roles

within the Company. Looking

ahead, many of the higher level

training programmes which

were provided for by external

agencies will be managed in-

house, allowing for more flexible

delivery and the development of

employees in training roles.

Employee breakdown by category and location is as follows:

EMPLOYEE CATEGORIES 2009 2010 2011 2012 2013

National Staff 1,640 1,653 1,636 1,674 1,737

Senior National Staff 169 175 181 189 198

Expatriates 101 110 108 106 115

Trainees - PNG Nationals in OTML training programmes

201 224 204 204 260

Total 2,111 2,162 2,129 2,173 2,310

2012 2013

EMPLOYEES NO % NO %

Expatriates 106 4.9 115 5.0

Western Province 801 36.9 863 37.3

Non-Western Province 1,266 58.2 1,332 57.7

Total 2,173 100.0 2,310 100.0

GENDER NO % NO %

Male 1,933 89.0 2,057 89.0

Female 240 11.0 253 11.0

Total 2,173 100.0 2,310 100.0

DEMOGRAPHICS NO % NO %

Under 30 343 15.8 363 15.7

30-39 708 32.6 764 33.1

40-49 679 31.2 710 30.7

Over 50 443 20.4 473 20.5

Total 2,173 100.0 2,310 100

Augustine Wama and Iso Ealedoria discussing planned work in Mt Fubilan Pit.


SCHOLARSHIPS AND GRADUATE PROGRAMMEOTML’s commitment to providing

a pipeline of future employees

continued in 2013 by providing

363 scholarships and school fee

assistance. The scholarships

enable children to move through

the high school education system

to year 10. If their grades meet

entry requirements, then students

go to National High School for

years 11 and 12. OTML also

reviewed its funding policy in

2013 and an effort was made to

continue funding students who

met University entry requirements.

This resulted in 46 graduates

attracting two year funding

scholarships commencing in

2013, a 70% increase on the 2012

graduate intake. The aim is to

facilitate permanent job offers to

those graduates with appropriate

qualifications. OTML has always

had a strong commitment to

developing trades people through

the apprenticeship programme.

Since 1982, 1,065 sponsored

apprentices completed their

courses and in 2013 a further

59 young men and women

were given the opportunity to

commence an apprenticeship.

A further 42 sponsored trainees

commenced enabling courses

as a precursor to full time

employment with OTML. Training

and development is targeted to

the “preferred area” employees.

An additional 154 employees commenced sponsored courses at the Centre of Distance

Education (CODE). These courses range from year seven to ten high school certificates,

year 11 to12 matriculation studies and year 12 upgrading. Thirty employees enrolled

in International courses. In 2013, total training and education costs (excluding salaries)

amounted to PGK 14.5 million (USD 6.4 million). A total PGK 23.3 million (USD 10.3 million)

was spent on local trainee, apprentices, graduates and other sponsorship and financial

assistance as part of the training and education programme.

CORPORATE TRAINING COURSESThe OTML Training Department offers the following corporate development courses and the

breakdown of employees and total hours training completed in 2013 were:

COURSE NAMENO. OF

EMPLOYEES MALE (%) FEMALE (%)TRAINING

HOURS

Diploma of Management (LDP) 14 93 7 1,568

Diploma of Vocational Education and Training (VET)

6 100 0 4,80

Certificate IV in Frontline Management 22 82 18 2,640

Certificate IV in Training and Assessment

19 79 21 3,040

Seven Habits of Highly Effective People

28 70 30 1,120

First Aid Training 468 90 10 5,616

Computer Training 599 80 20 9,584

Professional Development and Leadership Development

31 100 0 744

Certificate III in Instrumentation 13 92 8 1,560

Diploma IV in Instrumentation 10 80 20 1,200

Total 1,210 26,352

PERSONAL VIABILITY COURSE As part of the personal development programme, OTML offers a Personal Viability Training

course. In 2013, 340 staff completed the course which coaches individuals on how to better

understand their own makeup and how they operate. From this understanding employees

learn how to become more confident, self-reliant, prosperous and sustainable. The course

introduces the concepts of moral and spiritual growth which teaches individuals to better

understand and organise themselves to achieve their goals in life.

PEOPLE CONTINUED



OTML IS COMMITTED TO ACHIEVING THE HIGHEST PERFORMANCE IN OCCUPATIONAL HEALTH AND SAFETY (OHS) WITH THE AIM OF CREATING AND MAINTAINING AN ORGANISATIONAL CULTURE THAT ACTIVELY SEEKS TO IMPROVE WORK PRACTICES WHICH SUSTAIN A SAFE AND HEALTHY WORKING ENVIRONMENT THROUGHOUT ITS BUSINESSES. THIS COMMITMENT IS UNDERPINNED BY THE “ZERO HARM” PHILOSOPHY WHERE AN INCIDENT AND INJURY FREE WORKPLACE IS ACHIEVABLE.

OHS is a critical requirement of OTML’s

business and the requirements are set-

out in the OHS Policy and the Code of

Corporate Conduct and Business Ethics. It is

a requirement that all OTML employees and

contractors follow the OHS Policy, standards

and procedures; attend daily safety talks and

on-going training programmes.

OTML requires all employees, contractors

and visitors to be inducted prior to entering

OTML controlled work areas. The inductions

are specific to the area of work and provide

information on area hazards, emergency

contacts and Personal Protective Equipment

(PPE) requirements.

OHS training is important to ensure that people

have the necessary understanding of the

hazards and risks associated with the work

they undertake and also to implement the

appropriate controls and procedures so that

work can be completed correctly and safely.

In 2013, Occupational Health and Safety

and Wellness (OHSW) training totalled

61,560 person hours. The OHSW Training

(OHSW&T) Department offers a 104 OHS

courses across all areas of the business.

The OHSW&T team is a centralised resource

providing support and advice on OHSW

issues to the operating departments. They co-

ordinate a centralised OHSW management

system and organise monthly OHSW

campaigns based on various safety themes.

Each major operating section has dedicated

OHSW staff including an OHS manager at the

Mine and Processing departments.

SAFETY PERFORMANCEThe safety performance in 2013 was

outstanding with the best results recorded

in the past five years with a significant

reduction in serious injuries compared to

2012. OTML reports against the industry

standard lagging indicators of; Total

Recordable Injury Frequency Rate (TRIFR),

Lost Time Injury Frequency Rate (LTIFR) and

Significant Incident Frequency Rate (SIFR).

There was a 47% improvement in TRIFR,

a 69% improvement in LTIFR and a 45%

improvement in SIFR in 2013 compared to

2012. This result was achieved even through

there was considerable uncertainty during

the workforce restructuring in the latter part

of the year and the complexity of the risks at

Ok Tedi. A total of 15.5 million person hours

were worked for the year for both OTML and

its contractors.

As at December 31 2013, OTML had worked

a total of 6.1 million person hours without a

lost time injury. During 2013, PGK 6.4 million

(USD 2.8 million) was spent on OHSW capital

projects. These results maintain OTML’s

position as a premier safety leader not only

in PNG but also when compared against the

global metalliferous mining industry.

OTML management is committed to

achieving Zero Harm and during the

restructuring period in the latter half of

2013, Visible Leadership was implemented

by managers attending shop floor safety

meetings and workplace inspections. These

interventions not only helped identify potential

hazards, but demonstrated management’s

commitment to OHS&W and also offered

employees further opportunities to discuss

issues with their supervisors and managers.

OCCUPATIONAL HEALTH, SAFETY AND WELLNESS

3.32

Significant Injury Frequency Rate Lost Time Injury Frequency RateTotal Recordable Injury Frequency Rate

3.51

2.69

3.25

2.80

1.49

1.94

3.47

2.41

1.89

0.56

0.21

0.53

0.82

0.26

0

1.0

2009 2010 2011 2012 2013

2.0

3.0

4.0Frequency Rate


OCCUPATIONAL HEALTH AND SAFETY COMMUNICATIONSOTML has a monthly

occupational health and safety

theme which is rolled out to

all work locations through

toolbox meetings. Ongoing

OHS awareness sessions are

conducted throughout the

year. OTML has implemented

a layered approach to OHS

communications. This includes

face-to-face formal meetings,

informal coaching by peers and

supervisors, noticeboards and

the use of the Company radio

network and television channel

to broadcast OHS messages

and get the information to as

many people as possible. OHS

messages are also loaded onto

each computer screen saver on

the OTML network.

Formal communication

through structured meetings

provides employees and

contractors, the opportunity to

provide feedback and participate

in processes that impact their

areas of work and/or areas of

responsibility. These include:

• senior managers’

leadership: health, safety,

community relations and

environment meetings;

• safety technical

committee meetings;

• departmental OHS meetings;

• occupational health,

safety and environment

contractor meetings;

• tool box meetings;

• shift pre-start meetings;

• technical working groups; and

• risk assessment working

parties and review meetings.

OTML annual safety performance indicatorsLAGGING TARGETS (OTML AND CONTRACTOR) 2009 2010 2011 2012 2013

LTIFR (per year) 0.56 0.21 0.53 0.82 0.26

TRIFR (per year) 3.51 2.69 3.25 2.80 1.49

SIFR (per year) 1.89 2.41 3.32 3.47 1.94

OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT SYSTEMSWork continued on further integration and

standardisation of the OHS management

system to align with OHSAS 18001

requirements. In 2013, an external audit of the

system indicated an overall 8% improvement

against the OHSAS 18001 criteria compared

to 2012. In late 2013, the business decided

to upgrade all of its operating systems to a

fully integrated management system using

the SAP business software in 2015. This

opportunity will enable both the Risk and

OHS modules to be fully embedded into the

integrated system. Whilst this may impact

on the Company’s immediate goal to have

the OHS system aligned with OHSAS 18001

by 2015, there are still significant benefits to

be gained by having a fully integrated OHS

system by late 2015.

Each year the management team review

the findings of the OHS audits and as part

of the annual planning cycle develop OHS

improvement programmes. These plans

are compiled in the Safety, Health and

Environmental Action Plan (SHEAP) and

actions are allocated to departments and

individuals for implementation. Progress

against the SHEAP is formally reviewed

during each quarter. In 2013, the target for

SHEAP completion was 80%, however an

actual completion rate of 83% was achieved.

A review of the Company risk and injury

data identified that there were twelve areas

of significant risk. A major awareness

programme was rolled out to all employees

and contractors. Monthly safety themes

address a particular risk. Resource training,

wall posters, task observations and audits

will continue to be deployed throughout

2014 to ensure safe work procedures are

being followed.

ANNUAL SAFETY PERFORMANCE


OCCUPATIONAL HEALTH PROGRAMMEDuring 2013, OTML continued to

develop its occupational health

monitoring programme. OTML

has engaged external specialists

who have completed target

occupational health monitoring

campaigns, supported the

Company’s management system

development and provide training

to occupational health staff.

A review of potential

occupational aspects that

could impact on employees’

health identified the following

occupational hazards:

• dust and fibrous minerals;

• noise;

• lighting;

• vibration; and

• ergonomics.

Not all employees are exposed to all of these

hazards and therefore work activities were

assessed to identify which occupations

were potentially at risk. A number of

these hazards are seasonal, for example,

dust during short periods when the Ok

Tedi region is dry. Baseline monitoring

programmes continued to be conducted

to collect information across all work sites.

The information collected in 2013 has

been analysed and will assist in a more

targeted monitoring programme in 2014. In

areas where the monitoring has indicated

higher than recommended exposures, a

review of engineering controls and PPE

requirements were completed. Associated

with this information is the development of

information training packages on the hazards

and controls for delivery to employees and

contractors as part of the Company’s OHS

toolbox talks.

EMPLOYEE HEALTH AND WELLNESS PROGRAMMEThe aim of the Employee Health and

Wellness Programme (EHWP) is to assist

employees to remain physically and

medically fit for work and also enjoy quality

time with their families. As part of the EHWP

in 2013, the Company commenced with

targeting lifestyle factors including those

that contribute to heart complications like

obesity, high blood pressure and diabetes.

In 2013, an increased number of patients

were referred from the hospital for non-work

related illnesses requiring overseas attention

in Singapore, Philippines or Australia. The

number of referrals increased from 10 in

2012 to 41 in 2013, with the increase being

mainly due to improved diagnosis. In 2013,

the Company reviewed its pre-employment

medicals and this resulted in adopting a

number of lifestyle factor assessments for

inclusion in future testing. As a result of this

review, annual medicals will be introduced

in 2014 commencing with employees in

the higher risk exposure groups, in order to

monitor changes in the individual’s health

and to allow the implementation of suitable

interventions. OTML is also working with the

catering partners, to provide healthy meal

options to all the meal facilities.

During 2013, the services that provide part

of the Employee Wellness programmes were

restructured, resulting in the centralisation of

all services under the OHSW&T Department.

The Department coordinates the EHWP,

the Recreational Services Section and the

Employee Assistance Programme (EAP),

combining all areas relating to the promotion

of a holistic approach to employee support

through physical, medical and psychological

wellbeing. The medical staff at the mill,

mine, Kiunga and Bige clinics are also part

of the Department. In 2013 a new medical

assessment facility was approved at

Tabubil to facilitate mandatory medical and

position profile assessments services in the

workplace, whilst the Tabubil hospital under

the management of DPhL, will continue to

provide routine and emergency care to the

greater Tabubil community.

OCCUPATIONAL HEALTH, SAFETY AND WELLNESS CONTINUED



FATIGUE MANAGEMENTThe management of fatigue in the

workplace is a priority for OTML.

In 2012, fatigue was identified

as a contributing risk factor to

incidents that need to be pro-

actively managed. Factors that

can contribute to fatigue include;

the work hours and rostering

and night shift employees not

sleeping adequately during

the day. In 2013, OTML

commenced a three year fatigue

management programme, by

engaging Dr Adam Fletcher of

Integrated Safety Support Pty

Limited, a fatigue specialist from

Melbourne, Australia.

The programme kicked-off

with site surveys and includes

awareness training, supervisor

fatigue tool kits, assessment

of fatigue across all areas of

the operation and the impact

of cultural issues. The report

identified areas for improvement

including rosters, single persons’

accommodation, and the need

for awareness and management

training. These findings have

been incorporated into new

working roster arrangements, for

implementation in February 2014

and also incorporated into the

design of the new single person

accommodations. The fatigue

monitoring programmes will be

continually reviewed and refined

during 2014 to 2015.

OFF-THE-JOB HEALTH AND SAFETYOTML also introduced an “Off-the-Job”

safety campaign that has targeted families

and schools. The Company believes that

safety does not stop at work and that it

is part of everyday life. Mechanisms to

ensure that safety and health awareness are

available to the families of OTML employees

and contractors were incorporated into the

campaign and form an important part of

getting commitment for the ongoing health and

safety improvement of OTML’s employees.

A school health and safety programme was

conducted over a five month period for all

the local schools. The programme featured

topics such as bicycle safety, playground

safety, road safety, dental care, healthy diet

and eye care. The OTML healthy eating and

wellness mascot “Moses Munch” kept the

children focused on the important topics

being presented.

OTML organised a safety week in Tabubil

as part of PNG Mineral Resources Authority

nationwide initiative to showcase the OHS

initiatives and work being undertaken by

OTML and the contractors towards safety

improvements. During the week a variety

of activities were staged to focus on the

importance of health, safety, and wellness.

The highlight of the week was the Expo,

which was open to all stakeholders, schools

and the general community.

OTML AND STATE MINING DEPARTMENTSThe OTML OHSW&T Department is active in

partnering with the PNG Mines Inspectorate

through the Apex Mining Safety Council to

develop mining specific guidelines for major

hazards. OTML coordinated with other PNG

mines to develop the guidelines for Light

Vehicle operations. Other guidelines currently

under review by the Apex Mining Safety

Council that OTML has contributed towards

include fatigue management, supervision,

and contractor management. The PNG

Department of Mineral Policy & Geohazard

Management is currently undertaking a review

of the Mining Health and Safety Act. OTML

has provided senior staff support to the PNG

Chamber of Mines and Petroleum peer review

of the draft Act and Regulations. OTML also

prepares regular OHS reports for the PNG

MRA including monthly, quarterly and the

Annual OHS Year Books as requested by the

PNG Chief Inspector of Mines.

SECURITY HUMAN RIGHTS TRAININGThe OTML Asset Protection Department

(APD) manages security and contractor

security for OTML Assets. Human Rights

training completed in 2013 meets the

content intent of the International Voluntary

Principles on Security and Human Rights.

OCCUPATIONAL HEALTH, SAFETY AND WELLNESS CONTINUED

CASE STUDY


2013 PNG MINING EMERGENCY RESPONSE CHALLENGEIn November 2013, OTML was the proud host of the 3rd National Mining

Emergency Response Challenge in Port Moresby. The aim of the challenge was

to allow the Company’s emergency response teams to compete in both theory

and practical exercises. The challenge provides an avenue for individual and

team self-improvement and for individuals to take away positive experiences.

Karl Spaleck, Chairman of the National Apex Mining Safety Council, told the

participating teams at the welcoming night that anything was possible in PNG

if they applied themselves diligently. ‘The challenge itself is not only about

winning trophies, it’s about the opportunity to measure oneself as a team and to

challenge oneself to reach full potential. It is about being leaders and respecting

others and about integrity, honesty, and also responsibility’.

The teams came from the following PNG mineral resource projects and companies:

• Hidden Valley Gold Mine - Morobe Mining Joint Venture;

• Porgera Gold Mine - Barrick Gold;

• Oil Search Limited;

• Ramu Nico Management (MCC) Limited;

• Simberi Operations – St Barbara Limited,

• Lihir Gold Mine – Newcrest Mining Limited; and

• Ok Tedi Mining Limited.

All teams took part in the following seven events: Hazardous Material

Management, Rope Rescue, Search and Rescue, Fire Fighting, Multi-Casualty,

Endurance, and Theory.

The following assessments were carried out during each event: Captain Assessment,

Team Safety Assessment, First Aid Assessment, and Scenario Assessment.

On the afternoon of the welcome reception, the 63 participants undertook a

written theory paper followed by the Chief Inspector’s question session.

During the presentation night, OTML’s MD and CEO, Nigel Parker remarked that

the nine teams were all to be congratulated on the participation and enthusiasm

for the challenge and that their skills were an integral part of safety management

in the resource sector in PNG.

Image: OTML emergency response members recovering a simulation motor vehicle accident victim during the challenge

EMERGENCY RESPONSEOTML has developed competent

Emergency Response Teams (ERT) under

the direction of the APD. Due to the remote

location of the mine and limited public

emergency response capability, OTML

has to be able to mobilise its teams in

the event of an emergency. Regular risk

reviews are completed to identify the range

of emergencies that could occur during

exploration and mining activities, at the

processing facilities at Kiunga and Bige and

during logistic and transport activities. Due

to the distance between each operational

base, the Company has developed an ERT

at each centre.

Training of Emergency Response Teams

is an ongoing commitment so each team

member can develop the skills required to

rapidly deploy in the case of an emergency.

Training is to Certificate IV competencies

and based on Australian course material

and hands on practical training sessions.

Following each training session and

emergency callout, debriefing sessions are

conducted to identify what worked well

and areas for improvement. In 2013, OTML

hosted the 3rd National Mining Emergency

Response Challenge at Sir Hubert Murray

Stadium in Port Moresby.


OTML IS COMMITTED TO ACHIEVING IMPROVEMENTS IN ITS ENVIRONMENTAL PERFORMANCE AND AS A MINIMUM REQUIREMENT, MEETING THE CURRENT ENVIRONMENTAL LICENSE CONDITIONS.

The Ok Tedi mining operations are centred

on the Mt Fubilan deposit in the upper

Fly River catchment in the remote Star

Mountains, Western Province and only

16 km east of the Indonesian border. The

mine is located at approximately 2,000

m relative elevation in an area of dense

rainforest where annual average rainfall

is approximately 10,000 mm per annum.

Geotechnical hazards comprise fractured

and friable siltstone with limestone outcrops

that erode easily, resulting in frequent

localised landslips.

The OTML Environment department is

responsible for providing advice and

support to the operational teams, by

monitoring and assessing the effects of

the mining and associated activities on

the receiving environment, implementation

of environmental mitigation programmes

and support to the Community Relations

department with environmental information.

The team is responsible for monitoring

impacts along the 900 km downstream

riverine system from the mine to the Gulf

of Papua. This includes maintaining a

hydrological network of monitoring stations

along the river system, regular field sampling

campaigns and community consultation and

information dissemination in consultation

with the community relations team. The

environmental department uses contract

local labour to assist with monitoring and

maintaining the hydrologic network. The

department has its own environmental

testing laboratory facilities that are PNG

Laboratory Accredited and also sends

samples overseas for complex determinants

and to maintain a high level of quality

control. In 2013, PGK 235.6 million

(USD 88.5 million) was expended on

environmental programmes.

The 2013 focus areas for the environmental

team are as follows:

• monitoring and assessing the effects

of tailings and waste rock disposal

on the downstream riverine receiving

environment and the communities

who depend upon natural resources

throughout the Fly River system;

• mine mitigation programmes aimed at

reducing sediment and chemical effects

on the riverine system;

• monitoring the establishment of the

engineered waste rock stable dump;

• rehabilitation trials on the riverine dredged

stockpiles at Bige;

• working with the PNG Department of

Environment and Conservation and

their external reviewers to complete an

external review of the environmental

studies for mine continuation studies;

• waste management initiatives; and

• environmental management system

development.

COMPLIANCE MONITORINGThe Ok Tedi Mine is governed by the

Mining (Ok Tedi Agreement) Act, 1976 as

amended and supplemented. The schedule

to this Act is the Principle Agreement that is

amended from time to time and to date has

been amended ten times previously. The Ninth

Supplemental Agreement that was passed by

the PNG Parliament in 2001 has adopted the

“Environmental Regime” which contains OTML’s

environmental management and reporting

obligations against a set of six environmental

values. The Environmental Regime requires

OTML to undertake specific annual monitoring

activities and to prepare an Annual Environmental

Report (AER) for the State.

ENVIRONMENT


OTML prepared the 2013 AER (covering July 2012 – June 2013) and submitted a copy to the State in September 2013.

The Mine was in compliance with all the Environmental Regime conditions and there were no fines or non-monetary sanctions.

This is summarised below and compared to the previous four years of monitoring:

ENVIRONMENTAL CRITERIA 2009 - 2013 COMMENTS REGARDING 2013 ASSESSMENT

Water in main channel satisfies drinking water standards

Compliant

The water in the main channel and the floodplain satisfies drinking water standards if allowed to settle. Apart from dissolved copper (dCu), key water quality parameters measured in 2013 were within acceptable limits of aquatic ecosystem standards (ANZECC, 2000). Dissolved copper is the main concern for water quality within the river system. While the concentration measured is variable with time and space, an improving trend has been observed, especially in the Middle Fly, over the last decade. This improvement reflects changes in mine cut-off grade and the implementation of the mine waste tailings project in 2008.

Fish metal concentrations are below ANZFA Food standards guidelines

Compliant

Levels of contaminant metals (Cd, Cu, Pb and Zn) in Fly River fish were comparable to levels in similar food within relevant international (Australian and US) and regional (Porgera, Strickland and Fly) market basket and dietary studies. Intake of these metals was within the range of the values established by the World Health Organisation.

Terrestrial food resources are below ANZFA Food standards guidelines

CompliantLevels of contaminant metals (Cd, Cu, Pb and Zn) in terrestrial food were comparable to international (Australian and US) and regional (Porgera, Strickland and Fly River catchments) market basket and dietary studies. Intake of these metals is low compared to the World Health Organisation thresholds.

Fly River navigability CompliantRiver levels over the past decade have generally been above average due to the absence of El Nino conditions. There was no unusual impediment to shipping due to low river levels during 2013. There were 47 non-shipping days at Kiunga in 2013 compared with 52 in 2012.

Dissolved and bioavailable copper concentrations

Compliant

A general decrease in dCu and bioavailable copper concentration has been observed over the last decade. These decreasing trends are caused by a combination of factors including: high water levels, decreasing exposure of oxidisable sediments, implementation of the mine waste tailings project and a decrease in copper cut-off grades.

Undertaking eco-toxicological monitoring programme

Compliant

Algal growth inhibition (%AGI) at all compliance sites except Ningerum was below or only slightly exceeding the 5% threshold for significance, as has been the case over the last five years. Bacterial growth inhibition (%BGI) at all sites mostly exceeded the 25% threshold value for significance. %BGI for Obo and to a lesser extent, Nukumba has generally decreased over the last five years. The improvement in %AGI and to a lesser extent %BGI observed over the last decade is associated with the observed decrease in the concentrations of dissolved copper and bioavailable copper.

Fish biomass remains sufficient to provide food for households along the river

CompliantAnalysis of the long term (1983-2013) catch data shows a biomass decrease at all sites monitored with the highest decreases observed closest to the mine. While biomass decreases are observed throughout the system, there remains sufficient fish to satisfy the food needs of the community.

Extent of vegetation dieback Compliant

Vegetation dieback mapping undertaken in 2013 revealed that the total area affected by dieback was 1,875 km2, representing a 3.0% (55 km2) increase over the previous year. The area under some form of recovery has fallen 3.4% (from 298 km2 to 288 km2). The area of dieback is approaching its maximum likely extent, which is significantly less than the previously predicted future maximum extent of 2,395 km2.

Monitoring of potential for ARD formation within mine and river

Compliant

Results of the extensive surveys of sediments in the river system and the mine waste dumps conducted during 2013 indicate that the acid-base chemistry of the riverine sediments continues to improve following the implementation of various mitigation measures, especially the mine waste tailings project. The critical ANC/MPA ratio in dredged sediments at Bige increased to an annual average of 1.98 in 2013, the third consecutive year that the ratio has exceeded the target of 1.5.


MANAGEMENT OF MINING WASTE ROCK AND TAILINGSThe primary effect of the mine operation

on the environment is caused by the use of

riverine waste disposal. In 2013, 15.7Mt of

tailings was discharged to the upper reaches

of the Ok Tedi, and 44.9Mt of waste rock

was discharged to a failing dump to the

north of the mine and the stable waste dump

to the south of the mine. The discharge

of waste to the river results in sediment

deposition on the bed of the river and to a

lesser extent on the associated floodplains.

The primary environmental and human

health risks associated with riverine waste

disposal based on external and internal risk

assessments include:

• increased duration of overbank flooding

and associated forest dieback;

• the potential to generate Acid Rock

Drainage (ARD) due to oxidation of

residual pyrite in waste rock dumps and

tailings exposed on raised sandbanks

and river banks during low flows.

Limestone waste, which can neutralise

the ARD has decreased as mining

accesses deeper ore zones;

• increased metal concentrations

(especially copper) in both dissolved and

particulate phases in the river system and

the risk of adverse ecological effects; and

• decrease in fish biomass in the main

channels through smothering of habitat

and dissolved metal concentrations.

ENVIRONMENT CONTINUED

Fungal communities growing in the natural environment.


The table below summarises the main environmental risk mitigation programmes implemented by OTML.

MITIGATION APPROACH RATIONALE AND EFFECT

Removal of riverine sediments by dredge at Bige.

(1998 – current)

Bed aggradation occurs when sand particles settle on the bottom of the river bed, which increases the amount of time the river floods its floodplain in high flow and consequently can cause vegetation dieback. While the area of dieback has continued to slowly increase since 1998, the rate of increase has markedly decreased and presently is not expected to reach the original estimated area of 2,395 km2.

The dredge removes 85% of sand passing Bige which is approximately 100 km downstream of the mine. In 2013, 18.9Mt of sand and silt were removed from the river and placed in engineered stockpiles on the East and West Banks of the Ok Tedi River. Measurement of the river’s cross-section at various points downstream of the dredge show that the bed aggradation has stabilised since the implementation of dredging.

However, there is a ‘wave’ of sand that was downstream of the dredge in 1998 that is slowly moving through the system and which will cause increased floodplain inundation in the lower reaches of the middle Fly River over the next few decades.

Mine Waste Tailings Project (MWTP) (2008 – current)

The removal of pyrite from tailings is important to reduce the risk of ARD formation when sulphur oxidises if left exposed on sandbars or river banks in low river flow conditions.

The MWTP treats tailings to remove most of the pyrite and transports the PCon 125 km downstream by pipeline to Bige where the PCon is stored in pits below the water table on the West Bank of the Ok Tedi River at Bige.

When full, the PCon pits are covered with at least 10m of dredged sand to ensure that the PCon remains saturated with water (which renders it unreactive) even under drought conditions.

The material being dredged at Bige in 2013 was not acid forming and is being used to produce a final capping cover for the stockpiles. In addition, the sulfur concentration of sediments in the river system has shown a gradual decrease in concentration. The MWTP will ensure that the sulphur concentrations in the river will continue to decrease.

-150 NAPP plan

(2002 – current)

To minimise the risk of ARD developing in the failing waste dumps at Mt Fubilan, limestone is added to the waste rock stream to make sure that there is sufficient excess limestone to control any oxidation of pyrite in the waste rock. This is referred to the -150 NAPP (Net Acid Production Potential) plan.

OTML monitors the NAPP of the mine area creeks immediately downstream of the waste dumps on an annual basis. Since the implementation of the -150 NAPP plan, sediments in the mine area creeks have generally approached or exceeded the -150 NAPP target and no evidence of ARD formation is observed.

Milling Limestone

(2010 – current)

To increase sand-sized limestone particles to the riverine deposits in the Ok Tedi River, the mill has produced on average, 4,000t of limestone per day. Monitoring shows that the limestone content of material reaching Bige increases, but the effect is muted due to deposition of limestone in the river upstream of Bige (which improves ARD control upstream of Bige). Since the implementation of this initiative, a gradual increase in limestone content at Bige has been observed.

Changes to mine cut-off ore grades

(continuous)

In 2013, the cut-off ore grade was lowered due to location of the ore zones in the pit and ore availability. This has the effect of converting waste containing significant quantities of copper into ore. The copper is extracted by metallurgical processing before disposing of the residue tailings material. The effect of this is to decrease the total load of copper being added to the rivers.

In combination with the MWTP the copper concentration in dredged material at Bige has decreased by approximately 20% over the last three years.

The average dissolved copper concentrations in the river system have fallen year on year to a low 7 microgram per litre (ug/L) in 2013 compared to 10 ug/L in 2009.


BIODIVERSITY IMPACTSThe primary impacts on

biodiversity are caused by the

use of riverine waste disposal

and to a lesser extent land

clearing for Bige stockpiles. The

discharge of waste to the river

results in sediment deposition

on the bed of the river and to a

lesser extent on the associated

floodplains. The secondary

effect of sediment deposition on

the bed of the river has caused

an increase in the duration of

floodplain inundation, which has

in turn resulted in conversion of

parts of the forested floodplain to

grassed floodplain in the lower Ok

Tedi and the Middle Fly reaches

of the river system. The forest

dieback extent is monitored

annually and reported to the

State in the Annual Environmental

report. In 2013, 1,875 km2

of dieback was recorded, of

which 288 km2 showed some

form of recovery. The areas

have not been recorded on the

PNG register as having high

biodiversity values or protected

status. OTML has not developed

Biodiversity Management Plans

for the impacted area. No direct

restoration of impacted areas

has occurred, however regular

monitoring is completed.

Since 1998, OTML has operated a

dredging operation at Bige that removes

approximately 85% of the sand-sized

material passing through the river system. By

removing the sand, increases in floodplain

inundation downstream is reduced and since

the implementation of dredging, the rate of

increase of dieback has decreased markedly.

A second major effect on biodiversity relates

to fish diversity. OTML has monitored fish

biomass and diversity using standardised

methods since 1983 and is therefore able to

assess the effect of riverine waste disposal

on diversity particularly in the main channels

of the river where the effect of riverine waste

disposal is greatest. It is conservatively

assumed that the decrease in fish diversity

is solely due to the Mine’s riverine waste

disposal practices. However, there are also

other effects due to:

• a rapidly increasing human population

with greater access to modern technology

(e.g. outboard motors and fishing nets);

• a commercial fishery that operates

periodically in the middle Fly; and

• introduced species such as Tilapia

appearing in the rivers and off water bodies.

Fish diversity is monitored annually at three

sites in the middle Fly River and reported to

the State in the annual environmental report.

In 2013, decreases in species richness (used

here as a surrogate for ‘diversity’) of 35%,

51% and 37% over the period from 1983 to

2013 were reported at the three monitoring

sites at Kuambit/Erekta, Bosset and Ogwa.

Detailed fish diversity studies throughout

the Ok Tedi and Fly River systems have

been completed in 2005 and 2011/12. The

most recent independent report; “Fly River

fish diversity survey 2011/2012”, stated

that, “Overall the 2005 and 2011/2012 fish diversity surveys and associated sampling in the catchment since 2000 have demonstrated that the majority of the fishes in the Fly River system continue to maintain populations within the catchment, but with marked reductions in the diversity of fishes in most reaches downstream of the Ok Tedi mine, at least as far as Everill Junction where the Strickland River converges with the Fly River, and possibly downstream of that point. Declines are more pronounced in the channel, but changes in the floodplain are also evident”.

OTML will continue to monitor the

riverine biodiversity as part of the annual

monitoring programme and maintain the

environmental mitigation projects to reduce

the overall impacts.

ENVIRONMENTAL PERFORMANCEOTML is committed to improving

environmental performance across all

aspects of the Company’s operations and

have prepared the 2013 data tables and

previous four years of data for comparison.

The total volume of waste rock and tailings

disposed in the riverine environment in 2013

was 59.9Mt, consisting of 44.2Mt of rock and

15.7Mt of tailings. The tailings production

was 37% lower than 2012 production. This

was due to extended down time as a result

of the failure of the SAG mill 2, pit flooding

impacting on ore delivery and general

maintenance time in the processing circuit.


CASE STUDY


WATER USAGEIn 2013, total water use was 31% lower than

in 2012 and 77% of the water was recycled

through the processing plant with only 23%

made up of freshwater. Whilst the overall total

water use reduced, the water use per tonne of

copper increased from 109 to 122m3/t.

ENERGY CONSUMPTIONMining and processing of ores is an energy

intensive industry. OTML is a significant

user of diesel fuel in PNG. Fuel costs are a

major component of the overall costs and

where possible high cost fossil fuel use is

minimised whilst hydroelectric base load

power is being generated.

Diesel is used for all major transportation

including: powering of cargo ships and

concentrate barges, road transportation

of materials and goods from the Kiunga

wharf facility to Tabubil town and the mining

fleet consisting of trucks and shovels and

ancillary equipment and supplementary

power generation at Tabubil and Kiunga.

In 2013, total diesel consumption was

93.3 Megalitres (ML) and 26% was used

for power generation. Diesel is sourced

from the PNG State owned Interoil refinery

in Port Moresby and shipped to Kiunga.

Hydroelectric power provided 74% of

the power requirement through the two

hydroelectric generation stations, one at Ok

Menga and the other at Yuk Creek.

Twelve Gigawatt hours (GWh) of electricity,

comprising approximately 2% of OTML’s

total of 520GWh of electricity generated, was

sold to Western Power Utility for distribution

in the Kiunga town.

Greenhouse gas emissions were 40% lower

at 232,000 t CO2-e in 2013 compared to

2012. This decrease is attributed to less

fuel use and higher hydroelectric power

generation. The main CO2 sources include

diesel power generation, transportation and

CO2 generated as part of the conversion of

limestone to lime in the lime kiln.

WASTE RUBBER RECYCLING PLANTDisposal of mobile mining equipment waste tyres is a global mining industry

environmental management issue. Current industry practice has been to bury

these tyres in engineered constructed waste dumps. Environmental concerns

have been raised about the potential risk that tyres can resurface from the waste

dump burial in the future and the leaching of contaminants into waterways.

At OTML burial of tyres in engineered waste dumps is not an option, due to the

failing waste dump methodology. Tyres and other major rubber waste such as

used conveyor belts have been stockpiled at various locations at the Mt Fubilan

mine site and at Tabubil. This waste stream totals approximately 40,000m3 in

2013 and occupies valuable land, is unsightly, a fire hazard, does not break

down and is a potential community health risk by providing a breeding site for

rodents and mosquitoes.

In 2012, OTML purchased plant and equipment suitable to convert tyres and

conveyor belts into three recyclable products including: rubber crumb, steel and

waste textile. This plant is a first for PNG and cost PGK 14 million (USD 6 million).

The plant was commissioned in 2013 and small batches of tyres processed

to confirm product consistency. In 2013, 139t of tyres and conveyor belt was

crumbed, resulting in 107t of rubber crumb with the rest being steel or fibre belt.

The plant produces a rubber crumb (1-3 mm granules), and OTML sold 70t

to an Australian firm specialising in using the crumb for recycled products.

This includes; a component of asphalt road construction as a residual binder,

low impact surfaces for sporting fields, playgrounds and gymnasiums, sound

suppressing cladding for walls, bollards, boundary posts, road barriers, speed

bumps and rubber bricks. Further developments are planned to recycle the

rubber crumb into usable products onsite.

Image: Waste rubber recycling plant during commissioning.


ENERGY TYPE 2013 CONSUMPTION (PJ)

Total energy used (fossil + renewables) 5.07

Total energy (fossil) 3.69

Total renewable energy 1.38

Energy used for transportation (ships, planes, transport etc.) 3.2

ENVIRONMENTAL MANAGEMENT PERFORMANCE 2009 2010 2011 2012 2013

Environmental induction (No. of OTML and contract employees) 3,339 1,403 1,364 1,978 1,745

Environmental action plan (% completed) 74 81 85 81 81

Incidents level 3+ (medium, major or catastrophic) 0 1 5 1 1

WATER MANAGEMENT

Total water used (‘000 m3) 44,051 64,354 56,434 75,542 57,665

Freshwater (‘000 m3/% of total) 18,569 / 42 12,227.3 / 19 9,730 / 17 13,601 / 18 12,840 / 23

Recycled water (‘000 m3/% of total) 25,482 / 58 53,259 / 81 46,704 / 83 61,940 / 82 44.820 / 77

Freshwater intensity index (m3/t contained copper) 124 77 75 109 122

WASTE MANAGEMENT

Total riverine disposal (‘000 t) 54,235 45,705 27,279 53,978 59,873

Waste rock (‘000 t/% of total) 33,965 / 63 25,412 / 56 9,485 / 35 32,517 / 60 44,177 / 74

Tailings (‘000 t/% of total) 20,270 / 37 19,570 / 44 17,794 / 65 21,461 / 40 15,696 / 26

Riverine disposal intensity index (t/t contained copper) 360 286 209 431 464

Annual dredge slot production rates (Mt) 18.2 18.0 17.9 18.0 18.9

Average annual % sulphur in waste rock 1.46 0.92 0.25 0.53 0.68

Average annual % sulphur in tailings 0.82 0.99 0.95 0.86 0.86

Average annual ANC/MPA in dredged sediments 1.11 1.33 1.58 1.64 1.98

Average dissolved copper (ug/L) at Nukumba 10 9 9 8 7

Scrap metal (t shipped for recycling) 5,064 6,142 6,124 4,869 4100

ENERGY AND GREENHOUSE GAS PRODUCTION

Total diesel consumption (ML) 105.6 114 95 106 93.3

Diesel consumption for power generation (ML/% of total) 43.1 / 41 51.6 / 45 39 / 41 45 / 42 31.6 / 34

Diesel used for machinery / other (ML/% of total) 62.5 / 59 62.2 / 59 56 / 59 61 / 58 62.7 / 66

Electricity use (MWh) 521,500 483,516 469,478 532,899 519,700

Diesel generated electricity (MWh/% of total) 139,098 / 27 151,113 / 31 126,801 / 27 159,364 / 30 134,700 / 26

Hydroelectricity (MWh/% of total) 382,402 / 73 332,403 / 69 342,677 / 73 373,535 / 70 385,000 / 74

Power sold (MWh) NR NR NR NR 12

Energy intensity index (MWh/t contained copper) 3.5 3 3.6 4.3 4.8

GHG emissions (‘000 t CO2 e) 391 422 352 392 232

GHG emissions index (t CO2 e/t contained copper) 2 2 2 3.1 2.2

New land disturbed in 2013 (ha) 0 0 0 54.9 30

Total land disturbed to date (ha) 2,623 2,623 2,623 2,678 2,708

Land rehabilitated in 2013 (ha) 0 0 0 0 42

(NR = Not recorded)




In 2013 a revised Mine Closure Plan (MCP)

was prepared to address the new mine

works and increased disturbance associated

with the mining West Wall Pit cutback,

development of the stable waste dump and

a further ten years of stockpile development

at Bige. The aim of mine closure planning is

to reduce the environmental impacts to as

low as practicable, progressively rehabilitate

final disturbed land when it comes available

for closure, to create stable landforms and

vegetate with plants and trees native to the

local areas. The MCP was submitted to the

State for approval. The MCPs are reviewed

with the CMCA communities.

At the Mt Fubilan mining area, there has

been no progressive rehabilitation to date

due to the mining area still being an active

operational area. However, self-seeding

and revegetation of areas of the older pit

wall and benches has occurred. At Bige,

the Company has established a nursery

where local trees have been propagated for

revegetation of the Bige Stockpiles. Trial

areas have been contoured and planted

with various grasses and tree seedlings with

the necessary fertiliser and organic material

which species can establish and survive.

This trial work will continue through 2014.

As part of planning for closure, OTML

has put aside PGK 555 million (USD 227)

million in a Financial Assurance Trust Fund

for closure works. This was reviewed as

part of the mine continuation studies.

Financial modelling has demonstrated that

the principle amount will meet the financial

needs for future closure based on normal

financial investment returns.

LAND DISTURBANCE AND MINE CLOSURE PLANNINGIn 2013, a further 30ha of new

land was disturbed for the

expansion of the Bige sediment

stockpiles, taking the maximum

disturbance to 2,708ha. During

this period, 42ha of Bige

stockpiles were rehabilitated

using a mixture of grasses and

tree species. No land rehabilitated

meets the end land use.

MINE CLOSURE PLANNINGThe progressive rehabilitation

of land and mine closure

planning are required to meet

stakeholder expectations and

environmental licence conditions.

The Mt Fubilan operation

and processing plant have a

comprehensive closure plan

in place. Implementation of

the plan was to commence in

2014/2015, however, with the

mine continuation, mine closure

will commence after 2025.


ENVIRONMENTAL COMPENSATIONOTML reports on the amount of environmental compensation paid to communities and

landowners either as direct payment for damage to crops, gardens, waterways in the event of

a process or chemical spill or other mine related incident. These are reported as non-CMCA

related payments. In 2013, these payments totalled PGK 457,808 (USD 200,611) comprising

of PGK 360,000 (USD 157,752) for Kobom Creek vegetation dieback identified in 2012,

contamination of Kum Creek with copper concentrate from the Kilometre 59 pump station,

identified in 2012 PGK 30,000 (USD 13,146) and PGK 67,808 (USD 29,713) for sediment

impact to a creek line to the north west of the mine pit from mine operations. In addition to

compensation being paid, remedial actions were put in place as a result of these incidents.

The other annual compensation payment was made to the nine CMCA regions as direct

reparation due to legislated continued use of riverine tailings discharge. In 2013, this payment

totalled PGK 64,818,631 (USD 28,403,524).

ENVIRONMENTAL COMPENSATION (PGK) 2009 2010 2011 2012 2013

Non-CMCA related 0 8,000 1,077,140 0 457,808

CMCA related 64,565,984 65,153,570 66,410,654 64,373,513 64,818,631

Total 64,565,984 65,161,570 67,487,794 64,373,513 65,276,439

ENVIRONMENTAL COMPENSATION (USD)

Non-CMCA related 0 2,935 452,398 0 200,611

CMCA related 23,502,018 23,898,329 27,892,475 31,079,532 28,403,524

Total 23,502,018 23,901,264 28,344,873 31,079,532 28,418,511

Rural village in mine affected area.

WASTE MANAGEMENTOTML waste management

other than waste rock and

tailings, previously described

in this report includes the

recycling of various waste

products. No hazardous waste

was transported, imported or

exported. Other general waste

streams are sent to landfill.

Recycling included:

Waste oil2.3ML was used as fuel

in the lime kiln

Water73% of process water

was recycled through the

processing plant

Tyres and rubber139t of rubber was shredded

and 70t sold to A1 Rubber in

Australia for recycling

Steel4,100t of scrap steel was

shipped to Port Moresby for

onward sale as recycling.


CASE STUDYThe aim of the revegetation is to:

• stabilise the stockpile’s outer slopes

and crown through sustainable

vegetation cover;

• establish a primary vegetation cover

through which final canopy tree species

can be planted; and

• develop standard rehabilitation protocols

that include preferred species, vegetation

techniques and fertilisers that can then be

applied to future revegetation.

As part of the trials, the team identified

that the finer silt material could support

vegetation and harvesting of the silt material

naturally eroding from the stockpiles has

resulted in the recovery of over 20,000t of

material that has been reused in recent trials.

OTML purchased an industrial tub grinder to

mulch and chip trees and other vegetation.

This grinder was commissioned in

November and will be able to progressively

chip vegetation from areas where new

stockpiles are planned. The wood chip will

be incorporated into the final soil layer to

provide valuable organic material.

In May 2013, the Bige team commenced

the trials for the hydro mulch technology

on a 0.2ha area of the East bank stockpile

outer slope. The hydro mulch uses a

mixture of bonded fibre matrix (chipped

sorghum, paper, glues and tackifiers),

Japanese millet, Acacia auriculiformis, native seed (Premna serratifolia, Nauclea orientalis, Timonus timon, Paraserianthes falcataria and Glochidian novoguineense)

and inoculum. The mixture is sprayed onto

the slopes and initial success indicated a

healthy establishment of trees and grasses

after seven months. It is anticipated that the

learnings from this trial can be replicated on

future stockpiles.

BIGE REHABILITATION TRIALSThe Bige dredging project has

been operational since 1998 and

has recovered approximately

17Mtpa of sand and silt. This

material has been placed into

engineered stockpiles on the

East and West banks of the

river. Sections of the East bank

stockpile have reached final

design and the environmental

team commenced revegetation

trials on sections of the stockpile.

The stockpiles are predominately

constructed of sand-sized

particles and have negligible

organic and nutrient content.

MINE WASTE TAILINGS PROJECT ALLOWS COVERS TO BE PLACED ON BIGE EAST BANK STOCKPILES.In late 2008, the Mine Waste Tailings

Project (MWTP) was commissioned

by OTML. This project had been

implemented primarily in response to the

gradually increasing sulphur content of the

mine’s tailings and the associated risk of

ARD developing in the Bige stockpiles and

in some sediments deposited through the

lower Ok Tedi and Middle Fly Rivers.

The MWTP consists of three major

components with a capital cost exceeding

PGK 1,221 million (USD 466 million). The

first component is the Tailings Processing

Plant (TPP) which is effectively a complete

additional flotation circuit added to

the back end of the existing copper

concentrator. The TPP removes at least

80% of the sulphur in the form of the

mineral pyrite from the copper concentrate

tailings. The TPP produces two products;

a Pyrite Concentrate (Pcon) which is

transported via pipeline to Bige for safe

storage in constructed subaqueous pits

on the Ok Tedi floodplain at Bige and

a tailings stream comprising residual

ground up rock, with a mean sulphur

concentration of less than 1% that is

discharged to the river system. The second

component of the MWTP is a 125km

pipeline which transports the PCon to

OTML’s Bige site and the third component

is a series of large storage pits dredged

into the Ok Tedi floodplain that allow the

PCon to be safely and permanently stored

subaqueous and ultimately buried under at

least 10 metres of dredged sand.

By decreasing the sulphur content of the

tailings, the sulphur content of sediments

throughout the river system is gradually

decreased thereby decreasing the ARD

risk. At Bige the concentration of sulphur

in dredged material has decreased

to approximately 1.50% in 2013.

Simultaneously, the Acid Neutralising


0

0.5

1

1.5

2Median annual ANC/MPA ratio

20132012201120102009


Capacity (ANC) of the dredged material has

increased as a result of targeted limestone

dumping into the mine’s waste dumps and

through the milling of barren limestone. As

a result the dredged material has changed

from being Potentially Acid Forming (PAF) in

2008 to being on average, Non-Acid Forming

(NAF) since the MWTP implementation.

The best measure of the improvements

in the geochemical quality of the dredged

material is through the ANC/MPA ratio which

is a measure of the risk of acid formation

occurring for a sample. Extensive testing on

OTML dredged materials shows that if the

ANC/MPA is less than one, then there is a

very high probability of the sediment being

acid forming ultimately. If the value is greater

than one, the risk of acid formation drops off

rapidly and the higher the ANC/MPA ratio

the lower the ARD risk. (The graph shows

how the median ANC/MPA ratio in dredged

material has continuously improved over

time since the MWTP was commissioned

and in 2013 was 1.98.)

Images (top to bottom): Mine Waste Tailings plant, Regrading Bige stockpiles prior to vegetation, Bige revegetation after seven months.

The alkaline material can be placed over

older, PAF material on the East Bank

stockpiles at Bige as a cover. This will

decrease the potential acid generation by

approximately 90%. Moreover since it has

such a high ANC/MPA ratio, the risk of future

acid generation forming on the cover is

minimised which allows for the successful

revegetation of the stockpiles.

VARIATION IN ANC/MPA AT BIGE BY YEAR


OTML IS COMMITTED TO CONDUCTING ITS OPERATIONS IN A SOCIALLY RESPONSIBLE MANNER THAT RESPECTS CULTURAL HERITAGE AND TRADITIONAL RIGHTS. OTML BELIEVES THAT IT CAN CONDUCT BUSINESS IN A SAFE AND SUSTAINABLE MANNER THAT CAN BRING BENEFITS TO CURRENT AND FUTURE GENERATIONS. THE COMPANY RECOGNISES THAT THE OPERATIONS CAN HAVE BOTH POSITIVE AND NEGATIVE IMPACTS.

OTML acknowledges that its environmental

impacts are inherent with the business

and therefore the Company needs to fully

disclose the effects as part of transparent

communications and the license to operate.

The Company engages with its stakeholders

and maintains open and transparent

dialogue with the impacted communities

and government. The Community Relations

department (CRD) undertakes comprehensive

community engagement with all of those

communities who are affected by the

operations. The license to operate is linked

to Free Prior Informed Consent (FPIC) and

without a social license granted by the

CMCA communities, the PNG Government

and stakeholders, OTML acknowledges it

could not operate.

The social responsibility programmes

include a priority to recruit from the local

area wherever possible and engage local

businesses for contract services. The

programme’s focus is on developing

partnerships with local communities,

governments and businesses in order to

improve long term social and economic

development in Western Province.

This approach ensures the community

development programmes and benefits

are distributed appropriately and they

complement government initiatives and

aid agencies and Non-Government

Organisations (NGOs) working in the region.

A key goal is to build capacity within the

local community in order to manage long

term sustainable outcomes in health,

education, business and employment.

OTML participates in local business capacity

building through providing resources and

staff to participate on various boards and

trusts, strategic planning support, technical

services, networking assistance, financial

and in-kind resources.

The commitment to social responsibility

covers all phases of the project life cycle from

exploration, construction and development,

operations and mine closure activities.

COMMUNITY CONSULTATIONOTML believes that open dialogue with

its stakeholders is very important and key

to building strong relationships based on

trust and respect. By listening and openly

discussing issues, the views and concerns of

the community and stakeholders can be used

in the business decision making process.

The CRD is responsible for managing

the dissemination of information to the

communities and undertaking formal and

informal consultation. They are the main

interface between the stakeholders and

the Company. In the last ten years, there

has been no major community disruption

to OTML operations and the Company

generally enjoys a healthy working

relationship with the communities and this

has attributed to continuous consultation

and resolving issues promptly. Twice a year,

the team completes formal community

visits to each of the 156 villages in the

CMCA region. These meetings provide the

community and OTML a process to listen to

each other’s plans and grievances. OTML

uses the meetings to provide feedback

on issues previously raised, provide

information updates on mining operations

and environmental impacts. The community

is able to raise issues of concern and these

are recorded as requests or as grievances

through the grievance mechanism for follow-

up and resolution. Formal meetings are also

held with local, ward, provincial and national

government authorities. The bi-annual

community meeting process has proven to

be successful and has been used for the

CMCA community reviews and for the mine

continuation consultation. The patrols cover

all of the 156 CMCA villages and cover a

geographical area of over 98,000km2.

SOCIAL RESPONSIBILITY



MINE CONTINUATION COMMUNITY CONSULTATIONMine continuation community consultation

was a phased approach, culminating in

a consultation programme in April 2013.

The mine continuation consultation was

completed by a PNG based consultancy as

independent facilitators supported by the

OTML CRD. The consultancy was assisted by

independent observers, two PNG nationals

of notable repute who were responsible for

monitoring the process and publicly reporting

on the conduct of each meeting.

During the consultation process, the

community expressed concern about waste

management practises and long-term impact

on the river. As part of the social license to

extend the mine, the Company proposed a

geotechnically stable waste rock dump be

constructed at the mine and also that the

total sediment loading impact to the riverine

system should not exceed that of the 2015

impacts. These constraints were incorporated

into the engineering studies and a suitable

mine plan was developed that enabled the

mine life to extend to 2025. To meet the

riverine constraint, processing production will

decrease after 2016 from 23Mtpa to 15Mtpa.

Lower production will reduce income and

subsequent royalty and community economic

benefits in the early years whilst the large

waste rock removal programme is completed

to expose the mineral resources.

The level of maturity in the

Company’s consultation

processes was tested during the

past three years of negotiations

regarding the proposed mine

continuation. This three-year

consultation programme

commenced with a request

from the communities to OTML

to investigate how the mine

operations could extend beyond

the proposed 2015 mine closure

date. A four-step consultation

process was implemented with

all of the 156 CMCA villages and

culminated in early 2013 with

CMCA communities consenting

to the mine continuation plans

to extend the mine operations

to 2025. Other material issues

raised by the communities and

other stakeholders during 2013

include the following:

• waste disposal of rock and

tailings to the riverine system;

• economic performance

and flow of benefits to

the community from mine

continuation;

• community consultation;

• community development

programmes;

• health;

• education; and

• employment and

training opportunities.

SOCIAL RESPONSIBILITY CONTINUED

12

4

3


The four phase process that was incorporated into the mine continuation consultation included:

PHASE ONE June 2009 – “Preparations, Agenda Setting and Information Exchange”. Discussions with all the villages and the nine CMCA groups to select delegates.

Set out the consultation process and provide background information.

PHASE TWO March 2010 – “Options Discussed and Information Shared”. Formal meetings held in the village, regional and delegate levels. Meetings focussed on

open sharing of information and exchanging views and concerns between all parties.

PHASE THREE 2011 – 2012 – “Build Agreement” OTML presented to all parties the studies on the mine continuation project and the

findings from the environmental studies. The objective was to provide the communities

with a balanced understanding of the mine continuation benefits and environmental

impacts and the proposed environmental mitigation plans. This information exchange

was very important for the communities to make an informed decision.

PHASE FOUR November 2012 – April 2013 – “Signing of Mine Continuation Agreement”All nine CMCA regions consenting to the mine continuing through to 2025 and

signing of the Mine Continuation Agreement and communicating the outcomes

of the process to all 156 communities through a community consultation patrol.

Electrical maintenance workers completing transmission line repairs.


SIGNIFICANT DISPUTES RELATING TO LAND USE OR CUSTOMARY RIGHTSIn 2013 there were eight current land

disputes still open and under review or

involving court proceedings. The disputes

are generally about land ownership claims

around the Special Mining Lease land that is

leased to OTML and/or royalty payments.

In 2013 there was no resettlement of

community landowners on OTML leased lands.

ALLUVIAL SMALL SCALE MININGGold panning in the Upper OK Tedi provides

a livelihood to community members who are

unable to obtain other formal employment.

OTML completed surveys in 2008 and

2010 to determine the extent of small-scale

mining. In 2010, 241 miners were interviewed

comprising 70% male and 30% female, with

66% operating in the Western Province.

Those interviewed indicated they knew of up

to five other persons involved at any one time.

An estimate of potential miners engaged in

the activity is up to 2,300 persons. The survey

identified that a further three persons per

miner depend directly or indirectly on alluvial

mining. On average an alluvial miner could

earn up to PGK 1,000 (USD 230) per week

if conditions were favourable. The reasons

cited for mining were to earn an income to

meet daily living needs, pay school fees,

increase buying power and to meet bride

price demands. Issues associated with alluvial

mining include; impacts to the environment

through illegal settlements and uncontrolled

dumping of rubbish, health issues, increased

illegal sale of alcohol, drugs, theft, gambling

and prostitution.

INTEGRATED COMMUNITY DEVELOPMENT MANAGEMENT SYSTEM Considerable progress with development

of the Integrated Community Development

Management System (ICDMS) occurred

during the year. The ICDMS focus is

to provide a robust system to manage

community relation issues through till 2025.

The ICDMS builds upon previous work and

following a review of issues and challenges

a number of system components were

updated or developed. These include:

• community relations Strategic

Management Plan 2014 -2018. This plan

is aligned with the OTML 2025 Vision

and the content is aligned with the IFC

Performance Standards. The 2014 work

plan and budget was finalised;

• review of the community relations team

structure, roles and responsibilities. This

review also identified a need for updating

skills, training and knowledge transfer;

• development of the Community Grievance

Mechanism (CGM) system and database;

• Community Development Tool Kit

training; and

• Community relations data and records

management review and completed

analysis for a socio-economic database.


The meetings held between

November 2012 and April 2013

concluded the formal mine

continuation consultation and the

following information and activities

were shared with the communities:

• final mine continuation

feasibility studies;

• final environmental studies

on the mine continuation;

• Community Mine Continuation

Agreement finalised;

• final OTML compensation

package for CMCA

communities;

• PNGSDP commitments;

• PNG Government

commitments; and

• other amendments to

legal documents including

Trust Deeds and Financial

Autonomy for Village

Planning Committees

The final step in providing

legal approval and setting

license conditions for the mine

continuation and all of the

social commitments is for the

PNG Parliament to develop

and pass the OTML Eleventh

Supplementary Agreement.


OTML STAKEHOLDER COMPLIANT AND GRIEVANCE MECHANISMIn the Mineral Resource industry, addressing

environment and social complaints and

grievances in a responsible and systematic

approach is now an internationally accepted

standard. The United Nations and IFC

have encouraged the use of a Grievance

Mechanism tool in resource industries as

a means of empowering human rights and

resolving grievances.

The OTML Community Relations department

has developed a Grievance Mechanism

Framework for implementation under the “Ok

Tedi 2025 Securing Our Future”. The objective

of the CGM is to have a standard process

in place and a procedure for receiving,

registering and addressing complaints and

grievances in a timely manner. The CGM

has a process of escalation leading to

independent arbitration should a compliant

be unresolved through normal negotiation

processes with OTML management.

COMMUNITY RELATIONS STAFF UP-SKILLING IN COMMUNITY DEVELOPMENTDuring 2013, an external consultant provided

training for the Community Relations teams.

The course included 20 sessions of the

International Council of Metals and Mining

(ICMM) Community Development Toolkit

(2013) “Train the Trainer” and two additional

toolkit sessions on the ICMM Sustainable

Livelihoods Framework and Logical

Framework Approach. The training methods

were based on a participatory approach and

used problem based learning techniques,

short lectures and group presentations

to deliver capacity building outcomes.

The learnings will assist in development

of the ICDMS and improved community

development programmes.

COMMUNITY MINE CONTINUATION AGREEMENTThis agreement defines the cash

compensation, investment and development

payments that OTML will make to the 156

CMCA villages affected by the operations.

The CMCA communities are grouped into

nine areas (Regional Map) and represent over

120,000 people. The nine CMCA regions

extend from the mine to the South Fly. Each

region is represented by four representatives,

with at least one woman. A total of 36

elected community members comprise

the CMCA Working Group and attend the

delegates meetings along with government

representatives, OTML, churches, women

and youth organisations and NGOs.

WOMEN’S REPRESENTATION In 2007 during the mine

benefits stream negotiations for

communities affected by the

OTML operations, each CMCA

region was represented by one

woman. The women were able

to negotiate for 10% of the

funds from the mine operations.

These funds are to be dedicated

to women and children’s

programmes. This was a ground

breaking achievement for women

in PNG and reinforced women’s

access rights of representation

at the highest levels of decision-

making on mine benefits for local

communities. The Memorandum

of Agreement (MOA) following

the review specifically provided

for recognition of women’s

representatives on Village

Planning Committees (VPC), the

CMCA Association and the Board

of the OTDF. The 10% translated

into PGK 101 million (USD

45 million) and as expected,

planning and disbursing the

money into projects presented

implementation challenges.

Opening of the Kuem Primary School (Middle Fly) solar electrical supply project.


The CMCA women’s leadership

engaged with the PNG

Department of National Planning,

OTML, PNGSDP and the OTDF

who assisted in planning by

articulating and prioritising

the vision and needs into nine

respective CMCA Women and

Children’s Action Plans for

implementation. Drawdown

of the funds and successful

project implementation has been

slower than anticipated due

to the challenges on capacity

deficits and knowledge around

the process of the MOA, funding

sources and responsibilities of

different entities charged with

project implementation.

In 2012, when the Mine

Continuation Agreements came

up for five year review, up to 30

women leaders participated in

the negotiation process. Each

region was represented by three

women negotiators with six from

the Mine Village CMCA. During

the negotiations, the women

were able to increase the trust

funding set-aside for women

and children from between 10%

to 18.24%, depending on the

region. Support for the increase

came from the male leaders

as they recognised that the

women leaders were facilitating

programmes that benefit the

whole village and the families.

During the planning stages the women

identified five high impact priority

expenditure areas for project design and

implementation as follows:

• capacity building and institutional

strengthening;

• infrastructure (feeder roads,

water transport, electricity and

communications);

• sustainable livelihoods and food security;

• education and adult literacy; and

• health (water and sanitation).

The CMCA women leaders identified the

main challenge as being ensuring mine

continuation compensation funds are

properly used for social and economic

infrastructure projects such as roads, jetties,

bridges, health centres, health outpost,

classrooms, libraries, teachers, doctors and

nurse’s houses. The view is that these are

the critical enablers for service delivery.

Other community needs include support

for the growing of cash crops such as

rubber and eaglewood and food production

including vegetables, fish and poultry to

support community livelihoods. The mine

continuation funding was seen as being a

lever for change leading to a self-supporting

sustainable future without OTML.

It was recognised by the women leaders that

there are still further steps to improve the

implementation including:

• Capacity Development – institutional

capacity and human resource development

are the primary means to ensuring

that women are able to manage their

associations, take control and manage the

Women and Children’s Fund separately

from current Trust arrangements;

• Stakeholder collaboration – closer

collaboration and partnership between all

stakeholders to complement each other’s

efforts in project delivery;

• Empowering Village Planning Committees

with project management skills –

empowering VPCs to manage small village

projects would ensure project ownership;

• Ownership and sustainability – the

negotiators would like women’s

leadership to be consulted to ensure

ownership and sustainability; and

• Greater representation on the OTDF board.

During the mine continuation’s final five weeks

of negotiations, the World Bank was invited

by OTML to be an independent observer of

the process and to observe women’s roles

in the process and to document women’s

aspirations and expectations from the

process. The World Bank prepared a report

on the process entitled, “Negotiating with the

PNG Mining Industry for Women’s Access

to Resources and Voice: The Ok Tedi Mine

Continuation Negotiations for Mine Benefit

Packages”, December 2013 can be found at

www.worldbank.org/png.

In 2013, eight of the CMCA Women’s

Associations were formally registered and

election of women leaders completed and

initial meetings conducted. Highlights in

2013 were the women earning first place

at the Morobe Show for their display, the

Middle Fly women funding their own agro-

forestry eaglewood project, the opening of

learning and training centres at Haidowogam

in North Fly and Deware in the South Fly.

COMMUNITY HEALTH Access to high quality health services by the

community and the Company’s employees

is a priority. OTML has been the main

provider and financial supporter of private

and public health services in the Tabubil and

mine affected regions. The Company works

closely with a number of multi-sectoral

stakeholders for provision of health services

through the Western Province. These include

the Western Province Provincial Health

Department, various church based providers,

NGOs and private health providers.


CASE STUDY


JOSEPH RETURNS HOME TO SAMARI VILLAGE AS A QUALIFIED PRIMARY TEACHERSiware Joseph lives in the Samari village in the South Fly district and returned as

a qualified primary school teacher thanks to sponsorship from the CMCA Kiwaba

Trust. After completing Grade 12 in 2008, Joseph was left with no opportunities

for continuing his education so he remained in the village for two years helping

his parents with gardening and fishing. In 2010 Joseph heard about the Catholic

Sacred Heart Teachers College in Port Moresby. He applied for entry and his

family submitted a sponsorship request to the Kiwaba Trust Board. Joseph was

accepted into the college and the Trust sponsored Joseph for two years so he

could complete his Diploma in Primary Teaching in 2012.

After graduating, instead of staying in Port Moresby teaching, Joseph returned to

Samari village to teach grade 3 and 4 at Samari Primary School.

Asked what made him return to his village, which is one of the most isolated

villages in the Kiwai Group of Islands, he said: “I had no opportunity for employment whatsoever but because of the (Kiwaba) Trust, I am now a teacher so I felt that I needed to return home and contribute something back to my village and the region. This is my way of saying thank you” and, “this is where I belong and this is where I can help bring change.”

Considered as educated elite within his own community, Joseph said in order

for Samari including the other 155 villages in the CMCA region to change,

people must change their attitudes. “Samari is one of the 11 villages that have been declared as Model Villages by OTDF in an attempt to deliver wholesale development changes within the CMCA. With education being one of the areas this programme will be looking at improving, I believe that this will change so many things, not just for myself and my family, but my whole village including the Kiwaba region and Western Province as a whole,” he said.

Image: Mr Joseph Siware (RHS) and headmaster Mr Bernard Bama from Samari Primary School, South Fly Region

OTML, as part of its long-term sustainability

vision, has outsourced the provision of major

health services to concentrate on its core

business of mining. OTML has engaged

Divine Word University’s (DWU) commercial

subsidiary, Diwai Pharmaceuticals Limited

(DPhL) to manage the Tabubil hospital.

The hospital, which is owned by OTML,

has served employees and their families,

contractors and communities from Western

Province and Telefomin District for many

years and is best known for being the

Western Province’s referral hospital,

servicing the North, Middle and South Fly

districts. OTML will continue to provide core

funding for the hospital and a new Board

comprising members from DWL and OTML

will provide oversight and governance.

Under the arrangements DPhL will develop

the hospital into a teaching hospital that will

support university students under the rural

health programme in their clinical training

and also conduct medical research. The

hospital has consistently rated five stars in

accreditation under the PNG National Health

Service Standards.

In 2013, the focus was on completing

the handover and transition to DPhL

management, whilst providing high level of

patient service and care. A review of staffing,

housing, funding and developing a 2014

strategic plan was completed. A number

of staff transitioned from OTML to DPhL

contracts. The hospital currently has over

80 staff with senior medical practitioners

specialising in obstetrics and gynaecology,

paediatrics, general surgery, consulting

physicians and offers outpatient, pathology,

x-ray, dental, blood bank services as well as

public health programmes.

The community has also established the

“Friends of Tabubil Hospital”, an auxiliary

group that meets monthly. The group

holds regular fund raising functions and

also provides support through visitations

especially to the children’s and maternity

wards. The group has donated ultrasound

equipment for the maternity ward and

televisions in the outpatient areas.


NORTH FLY HEALTH SERVICES2013 marked the completion of the first

five years of the North Fly Health Services

Development Programme (NFHSDP). This

public private partnership is funded by

OTML and is a partnership between OTML,

Evangelical Church of PNG, Catholic Health

Services, North Fly District Health Services

and Abt JTA, a specialist International

health sector firm. The programme works

with all health service delivery stakeholders

in North Fly to achieve sustainable health

improvements through the strengthening

of the existing health system. In November

2013, OTML committed funds for a further

five years of the programme.

The NFHSDP was designed and is being

implemented in line with the National

Department of Health’s (NDoH) Strategic

Plan and priorities. The NDoH priorities,

and therefore a number of the NFHSDP’s

12 objectives, align with several United

Nation Millennium Development Goals

(MDGs), including:

• MDG 4 - Reduce Child Mortality;

• MDG 5 - Improve Maternal Health; and

• MDG 6 - Combat HIV/AIDS, Malaria

and other diseases.

The PNG National Department of Health’s

Annual Sector Review reported that provision

across the North Fly District remained above

national averages for eight of the 14 indicators

used to monitor the performance of the health

system across the country in 2012 (2013

report is not due till May 2014). Key areas of

improvement in the North Fly District are:

• pneumonia related deaths in children

under five years of age decreased from

4.5% in 2011 to 3.2% in 2012;

• the percentage of low birth weights

decreased from 13% to 8%;

• a decrease in incidence in malaria from

342 cases per 1,000 population to 207

cases per 1,000 population;

• the proportion of women having

supervised births in health centres and

hospitals remains high at 95%;

• adequacy of medical supplies with the

percentage of months that facilities have

no shortages is high at 95%; and

• 3rd dose pentavalent immunisation

coverage remains high at 74%.

Tabubil hospital provides

support for the six local aid

posts in the mine lease areas

including Finalbin, Bultem,

Migalsim, Sissimarkem, Ok

Ma and Atemkit. As part of the

rural health plan functional aid

posts stocked with medicines

and qualified staff mean that the

community can be assessed

and treated for most illnesses

by the aid post and if serious,

referred to the Tabubil hospital.

Local treatment options mean

that patients do not have to

travel to centralised services and

this has reduced the number of

outpatients presenting at Tabubil.

In June 2013 the CMCA

committees and governmental

health officials created the

Western Province Health Steering

Committee in collaboration

with the Fly River Provincial

Government (FRPG). This

committee combines all interested

stakeholders from the community,

public and private sectors and

meets quarterly to bring together

the key stakeholders with the

will to improve health outcomes

across the Province.

Recently constructed regional Balimo Hospital funded from the Ok Tedi Tax Credit Scheme.



• repaired radio and cold chain

equipment at Kiunga Hospital,

Catholic Health Services and

Rumginae Hospital;

• 11 participants from all

health service agencies

participated in a two day

radio maintenance training

programme in November;

• commemorated World TB

day (24 March) in Kiunga and

Tabubil, with a community

programme to raise awareness

about the prevention and

treatment of TB; and

• commemorated World AIDS

day (1 December) in Kiunga

with a community programme

to raise awareness about the

prevention and treatment of HIV

and reducing stigma for people

living with HIV and AIDS.NFHSDP achievements in 2013 include:

• 16,100 outpatient services at Tabubil

Urban Clinic. This was an increase of over

1,000 consultations compared to 2012;

• 22 Maternal and Child Health (MCH)

patrols conducted in collaboration with

health service partners. MCH patrols

include immunising children, antenatal

checks, family planning clinics treating

sick people and school health visits;

• over 10,000 immunisations have been

administered. In addition to routine MCH

patrols with partner organisations, the

NFHSDP participated in the national

Supplementary Immunisation Activity in July;

• 6-weekly MCH outreach clinics from

Tabubil Urban Clinic to villages along the

Tabubil-Kiunga highway;

• participated in an integrated multi-

stakeholder response to a typhoid

outbreak in the Tabubil area in April;

• constructed a multi-purpose building

at Matkomnai Health Centre, a Catholic

Health Services-run facility;

• North Fly District Administrator assumed

the role of Chairperson of the North Fly

District Health Management Committee.

The committee was previously run as the

Programme Implementation Coordinating

Committee convened and chaired by

NFHSDP and has now evolved into a

broader forum for health sector coordination,

a significant achievement towards

sustainability in health sector governance;

• drafted an options paper for using mobile

health to address challenges in health

service delivery in North Fly District.

Recommendations will be considered and

implemented in 2014;

• one vehicle donated to Callan Services

to assist with their outreach services to

people with disabilities;

• new Tuberculosis (TB) ward, surgical

ward and morgue constructed at Kiunga

Hospital, and completed in April;

• assisted Catholic Health Services

to conduct Village Health Volunteer

Community Action and Participation

training in three villages in September;

• coordinated and participated in the

International Education Agency Couple’s

Counselling training in Kiunga in September;

• 23 health workers trained in administering

TB shots in December, a training

programme funded by NFHSDP;

• six rain water tanks installed at Kungim

Health Centre, in partnership with North

Fly District Health Services;

• attended a ceremony for the re-opening

of Mogulu Health Centre, for which

NFHSDP contributed building materials

in 2009;

• mobilisation activities with the

communities of Timinsiriap and

Rudmesuk which saw the villages adopt

the World Health Organisation endorsed

Healthy Village principles;

• 15 ventilated and improved pit

toilets constructed in Timinsiriap, a

collaborative effort between NFHSDP

and community members;


EDUCATIONOTML has been a long-term supporter of

the local schools and, through the PNGSDP

and OTDF, has constructed and refurbished

many new school classrooms and teacher’s

houses. Education is widely accepted by the

Western Province communities as a way their

children can improve their self-worth and a

pathway to obtaining quality employment and

a career. Provision of high quality education

is important for all residential employees who

raise their families in Tabubil. In Tabubil there

are the Primary and Secondary Schools.

In 2013, OTML provided funding for the

completion of new classrooms for years 11

and 12 at the Secondary school and these

classrooms were completed in time for the

2014 school intake.

In Tabubil, OTML also supported the

International School. The school was

recently managed by Star Mountains

Institute of Technology, a subsidiary of

the PNGSDP, which closed operations in

late 2013. OTML invited DWU to take over

management of the school, in a similar

private partnership to the Tabubil Hospital.

DWU is a premier university in PNG and has

strong strategic links with the education

primary sector. The school offers the

International Baccalaureate curriculum for

primary students aged three to 12 years

and a middle year’s programme for students

aged 12 to 16. The plan is to extend the

school programme to include classes up

to year 12. In 2014, the Memorandum

of Agreement will be finalised and the

management transition completed.

Other initiatives include DWU taking over

management of the Community Learning

Centre, which offers adult distance learning

up to year 12. Development of this centre

into a Flexible Learning centre will result in

DWU being able to offer flexible learning

diploma, degree and masters level courses.

Following a request from CMCA regarding

improving education through the Western

Province, OTDF facilitated the formation of

the Western Province Education Steering

Committee in collaboration with the Fly River

Provincial Government. The committee is

expected to meet quarterly and bring together

the key stakeholders with the aim to improve

the education sectors across the Province.

The Education Steering Committee had

its inaugural meeting in June 2013 and

is chaired by the Provincial Education

Adviser. By year-end a second meeting saw

members deliberate on an evaluation of 19

Expressions of Interest submitted to conduct

an education feasibility study, namely:

“To develop a Provincial Education

improvement programme with a focus on

elementary, primary and vocational education”.

Three companies were short listed and

approached to prepare a detailed proposal

by February 2014.

The Education Steering Committee also

agreed to return to the former centralised

schooling system created under the previous

Australian administration. Consequently,

OTDF took the opportunity to select model

schools in the Middle and South Fly and

partner with the Trinity Anglican School in

Cairns, OTML and the Liklik Skul Foundation

to deliver school resources, improve teacher

capacity and infrastructure. To date there

has been the installation of commercial solar

power at the Kuem and Nakaku Primary

schools funded by OTML, the delivery

of more than a tonne of school books,

stationery, craft and sporting equipment from

Trinity Anglican School and the rehabilitation

of the Kuem and Bosset elementary

classrooms by the Liklik Skul Foundation. In

2014, the Trinity Anglican School teachers

will visit Kuem for a fortnight during school

term to understand the needs of the school

and to subsequently develop a teacher

capacity-building plan.

The OTDF has been encouraging funding to

potential teachers and health workers with an

agreement with the FRPG to then return to

vacant positions in their respective regions.


MIDDLE AND SOUTH FLY HEALTH SERVICESDue to the success of the North

Fly Health Services Development

Programme, OTDF was invited

by the Western Province Health

Steering committee to complete

a health feasibility study to

investigate how to improve

Primary Health care in the Middle

and South Fly districts. Abt JTA

were selected by the committee

to deliver a comprehensive

health improvement programme

throughout all Middle and South

Fly CMCA villages over the next

five years, worth PGK 43 million

(USD 20 million). Abt JTA recently

completed a six-month baseline

study including visiting 65

villages and reviewing capacity

and infrastructure assessments

and an action plan for 2014,

prepared in consultation with

key stakeholders (Fly River

Provincial Government,

Churches and local communities).


OK TEDI DEVELOPMENT FOUNDATIONThe Ok Tedi Development Foundation (OTDF)

is a non-profit organisation established to

manage the delivery of projects for the people

of the CMCA in Western Province. OTDF

has proven to be successful in planning and

delivery of services, training and infrastructure

and is now the community provider of choice

for projects funded from CMCA Trust Funds,

The Western Province People’s Dividend

Trust Fund (WPPDTF) and the Women and

Children’s Funds. OTDF also takes on delivery

of OTML’s TCS projects.

OTDF works both independently on behalf

of the communities and also partners with

multi-sectoral stakeholders including the Fly

River Provincial Government, PNGSDP, The

PNG National Government and aid agencies

like the Australian Agency for International

Development (AusAID) to deliver a wide

range of community development and

infrastructure programmes.

OTDF has a team of 120 comprising both

full time employees and contractors. Within

the OTDF structure the three main groups to

support the delivery of services and projects

to the Western Province communities are:

• Regional Development – this group

engages in development projects that

benefit people living in the North, Middle

and South Fly Areas;

• Project Support Services – this group

manages services such as the Tax Credit

Scheme, Special Support Grants and

CMCA infrastructure projects; and

• Finance and Logistics – this group

comprises the CMCA Trust Administration

Team, OTDF Logistics, Finance and

Support teams.

In 2013, OTDF completed 285 Trust

Development Projects across the Province

worth PGK 14.1 million (USD 6.2 million).

The larger projects included:

• sponsorship of 1,869 students to attend

various education institutions across

PNG - PGK 3.3 million (USD1.5 million);

• building and housing infrastructure

improvements benefiting 305 families -

PGK 4.3 million (USD 1.9 million);

• Women and Children’s Programme -

PGK 478,992 (USD 210,725); and

• livelihood development programmes

(food security, forestry, water supply) -

PGK 601,874 (USD 264,825).

In 2013, PGK 135.8 million (USD 60.0 million) was available in the WPPTDF and four major

projects were approved by the committee for funding. These included:

Middle and South Fly CMCA Area Health Programme PGK 43.0 million (USD 18.9 million)

Pampenai Road Rehabilitation Project PGK 10.1 million (USD 4.4 million)

Ningerum to Nupmo Footbridge PGK 10.6 million (USD 4.7 million)

Aiambak to Lake Murray and Kasa Feeder Road Project PGK 61.3 million (USD 27.0 million)

Total PGK 125.0 million (USD 55.0 million)

Further information on OTDF activities can be found on the website: www.otdfpng.org and in

the OTDF Annual Report, 2013.


PNGSDPThe PNGSDP was established as an

Independent not-profit, special purpose

company with a mandate to apply OTML

dividends for infrastructure and other

sustainable projects are in the Western

Province and other regions of PNG.

PNGSDP had committed PGK 33.2 million

(USD 14.6 million) in funding to various

projects, including the Women and Children’s

fund, South Fly water project and other

projects to be delivered by OTDF. With the

freeze in funds subsequent to the cessation

as a shareholder of OTML, delivery of these

projects has been put on hold. It will be

important for OTML to work with the State

to release these funds from the PNGSDP to

honour the agreed funding commitments.

ECONOMIC CONTRIBUTION Part of OTML’s social responsibility is the

ability to make positive social and economic

contributions to the region and communities

in the Western Province. OTML is the single

largest business in the Western Province

and provides significant funds towards

sustainable socio-economic development.

To maintain the social license to operate the

Company has a commitment to comply with

various agreements. Development must be

undertaken in partnership with stakeholder

involvement including communities and

various levels of governments. OTML

contributes economically to the communities

both directly – through services and

infrastructure provided specifically for

community benefit and indirectly – through

facilitating community access to services and

infrastructure necessary for the business.

OTML’s economic contribution to PNG and

the Western Province economy is through

the following ways:

• royalties from sales of copper,

gold and silver product;

• salaries paid directly to employees;

• capital and operating expenditure to

suppliers of goods and services in PNG;

• payments under the various land and

community agreements;

• various business taxes including, company,

payroll, goods and services, TCS;

• donations and investments in community

development programmes; and

• investment in local and regional

infrastructure including roads, bridges,

jetties, etc.

A summary showing all payments over the

past five years is shown in the following Table.

The total payments to all entities were lower

in 2013 than for the previous four years. Due

to declining ore grades, metal prices and

considerable operational down time in 2013,

the Company’s profit in 2013 was much lower

than in 2012. During 2013, the mine moved

into the first phase of commencing the mine

continuation with large stripping of waste rock

from the Mt Fubilan pit. No dividends were

paid. Salaries and wages were higher due to

redundancy payouts.

OTDF SUPPORT FOR CMCASThe CMCA has many small

enterprises wanting to start

business opportunities as well

as primary industry opportunities

thanks to improved transport

infrastructure, agriculture

and forestry projects being

delivered by OTDF. To support

small businesses startups

and cooperatives, OTDF has

recruited a Team Leader and

three staff members to fully

support communities from 2014.

Other CMCA projects that the

OTDF has facilitated include

financial literacy and agriculture

(e.g. rice farming, aquaculture),

agroforestry (eaglewood) and

livestock training (e.g. Muscovy

duck husbandry) across the

CMCA as well as the Women and

Children’s Programme delivery

(e.g. cooking and sewing).

CMCA small business Muscovy duck husbandry project.



OTML contributions to Western Province and the PNG Economy in 2013

PGK MILLIONS USD MILLIONS

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Taxes & levees paid to PNG Government 310.0 919.5 1,173.5 444.8 261.5 112.8 337.3 496.0 214.3 114.6

Dividend Paid

- PNGSDP 485.4 939.0 490.4 458.3 - 176.7 344.4 221.9 221.9 -

- Government 140.0 303.9 141.6 132.3 - 52.5 110.0 64.1 64.1 -

- Fly River Provincial Government, MRA 140.0 237.7 141.6 132.3 - 52.5 85.0 64.1 64.1 -

765.4 1,480.6 773.6 722.9 - 281.7 539.4 350.0 350.0 -

Royalty Payment

- Western Provincial Government 33.6 46.8 42.9 32.7 25.1 12.2 17.2 18.1 15.8 11.0

- Land Owners 33.6 46.8 42.9 32.7 25.1 12.2 17.2 18.1 15.8 11.0

Less: Royalty tax - Land Owners (1.7) (2.3) (2.1) (1.6) (1.2) (0.6) (0.8) (0.9) (0.8) (0.5)

65.4 91.3 83.7 63.8 49.0 23.8 33.5 35.4 30.7 21.5

Tax Credit Scheme (TCS)

- Health 17.5 8.8 2.9 5.6 0.9 6.4 3.2 1.2 2.7 0.4

- Education 7.8 12.4 11.8 0.1 6.7 2.8 4.5 5.0 0.05 2.94

- Roads, bridges, airports 0.6 11.9 11.5 0.2 6.2 0.2 4.4 4.9 0.1 2.7

- Utilities 14.7 13.7 16.2 0.1 11.9 5.4 5.0 6.9 0.0 5.2

40.6 46.8 42.4 6.0 25.7 14.8 17.2 17.9 2.9 11.3

Goods Purchases in PNG 284.2 434.7 286.8 313.3 294.0 103.4 159.4 121.2 150.9 128.8

PNG Contractors 1,025.3 503.7 507.7 483.0 441.3 373.2 184.8 214.6 232.7 193.4

Local training costs 6.6 7.6 8.6 8.0 8.1 2.4 2.8 3.6 3.9 3.5

Salaries and wages 302.8 315.9 202.6 209.4 460.2 110.2 115.9 85.6 101.1 190.8

TOTAL 2,800.3 3,800.1 3,078.9 2,251.2 1,539.8 1,022.4 1,390.2 1,324.4 1,086.5 663.9



ROYALTY PAYMENTS In 2013, OTML paid PGK 49 million (USD 22 million) in royalties based on the copper

production. The royalties were distributed as follows to the various recipients:

Western Provincial Government PGK 25.1 million (USD 11.2 million)

Landowners PGK 25.1 million (USD 11.2 million)

National Government (IRC withholding tax) PGK (1.2) million (USD -0.4 million)

An annual payment of PGK 34.8 million (USD 15.3 million) was also incurred for the Kiunga to

Tabubil road maintenance.

COMPENSATION PAYMENTSOTML makes annual compensation payments. These payments typically cover payment for

the various leases the mine and its infrastructure overlay, general compensation payments to

CMCA, donations, mine landowner projects, environmental and other general compensation.

In 2013 compensation payments totalled PGK 72.8 million (USD 32.0 million).

CMCA PAYMENTS The CMCA provides specific funding on an annual basis to the 156 CMCA villages. The

funding includes reparation for the mining impacts on the receiving environment. The

Agreement requires OTML to seek consent prior to making material changes to its operations

and make investment and development payments through the eight Trust Regions and

six Mine Villages. To mobilise the Trusts, the VPC are empowered to identify and prioritise

sustainable development projects. The Trustees of each Trust meet every quarter to approve

new projects submitted by the VPC’s and to review progress of projects under construction.

In 2013 the following funds were deposited to the various groups and Trusts accounts:

Mine Landowners (6 village communities) PGK 2.68 million (USD 1.18 million)

Development Fund PGK 15.96 million (USD 7.02 million)

Women & Children’s Fund PGK 4.91 million (USD 2.16 million)

Investment Fund PGK 7.19 million (USD 3.16 million)

Special Compensation PGK 22.18 million (USD 9.76 million)

Logi, Kawok, Komokpin Villages PGK 1.83 million (USD 0.81 million)

TOTAL PGK 54.75 million (USD 24.09 million)


TAX CREDIT SCHEME The Tax Credit Scheme (TCS) was established by the PNG National Government in 1996

to deliver infrastructure and development projects to the Province in which the resource

company operates. This funding stream is poorly understood and is often thought to be

the resource developer’s funds, where in fact it is the National Government’s direct funding

for projects, from the taxes collected in the Province where they were generated. The TCS

guidelines issued by the Internal Revenue Commission define the types of projects that

qualify for TCS funding. The funding is based on the lesser of the income tax payable for the

year or 0.75% of assessable income.

OTML’s TCS was established in 1997 and has provided significant development and impact

project funding to the Western Province and Sandaun Province worth circa PGK 287.7 million

(USD 115 million). In 2013, the OTML TCS contribution was PGK 25.7 million (USD 11.3 million).

The projects included:

HEALTH

Balimo Hospital – Redevelopment (Stage 2) PGK 0.9 million (USD 0.4 million)

EDUCATION

Oksapin High School Development Project PGK 3.3 million (USD 1.4 million)

Telefomin High School Repair & Maintenance PGK 2.8 million (USD 1.3 million)

Raiakam Primary School Development PGK 0.6 million (USD 0.3 million)

ROADS, BRIDGES, AIRPORTS & BUILDINGS

Rehabilitation of existing Jetties and one new Jetty PGK 6.2 million (USD 2.7 million)

UTILITIES

Kiunga Town Water Supply Upgrade PGK 11.9 million (USD 5.2 million)

TOTAL PGK 25.7 million (USD 11.3 million)

CMCA women’s small business sewing training project.

LOCAL BUSINESS DEVELOPMENTOTML is a major customer for

local businesses who can provide

a reliable and competitive

service. Local business is a very

important industry that provides

direct employment and services

to OTML and the broader

community. To be sustainable in

the longer term, local businesses

need to diversify and develop a

larger customer base rather than

just rely on OTML.

OTML’s Contracts and

Procurement department

engages over 40 local businesses

with small to medium and large

contracts. Annually, over PGK

294 million (USD 130 million)

is being awarded in contracts

to PNG businesses. The local

businesses that have been

proven suppliers usually have

well developed management and

governance frameworks which

provide them with the capacity

to be awarded larger and more

complex contracts with OTML.


With the mine continuation

reducing production and costs

by approximately 30% into the

future, a review of the impact on

local businesses identified the

following issues:

• there are many small

businesses competing

against each other offering

the same services, and with

limited capacity;

• the larger, well-performing

businesses do not consistently

declare dividends and local

shareholders miss out,

especially in joint ventures and

partnerships; and

• local shareholding structures

are not clearly defined for

landowner businesses.

In the future, local businesses

will not be immune to an overall

reduction in purchasing from

OTML and the challenge going

forward for OTML is to review its

contractor local businesses and

implement a strategy that still

upholds its social responsibility

without compromising viability.

There are a number of options

that the OTML and OTDF

business teams are reviewing

to ensure that the Small and

Medium Enterprises (SME)

supply chain remain viable, are

dependable business partners

with OTML and the underlying

shareholders receive dividend

returns from the business profits.


In 2013, there were 2,154 service contracts (e.g. labour, plant and equipment hire, etc.)

awarded to PNG companies which was 84% of all contracts. The overall percentage value

was 49% of total value. The total value of service contracts was PGK 441.3 million

(USD 194.2 million). Goods purchased in PNG totalled PGK 294.0 million (USD 129.4 million).

The breakdown of purchase of goods by location is shown in the table below.

ORIGIN VALUE IN PGK VALUE IN USD

Western Province, PNG 50,021,685 22,009,541

National Papua New Guinea 244,006,605 107,362,906

Overseas 390,395,796 171,774,150

TOTAL 684,424,086 301,146,597

Breakdown of Purchase of Goods in Western Province, PNG

LOCAL PURCHASES IN WESTERN PROVINCE VALUE IN PGK VALUE IN USD

Daru 57,991 25,516

Kiunga 3,963,405 1,743,898

Tabubil 46,000,289 20,240,127

TOTAL 50,021,685 22,009,541


SOCIALLY RESPONSIBLE PLANNING FOR 2014The Community Relations Strategic Plan

outlines the programme planned for

deployment in 2014. The plan includes:

• improvement of functionality of the

Integrated Community Development

Management System (ICDMS) and staff

training. This will include a review and

update of all Community Relations (CR)

procedures and development of an

updated CR manual. This will support the

overall CR strategies and objectives;

• implementation of a CR document control

and data management system that meets

data collection and storage requirements

for IFC Performance Standards;

• Tabubil household survey. As part of the

mine continuation Social Management Plan

a commitment to update the 2009 Tabubil

household survey was recommended

and will provide updated social data for

assessment and future planning;

• complete an internal audit against

ISO26000: Guidance on Social

Responsibility. This standard comprises

seven core subjects aimed at identifying

and maintaining a social license to operate;

• complete a Pilot Social Impact

Assessment review of a village affected

in Middle Fly River by overbank flooding

and quantify against social mapping

and land-use criteria. The Pilot will be

used to develop and test social and land

mapping tools for a future wider review

and assessment of impacted villages; and

• delivery of Community Development and

infrastructure projects through OTDF.

Tabubil High School start of term student intake.


FINANCE

Breakdown of Contributions to the PNG Economy 2011 2012 2013

% % %

National Government, Tax Credit Scheme, Product levy 35 18 15

Dividend (National Government and PNGSDP) 23 27 0

PNG goods and services 16 20 27

OTML contractors 15 22 30

Employment 6 8 23

Royalty 3 2 2

Community compensation 2 3 3

Sales Revenue by Commodity (Million)2011 2012 2013 2011 2012 2013

PGK PGK PGK USD USD USD

Copper 2,981 1,960 1,602 1,241 943 706

Gold 1,638 1,352 1,091 692 650 482

Silver 90 52 45 37 25 20

FinaIisation/revaluation -173 -4 -68 -75 -3 -32

Total sales revenue 4,536 3,360 2,670 1,895 1,615 1,176

THE FOLLOWING INFORMATION SUMMARISES THE ECONOMIC PERFORMANCE FOR THE 2013 YEAR. THE FINANCIAL STATEMENTS HAVE BEEN EXTERNALLY AUDITED BY PRICEWATERHOUSECOOPERS PNG. DURING THE 2013 YEAR THERE WAS NO DIRECT FINANCIAL ASSISTANCE IN THE FORM OF TAX SUBSIDIES, ROYALTY RELIEF, GRANTS OR FINANCIAL INCENTIVES RECEIVED BY THE COMPANY FROM THE PNG GOVERNMENT.

New Caterpillar 793F truck tray enroute to Mt Fubilan mine.


PRODUCT STEWARDSHIPOTML produces copper-gold-silver in concentrate which is sold to smelters or refineries

in Asia or Europe. The OTML marketing division is located in Brisbane, Australia and has

formalised agreements with customers in Japan, the Philippines, South Korea, India and

Germany. Despite a decrease in output in 2013, customers remain committed to retaining

contracts to purchase copper concentrate due to the consistent quality and to OTML’s

reliability as a supplier.

OTML’s commitment to product stewardship is from the processing plant to the storage

vessel from where international ships load the copper concentrate for export markets.

OTML’s product management systems ensure that the concentrate chain-of-custody follows

the product from the processing mill via the pipeline to the drying and storage facilities

at Kiunga. From Kiunga the product is blended to meet specific customer contractual

specifications and then loaded onto copper feeder vessels where it is shipped to the

storage silo vessel, which is either moored in the Gulf of Papua or in Port Moresby harbour,

depending on seasonal weather factors.

OTML’s copper concentrate is considered to be clean by world standards with fluorine as

the only potential trace element of concern. The production process is carefully monitored to

ensure the copper concentrate product meets customer’s contractual specifications.

There were no outside penalties applied to OTML shipped concentrate product and no

external customer complaints in 2013.

Exports in 20132011 2012 2013

Concentrate (t) 553,574 459,335 394,622

Contained copper (t) 146,336 121,432 100,212

Contained gold (oz) 456,869 395,820 352,050

Contained silver (oz) 1,189,033 889,381 929,380

Exports by Recipient Countries

2011 2012 2013CHANGE

(2012 TO 2013)

% % % %

Japan 43.8 64.3 43.6 -32.2

South Korea 15.5 6.5 12.6 93.8

Philippines 17.3 7.7 23.6 206.5

Germany 3.6 12.9 5.1 -60.5

India 14.4 8.6 10.1 17.4

Indonesia 5.4 0 5.0


RESULTS: INCOME STATEMENT2011 2012 2013 2011 2012 2013

PGK’MILLION PGK’MILLION PGK’MILLION USD’MILLION USD’MILLION USD’MILLION

Sales revenue 4,536 3,360 2,670 1,895 1,615 1,176

Other operating income 20 0 5 8 0 2

Marketing costs -271 -263 -274 -114 -127 -120

Cash operating costs -1,918 -1,468 -1,526 -719 -768 -772

Change in product inventories -66 93 -47 -19 31 -5

Depreciation and amortisation -471 -470 -614 -187 -116 -245

Profit from operations 1,830 1,252 214 864 635 36

Net finance costs 18 -8 7 -4 -1

Profit from ordinary activities before tax 1,848 1,244 212 871 631 35

Income tax expense -604 -331 -31 -250 -159 -18

Net profit for the year 1,244 913 181 621 472 17

RESULTS: BALANCE SHEET2011 2012 2013 2011 2012 2013

PGK’MILLION PGK’MILLION PGK’MILLION USD’MILLION USD’MILLION USD’MILLION

Assets

Cash and cash equivalents 506 448 423 237 214 167

Trade and other receivables 314 212 295 147 101 117

Inventories 385 483 453 160 205 201

Income tax refundable 0 49 77 0 24 31

Other 38 30 40 19 15 16

Total current assets 1,243 1,222 1,288 563 559 532

Financial assurance fund 462 483 577 217 230 228

Property, plant and equipment 1,299 1,682 1,819 545 740 758

Restoration and rehabilitation 170 121 78 63 47 32

Other 128 14 297 53 8 117

Total non-current assets 2,059 2,300 2,771 878 1,025 1,135

Liabilities

Trade and other payables 116 156 362 55 74 143

Income tax payables -73 0 0 -34 0 0

Derivative financial instrument 34 17 0 69 9 0

Provisions 147 118 60 15 56 24

Total current liabilities 224 291 422 105 139 167

Deferred income tax liability 167 125 259 78 60 103

Restoration and rehabilitation 484 476 577 227 227 228

Derivative financial instrument 16 0 0 8 0 0

Provisions 21 23 0 10 11 0

Total non-current liabilities 688 624 836 323 298 331

Net assets 2,390 2,607 2,801 1,013 1,147 1,169

Share capital 195 195 195 234 234 234

Reserves -40 -13 0 -18 -5 0

Retained earning 2,235 2,425 2,606 797 918 935

Total equity 2,390 2,607 2,801 1,013 1,147 1,169

FINANCE CONTINUED


PRODUCTIONOverall production during the year was

disappointing due to a high number of lost

production days brought about by flooding

at the mine pit and breakdown of major plant

equipment. As a mitigating action some old

low grade stockpiles were processed to

maintain throughput. Last quarter production

was also impacted by high fluorine content.

Overall mill throughput was 16% below

budget whilst concentrate production was

9% below budget.

REVENUEGross revenues were 34% down in USD

terms (25% in Kina terms) against budget

mainly due to lower shipments and falling

metal prices. Concentrate shipments were

18% down on budget due to the lower

production and a buildup of inventories at

year end, whilst realised copper and gold

prices were 8% and 16% below budget

respectively. The strengthening USD

bolstered Kina revenues.

OPERATING COSTSAlthough production during the year was

significantly lower than budget, Kina

operating costs were over budget by 16%.

The main causes was the redundancy

payout expenses of PGK 224 million (USD

80 million) in December. Excluding this

abnormal item, other operating costs were

actually PGK 159 million (USD 70 million)

lower than budget, reflecting an increased

focus on operating costs in the changing

economic environment.

RECEIVABLESThe higher receivables at balance date

reflect the timing of shipments with three

shipments in December and the last BOL

dated 28 December 2013.

INVENTORYPhysical concentrate stocks were high

at balance date due to the high fluorine

product being held back, although the strong

December production volumes reduced unit

costs. A provision of PGK 28 million (USD 12

million) was raised to cover the fluorine issue.

EQUITYNil reserves at year end as small limited hedging contracts expired in mid-2013.

No dividends were declared during the year due to the reduced revenues, profit and the

resultant impact on cash.

Five-Year Summary of Earnings Before Interest and Tax (PGK) 2009 2010 2011 2012 2013

EBIT 2,252 2,869 1,847 1,244 211

EBIT Margin 56% 56% 41% 37% 8%

Five-Year Summary of CL Cash Cost (USD)2009 2010 2011 2012 2013

Copper Cash Cost 1.54 1.9 2.33 2.99 3.49

Metal Credits -1.47 -1.75 -2.35 -2.50 -2.21

Cash Cost 0.07 0.15 -0.02 0.49 1.28

NON-CURRENT ASSETSThe Financial Assurance Fund

(FAF) increased from PGK 483

million to PGK 577 million due to

the strengthening of USD against

Kina, with no significant change

in the USD 228 million value of

the portfolio.

Significant capital expenditure

in the year included west wall

stripping and payments for new

mining equipment in Capital work

in progress. Higher depreciation

was charged during the year due

to significant capital expenditure

in 2012 and 2013, offset by

continuation of mine life for

depreciation purposes to 2025.

CURRENT LIABILITIESPayables increased due to the

tax withheld for the redundancy

payments made in December.

Provisions decreased mainly due

to lower Share in Success Scheme

(SISS) charges for the year.

NON-CURRENT LIABILITIESNo change in the estimated

Restoration & Rehabilitation

provision at PGK 582 million (USD

230 million), with unwinding of the

discount offset by the significant

exchange rate movement.



CONTENTS PAGE NO.

Annual Report of the Directors to the Shareholders 92

Independent Auditor’s Report to the Shareholders 94

FINANCIAL STATEMENTS:

Income Statement 96

Statement of Comprehensive Income 96

Statement of Changes in Equity 97

Statement of Financial Position 98

Statement of Cash Flows 99

Notes to and forming part of the Financial Statements 101

FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013



OK TEDI MINING LIMITED AND ITS SUBSIDIARIES

ANNUAL REPORT OF THE DIRECTORS TO THE SHAREHOLDERS FOR THE YEAR ENDED 31 DECEMBER 2013

DIRECTORS’ REMUNERATIONThe following Directors’ fees and remuneration were paid during the year:

2013 K’000

2012K’000

Mr N. Parker 3,353 2,392

Mr A. Roberts 270 560

4,518 2,952

THE DIRECTORS ARE PLEASED TO PRESENT THEIR REPORT ON THE AFFAIRS OF THE GROUP, INCLUDING THE FINANCIAL STATEMENTS, FOR THE YEAR ENDED 31 DECEMBER 2013.

ACTIVITIESDuring the year, the Group has continued its principal activity of mining and processing copper ore. Shipments for the year totalled 394,622 (2012: 459,335) dry metric tonnes of copper concentrate.

FINANCIAL RESULTSThe Group made a profit after tax of K180,744,000 for the year (2012 of K913,450,000). In US dollar terms the result was a profit after tax of USD16,835,000 (2012 of USD471,799,000). The profit was low for the year as compared to previous year mainly due to low revenue attributed to lower metal prices and lower shipments as a result of lower production due to the shutdown of SAG2 and flooding in the pit.

DIRECTORSThe Directors as at balance date were:

Mr D. Vele (Chairman) Mr N. Parker (Managing Director/CEO) Mr M. Gumoi Mr J. Weiss

The Company Secretaries as at balance date were:

Mr E. Tajonera Mr C. Clark

DIVIDENDSThe Directors did not declare and pay any dividends during the year (2012: K3.75: USD1.82 per share / 2012: K722,946,000 or USD350,000,000).

AUDITORSDetails of amounts paid to the auditors PricewaterhouseCoopers for audit and other services are shown in note 3(a) to the financial statements.

DONATIONSThe total amount of donations made by the Company is stated in note 3(a) to the financial statements.

SHARE REGISTERDuring the year, the 122,200,000 ordinary shares in the Company held by PNG Sustainable Development Program Limited were cancelled and 122,200,000 new ordinary shares were issued to the Independent State of PNG consequent to the 10th Supplementary Agreement passed by Parliament.

ACCOUNTING POLICIESAny changes in accounting policies are stated in note 1 to the financial statements.

INTEREST REGISTERNo entries were made in the interest register in 2013.


REMUNERATION OF EMPLOYEESRemuneration paid to employees during the year, in excess of K100,000 in bands of K10,000 were:

SALARY BANDS K’000

NO. OF EMPL.


NO. OF EMPL.


NO. OF EMPL.


NO. OF EMPL.

100-109 107 400-409 4 720-729 2 1,110-1,119 1

110-119 104 410-419 8 730-739 4 1,120-1,129 1

120-129 81 420-429 11 740-749 1 1,150-1,159 2

130-139 90 430-439 11 760-769 1 1,160-1,169 1

140-149 75 440-449 10 770-779 1 1,170-1,179 1

150-159 77 450-459 4 780-789 3 1,190-1,199 1

160-169 72 460-469 5 790-799 2 1,230-1,239 1

170-179 71 470-479 1 800-809 2 1,300-1,309 1

180-189 69 480-489 1 810-819 2 1,310-1,319 1

190-199 84 490-499 5 820-829 2 1,320-1,329 2

200-209 77 500-509 4 830-839 1 1,340-1,349 1

210-219 90 510-519 5 840-849 1 1,360-1,369 1

220-229 85 520-529 3 850-859 4 1,400-1,409 1

230-239 57 530-539 4 860-869 4 1,420-1,429 2

240-249 65 540-549 5 870-879 1 1,450-1,459 2

250-259 61 550-559 2 880-889 2 1,500-1,509 1

260-269 49 560-569 5 890-899 2 1,560-1,569 1

270-279 53 570-579 2 900-909 1 1,570-1,579 3

280-289 44 580-589 3 910-919 2 1,590-1,599 1

290-299 44 590-599 2 920-929 1 1,630-1,639 1

300-309 34 600-609 4 930-939 2 1,690-1,699 1

310-319 35 610-619 1 940-949 1 1,780-1,789 1

320-329 23 620-629 8 960-969 2 1,950-1,959 1

330-339 19 630-639 1 980-989 2 2,070-2,079 1

340-349 27 640-649 1 990-999 1 2,120-2,129 1

350-359 18 660-669 3 1,000-1,009 2 2,330-2,339 1

360-369 17 670-679 5 1,010-1,019 1 3,010-3,019 1

370-379 8 680-689 2 1,020-1,029 1 3,350-3,359 1

380-389 14 690-699 3 1,030-1,039 1

390-399 10 710-719 1 1,090-1,099 1

Signed for, and on behalf of, the Board on 28 February 2014.

DIRECTOR DIRECTOR


INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF OK TEDI MINING LIMITED

REPORT ON THE FINANCIAL STATEMENTSWe have audited the accompanying financial statements of Ok Tedi Mining Limited (the Company), which comprise the statements of financial position as at 31 December 2013, the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 31 December 2013 or from time to time during the financial year.

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTSThe Directors are responsible for the preparation of these financial statements such that they give a true and fair view in accordance with generally accepted accounting practice in Papua New Guinea and the Companies Act 1997 and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal controls relevant to the Company and the Group’s preparation of financial statements that give a true and fair view of the matters to which they relate, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


OPINIONIn our opinion, the accompanying financial statements:

1. comply with International Financial Reporting Standards and other generally accepted accounting practice in Papua New Guinea; and

2. give a true and fair view of the financial position of the Company and the Group as at 31 December 2013, and their financial performance and cash flows for the year then ended.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSThe Companies Act 1997 requires in carrying out our audit that we consider and report on the following matters. We confirm in relation to our audit of the financial statements for the year ended 31 December 2013:

1. we have obtained all the information and explanations that we have required;

2. in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records; and

3. other than in our capacity as auditor, we have no relationship with, or interests in the Company or any of its subsidiaries. These services have not impaired our independence as auditor of the Company and the Group.

RESTRICTION ON DISTRIBUTION OR USEThis report is made solely to the Company’s shareholders, as a body, in accordance with the Companies Act 1997. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditor’s report and for no other purpose. We do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

PRICEWATERHOUSECOOPERS

STEPHEN BEACHPartner Registered under the Accountants Registration Act 1996

Port Moresby 5 March 2014



INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2013

COMPANY CONSOLIDATED

NOTE2013

K’0002012

K’0002013

K’0002012

K’000

CONTINUING OPERATIONSOperating Revenue:

Sales revenue 2(a) 2,670,179 3,359,570 2,670,179 3,359,570

Other operating income 2(b) 4,931 220 37,305 254

Total Operating Revenue 2,675,110 3,359,790 2,707,484 3,359,824

Operating costs 3(a) (2,461,851) (2,107,627) (2,492,957) (2,108,066)

Profit from Operating Activities 213,259 1,252,163 214,527 1,251,758

Finance costs 3(b) (4,976) (14,126) (5,132) (14,126)

Finance income 3(b) 3,071 6,306 3,164 6,711

Profit Before Income Tax 211,354 1,244,343 212,559 1,244,343

Income tax expense 4 (30,610) (330,893) (30,645) (331,088)

Net Profit for the year 180,744 913,450 181,914 913,255

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2013

Net Profit for the year 180,744 913,450 181,914 913,255

Other Comprehensive Income:

Changes in fair value of derivative financial instruments 18,864 38,016 18,864 38,016

Tax effect of change in fair value of derivative financial instruments (5,301) (10,891) (5,301) (10,891)

Other Comprehensive Income Net of Tax 13,563 27,125 13,563 27,125

Total Comprehensive Income for the year 194,307 940,575 195,477 940,380

This statement is to be read in conjunction with the Notes on pages 101 to 124.



STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2013


NOTE

ORDINARYSHARES

K’000

HEDGERESERVE

K’000

RETAINEDEARNINGS

K’000TOTALK’000

RETAINEDEARNINGS

K’000TOTALK’000

BALANCE AT 31 DECEMBER 2011 195,102 (40,688) 2,234,779 2,389,193 2,230,845 2,385,259

Comprehensive Income

Net Profit for the year - - 913,450 913,450 913,255 913,255

Other Comprehensive Income - 27,125 - 27,125 - 27,125

Prior Period Adjustment - - - - 916 916

Transactions with owners

Dividends paid 20 - - (722,946) (722,946) (722,946) (722,946)

BALANCE AT 31 DECEMBER 2012 195,102 (13,563) 2,425,283 2,606,822 2,422,070 2,603,609

Comprehensive Income

Net Profit for the year - - 180,744 180,744 181,914 181,914

Other Comprehensive Income - 13,563 - 13,563 - 13,563

Transactions with owners

Dividends paid 20 - - - - - -

BALANCE AT 31 DECEMBER 2013 195,102 - 2,606,027 2,801,129 2,603,984 2,799,086




STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2013


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

CURRENT ASSETS:Cash and cash equivalents 5 423,470 447,924 570,902 490,110

Trade and other receivables 6 295,164 211,761 298,158 213,822

Inventories 7 452,826 483,116 452,826 483,116

Income tax refundable 14 77,214 49,443 78,087 48,304

Other current assets 8 39,610 30,263 39,610 30,263

Total Current Assets 1,288,284 1,222,507 1,439,583 1,265,615

NON-CURRENT ASSETS:Property, plant and equipment 9 1,344,413 1,521,655 1,344,585 1,521,867

Mine development costs 10 475,017 160,922 475,017 160,922

Restoration and rehabilitation 11 78,240 120,621 78,240 120,621

Deferred income tax asset 16 219,026 204,478 218,639 206,412

Investment in subsidiaries 24(c) 26 26 - -

Financial assurance fund 25 576,817 482,584 576,817 482,584

Other non-current assets 12 77,262 14,128 77,262 14,128

Total Non-Current Assets 2,770,801 2,504,414 2,770,560 2,506,534Total Assets 4,059,085 3,726,921 4,210,143 3,772,149

CURRENT LIABILITIES:Trade and other payables 13 361,778 156,490 367,874 164,456

Provisions 15 60,347 117,829 204,681 136,543

Derivative financial instruments 26(b)(ii) - 17,452 - 17,452

Total Current Liabilities 422,125 291,771 572,555 318,451

NON-CURRENT LIABILITIES:Deferred income tax liability 16 258,687 329,198 261,358 333,265

Provisions 17 - 22,909 - 40,603

Restoration and rehabilitation 18 577,144 476,221 577,144 476,221

Total Non-Current Liabilities 835,831 828,328 838,502 850,089Total Liabilities 1,257,956 1,120,099 1,411,057 1,168,540Net Assets 2,801,129 2,606,822 2,799,086 2,603,609

SHAREHOLDERS’ EQUITY:Ordinary shares 19 195,102 195,102 195,102 195,102

Hedge reserve - (13,563) - (13,563)

Retained earnings 2,606,027 2,425,283 2,603,984 2,422,070

Total Shareholders’ Equity 2,801,129 2,606,822 2,799,086 2,603,609

These financial statements were authorised for issue by the Board on 28 February 2014

For, and on behalf of, the Board.

DIRECTOR DIRECTOR




STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2013


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

CASH FLOWS FROM OPERATING ACTIVITIES:Receipts from customers 2,586,776 3,461,725 2,648,885 3,461,761

Payments to suppliers and employees (1,671,187) (1,683,412) (1,752,476) (1,684,181)

Cash Generated From Operations 915,589 1,778,313 896,409 1,777,580

Interest received 3,071 6,306 3,618 6,340

Realised gold & copper hedge settlements 26(b)(ii) (14,148) (35,754) (14,148) (35,211)

Fund received from trustee - - 137,673 -

Royalty payments (30,143) (65,454) (30,143) (65,454)

Production levy paid (5,990) (10,530) (5,990) (10,530)

Amounts paid to compensation trust funds 17(b) (12,643) (13,497) (12,643) (13,497)

Amounts paid under CMCA 15(a) (69,639) (54,154) (69,639) (54,154)

Amounts paid to Shares in Success 24(b) (52,884) (81,238) (66,678) (99,320)

Income tax paid 14 (104,966) (229,473) (104,966) (229,473)

Net Cash Generated From Operating Activities 628,247 1,294,519 733,493 1,275,738

CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property, plant and equipment 9 (389,719) (467,903) (389,719) (467,903)

Mine development present costs 10 (318,472) (147,812) (318,472) (147,812)

Proceeds from sale of property, plant and equipment 214 425 214 436

Financial Assurance Fund investment 25 - (14,484) - (14,484)

Net Cash Used In Investing Activities (707,977) (629,774) (707,977) (629,763)

CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid 20 - (722,946) - (722,946)

Net Cash Used In Financing Activities - (722,946) - (722,946)

Net increase/(decrease) in cash and cash equivalents (79,730) (58,201) 25,516 (76,971)

Cash and cash equivalents at beginning of the year 447,924 506,125 490,110 567,081

Foreign exchange effect on foreign currency balances 55,276 - 55,276 -

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 5 423,470 447,924 570,902 490,110



RECONCILIATION OF NET PROFIT AFTER INCOME TAX TO NET CASH GENERATED FROM OPERATING ACTIVITIES


2013K’000

2012K’000

2013K’000

2012K’000

Net Profit For The Year 180,744 913,450 181,914 913,255

Add back non cash and non-operating items:

Depreciation of property, plant and equipment 566,044 244,761 566,044 246,034

Amortisation of restoration and rehabilitation 42,199 49,703 42,199 49,703

Amortisation of Lower Ok Tedi Compensation 182 463 182 463

Amortisation of pre-production expenditure 4,377 4,397 4,377 4,397

Non-cash finance charges - - - -

Non-cash interest – Financial Assurance Fund (4,976) (14,126) (4,976) (14,125)

(Gain)/loss on sale of property, plant and equipment (214) (95) (214) (95)

Net unrealised exchange (gain)/loss (117,436) (12,322) (117,398) (12,042)

Unrealised hedging (gain)/loss - 7,695 - 7,695

Provision for inventory obsolescence 39,237 10,195 39,237 10,195

Changes in Operating Assets and Liabilities:

(Increase)/decrease in trade and other receivables (83,403) 119,334 (84,336) 122,259

(Increase)/decrease in inventories 30,290 (97,625) 30,290 (97,625)

Increase/(decrease) in trade and other payables 205,288 30,717 203,418 26,145

Increase/(decrease) in provisions and others (121,255) (40,213) (13,327) (57,950)

(Increase)/decrease in income tax payable (27,771) 23,489 (29,783) 24,577

Increase/(decrease) in deferred income tax (85,059) 54,696 (84,134) 52,852

Net Cash Generated from Operating Activities 628,247 1,294,519 733,493 1,275,738



STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED



NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013

1. PRINCIPAL ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(A) BASIS OF PREPARATION

These general purpose consolidated financial statements of Ok Tedi Mining Limited and its subsidiaries have been prepared in accordance with the Papua New Guinea Companies Act 1997 and comply with International Financial Reporting Standards (IFRS) and other generally accepted accounting practice in Papua New Guinea. All amounts are stated in Papua New Guinea Kina (K), the functional currency of the Company, rounded to the nearest thousand Kina.

The accounts have been prepared on the basis of historical costs and do not take into account changing money values or current valuations of non-current assets, other than for most financial instruments which are measured at fair value. Cost is based on the fair values of the consideration given in exchange for the assets.

The preparation of the financial statements in conformity with IFRS requires the use of certain accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 1(c).

The Directors have the power to amend these financial statements after its issue.

Changes in Accounting Policies and Disclosures

a) Standards, amendment and interpretations effective in 2013

The following new standards and amendments were applicable for the first time during the accounting period beginning 1 January 2013:

• Amendment to IAS 1, ‘Financial statement presentation’ (effective 1 July 2012) regarding other comprehensive income requires entities to separate items presented in other comprehensive income into two groups, based on whether they may be recycled to profit or loss in the future. This will not effect the measurement of any items recognised in the balance sheet or profit and loss in the current period.

• Amendments to IAS 19, ‘Employee benefits’ (effective 1 January 2013) require the recognition of all re-measurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of the so-called ‘corridor’ method) and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. The Group does not have a defined benefit pension scheme.

• IFRS 10, ‘Consolidated Financial Statements’ (effective 1 January 2013) replaces all of the guidance on control and consolidation in IFRS 27 Consolidated and Separate Financial Statements, and SIC 12 Consolidation – Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent/principal relationships. Management do not expect the new standard to have any impact on the existing group.

• IFRS 11, ‘Joint arrangements’ (effective 1 January 2013) introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. As the Group is not a party to any joint arrangements, this standard will not have any impact on its financial statements.

• IFRS 12, ‘Disclosures of interests in other entities’ (effective 1 January 2013) includes the disclosure requirements for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. Application of this standard will not affect any of the amounts recognised in the financial statements, as the Group has no interest in other entities.

• IFRS 13, ‘Fair value measurement’ (effective 1 January 2013) aims to improve the consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards. The Group does not use fair value measurement extensively and it is unlikely the new rules will have a significant impact on any amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements.

• IAS 27 (revised 2011) ‘Separate financial statements’ (effective 1 January 2013) is now a standard dealing solely with separate financial statements. Application of this standard will not affect any of the amounts recognised in the consolidated or parent entity financial statements but may impact the type of information disclosed in relation to the parent’s investments in the separate parent entity financial statements.

• IAS 28 (revised 2011), ‘Associates and joint ventures’ (effective 1 January 2013) includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The Group is not a party to any joint ventures.

• Amendment to IFRS 7, ‘Financial instruments: Disclosures’ on offsetting financial assets and financial liabilities (effective 1 January 2013) enhance current offsetting disclosures. They are unlikely to affect the accounting for any of the Group’s current offsetting arrangements.

• Amendment to IFRS 1, ‘First time adoption’, on government loans (effective 1 January 2013) is not relevant to the Group.


NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2013 CONTINUED


1. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

(A) BASIS OF PREPARATION (CONTINUED)

• Annual improvements 2011 (effective 1 January 2013) include minor changes to IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34. The Group does not expect that any adjustments will be necessary as of result of applying the revised rules.

• IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ (effective 1 January 2013) sets out the accounting for overburden waste removal (stripping) costs in the production phase of a surface mine. The interpretation may require mining entities to write off existing striping assets to opening retained earnings if the assets cannot be attributed to an identifiable component of an ore body. This interpretation has been early adopted by the Group effective 1 January 2012.

b) New standards, amendments and interpretations issued but not effective for the year ended 31 December 2013 or adopted early:

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the entity’s accounting periods beginning on or after 1 January 2014 or later periods, but the entity has not early adopted them:

• IFRS 9, ‘Financial Instruments’ (effective date is open) is the first phase of replacing IAS 39, ‘Financial Instrument” with a standard that is less complex and principles based. The new standard addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not expected to change the entity’s existing accounting policy for its financial assets and liabilities. IASB has also amended IFRS 9 to allow entities to early adopt the requirement to recognise in OCI the changes in fair value attributable to changes in an entity’s own credit risk (from financial liabilities that are designated under the fair value option). This can be applied without having to adopt the remainder of IFRS 9.

• Amendments to IFRS 10, ‘Consolidated financial statements’, IFRS 12 and IAS 27 for investment entities (effective 1 January 2014) provides an exemption to investment entities from consolidating controlled investees. The Company is not an investment entity and will not therefore be affected by these amendments.

• Narrow scope amendments to IAS 36 “Impairment of assets” (effective 1 January 2014) address the disclosure of information about the recoverable amount impaired assets if that amount is based on fair value less costs of disposal. The Group has no such impaired assets.

• Amendments to IAS 32, “Financial Instrument: Presentation” (effective 1 January 2014). These amendments are to the application guidance in IAS 32 and clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

• Amendment to IAS 39, Financial instruments: Recognition and measurement, amendment in relation to “novation of derivatives” (effective 1 January 2014). This amendment provides relief from discontinued hedge accounting when novation of a hedging instrument to a central counter party meets specified criteria.

• IFRIC 21 “Levies”. This is an interpretation to IAS 37, “provisions, contingent liabilities and contingent assets. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have present obligation as a result of past event (known as obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy.

• IFRS 9 “Hedge Accounting” (no effective date – the standard is available for immediate application”). IFRS 9 relaxes the requirements for hedge effectiveness and, consequently to apply hedge accounting. IFRS 9 replaces the 80%-125% hedge effectiveness test with a requirement for an economic relationship between the hedged item and hedging instrument, and for the ‘hedged ratio’ to be the same as the one that the entity actually uses for risk management purposes. Hedge ineffectiveness will continue to be reported in profit or loss (P&L). An entity is still required to prepare contemporaneous documentation; however, the information to be documented under IFRS 9 will differ. The new requirements change what qualifies as a hedged item, primarily removing restrictions that currently prevent some economically rational hedging strategies from qualifying for hedge accounting. The standard provides an accounting policy choice for an entity to continue to apply hedge accounting (and hedge accounting only) under IAS 39 instead of IFRS 9 until the IASB completes its separate macro hedging project.

• Amendment to IAS 19 regarding defined benefit plans (effective 1 July 2014). These narrow scope amendments simplify the accounting for contributions to defined benefit plans that are independent of the number of years of employee service.

• Annual improvements 2012 (effective 1 July 2014) makes minor changes to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 37 and IAS 39.

• Annual improvements 2013 (effective 1 July 2014) makes minor changes to IFRS 1, IFRS 3, IFRS 13 and IAS 40.


the Minister for Mining on 7th May 2012. The Company have submitted an updated MCP in 19th December 2013, with no changes on the estimated Fund value of USD227 million. With the life of mine extension to 2025, the Company will be preparing another Detailed MCP in 2015. Should the new estimate of the Fund be higher than USD227 million, then the Company needs to make a bi-annual contribution to ensure the new estimated Fund requirements is met by 2025.

(iii) Provision for Obsolescence

Consumable items that have not been issued in the last two years are included as part of current inventory. A full provision however is made for potential write-off of these items. Management considers that it is prudent to make such provision given the uncertainties concerning the remaining life of the open pit mine.

(iv) Depreciation and Amortisation of Long Term Assets

In estimating the remaining life of the open pit mine, for the purpose of depreciation and amortisation calculations, due regard is given to the volume of remaining economically recoverable reserves but not to limitations that could arise from the potential for changes in technology, demand and other issues, such as early mine closure. These are inherently difficult to estimate and this uncertainty can lead to a financial limitation on the basis of depreciation and amortisation adopted and is reviewed annually under prevailing circumstances.

Major costs being depreciated or amortised over the extended mine life to 2025 that would have a significant financial impact should early mine closure eventuates are:

(B) CONSOLIDATION

The subsidiary undertakings and special-purpose entities for which the Company has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operation are consolidated. They are consolidated from the date on which control is transferred to the Company and are no longer consolidated from the date that control ceases. All inter-entity transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.

In the Company’s financial statements, investments in subsidiaries are stated at the lower of cost or recoverable amount.

(C) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The most significant estimates and judgements relate to the long term copper and gold price, mineral reserves and remaining open pit mine life, provision for restoration and rehabilitation obligations, recoverability of long-lived assets (including mine development costs) and depreciation. Actual results could differ from those estimates and may affect amounts reported in future years. Management believes that the estimates and assumptions are reasonable.

The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below:

(i) Life of Mine

During 2013, Management have changed the estimated life of mine through which the mining and processing of copper ore operation of the open pit mine are forecast to continue from 2015 to 2025. The new mine life of 2025 is based on the mine life extension (MLE) feasibility study that was approved by the Board in February 2013. The completed MLE feasibility study together with the environmental impact plan has been submitted to both the Department of Mining and the Department of Conservation and Environment for approval.

Agreements for the extension of the mine life have been completed and agreed with the nine (9) Community Mine Continuation Agreement (CMCA) impacted regions in December 2012.

Management and the Board anticipate legislative changes to give legal effect to the Independent State of Papua New Guinea (the State) and CMCA agreement for MLE to be presented before Parliament during 2014.

The total costs on the MLE feasibility study was K111.6 million (2012: K111.6 million) which have been capitalised. Other MLE related capital expenditure on new or upgraded plant and equipment of K804.6 million has also been capitalised. Stripping cost to date of K466.3 million (2012: K147.8 million) in preparation for MLE have also been deferred in the balance sheet. Total costs included in the balance sheet related to the MLE as at 31 December 2013 are K1,382.5 million (2012: K452.5 million). Should the MLE not ultimately be approved, these costs will need to be assessed for impairment and write down.

The State has extended the Change Notice #52/4.2;27/29.2 in respect of access to the area up to March 2014.

The impact of a change in life of mine estimate is applied prospectively from the beginning of the financial year during which the change has been determined. The financial effect of increasing the estimated mine life by one year would be to decrease the life of mine asset’s depreciation and amortisation for 2014 by K51 million.

(ii) Provision for Restoration and Rehabilitation

The Provision for Restoration and Rehabilitation is based largely on an obligation to contribute to the Ok Tedi Financial Assurance Fund (refer note 1(i) and note 26). Pursuant to the Mine Closure Code, contained in the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001, the Company is required to update its Mine Closure Plan (MCP) and submit it to the Office of the Environment and the Department of Mining every two years. The updated MCP must notify, amongst other things, what the Company’s latest estimate is of the open pit mine closure costs. The Company previously agreed in 2002 a MCP submitted to the Department of Mining to contribute USD100 million into the Fund by 2010. However, with the mine continuation up to 2013, the 2006 Draft MCP which was approved by the Minister for Mining in January 2008, stated that the Fund should contain USD130 million by 2013. In December of 2010, the Company lodged its 2009 Detailed MCP in which the Fund was estimated to be USD227 million by 2013. The Detailed MCP was approved by


2013K’000

2012K’000

2013K’000

2012K’000

Property, plant and equipment 1,344,413 1,410,044 1,344,585 1,410,256

Mine development 475,017 160,922 475,017 160,922

Restoration and rehabilitation 78,240 120,621 78,240 120,621

Roadco prepayment 1,433 2,866 1,433 2,866

Total Costs At Risk 1,899,103 1,694,453 1,899,275 1,694,665





(C) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(v) Impairment Assessment of Long Term Assets

As a result of recent events in global financial markets the Company has reassessed its key economic assumptions in relation to its future cash flow. The future cash flows of the Company are most exposed to volatility in the following:

• Copper and gold prices;

• Fuel prices; and

• Exchange rates (PNG Kina, US Dollar and Australian Dollar).

In accordance with the Group policy (note 1(s)), the Company has undertaken an assessment of impairment indicators and not withstanding the potential impact of changes to these key economic assumptions, the Group does not at present, consider it necessitates any impairment provisions to be made against any of its long term assets.

(D) REVENUE RECOGNITION

Revenue from the sale of copper concentrate, which also contain quantities of gold and silver, is brought to account: at the time of shipment to the buyer; when the significant risks and rewards of ownership have been transferred to the buyer; the Group no longer has control over the goods; and the amount of revenue can be reliably estimated. The revenue is based on one hundred percent of provisional weights, assays and prices and is adjusted when actual values are determined and invoiced in accordance with the terms and conditions of the relevant sales contract. The final settlement adjustments on the copper portion of the sales contracts is generally based on the average London Metal Exchange (LME) price for a specified future period generally three to five months after arrival at the customers’ facility. The copper concentrate sales invoicing is

done net of treatment and refining charges. However, for revenue disclosure purposes the sales are grossed up and the treatment and refining charges from the smelters and refineries are included in marketing costs (note 3(a)).

Unfinalised shipments at balance date are valued using metal prices, weights and assays known at that date. Where, in accordance with the terms of the sales contract, prices have not been finalised, sales values have been determined using three months forward price for copper and spot prices at year end for gold and silver.

The average forward prices used at 31 December 2013 were USD3.34 per pound for copper (31 December 2012: USD3.60), USD1,222 per ounce for gold (31 December 2012: USD1,688) and USD20.00 per ounce for silver (31 December 2012: USD29.00).

Interest income is recognised on a time-proportion basis using the effective interest method.

(E) MINERAL HEDGING

Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequently remeasured at their fair values. On the date a derivative contract is entered into, the Group designates the contract as a hedge against specific future production. The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged.

Changes in the fair value of derivatives that are designated against future production and that qualify as cash flow hedges, and are deemed highly effective, are recognised in equity. Amounts deferred in equity are transferred to the income statement and classified as revenue in the same periods during which the hedged sales affect the income statement.

Certain derivative instruments, while providing effective economic hedges under the Company’s risk management policies, do not qualify for hedge accounting under the specific rules in IAS 39, “Financial Instruments - Recognition and Measurement”. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting under IAS 39 are recognised immediately in the income statement.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting under IAS 39, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the committed or forecast production is ultimately recognised in the income statement. If the committed or forecast production is no longer expected to occur however, the cumulative gain or loss reported in equity is immediately transferred to the income statement.

The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific forecast concentrate sales. The Group also documents its assessment, both at the hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

In assessing the fair value of non-traded derivatives and other financial instruments, the Group obtains a valuation from an external party.

The Company’s hedge programme expired in June 2013.

(F) PROPERTY, PLANT AND EQUIPMENT

All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be reliably measured.

Certain properties owned by the company and rented externally to third parties would be classified as Investment property under IAS 40. These properties are classified under Property and accounted for under IAS 16 at depreciated costs as the carrying amount is considered immaterial for re-classification. All other repairs and maintenance costs are expensed.

Property, plant and equipment are depreciated on a straight-line basis over their estimated economic lives or the extended life of the mine, whichever is shorter. Capital spare parts are depreciated over the life of the equipment for which they are purchased.

The range of estimated economic lives of the major asset categories are:

Buildings 5 years to life of mine

Automotives and other equipment

4 - 10 years to life of mine

Mobile mining equipment 4 years to life of mine

Support facilities 5 years to life of mine

Processing equipment 10 years to life of mine

The current life of the open pit mine estimate is that mining and processing of ore will continue until the end of 2025 (note 1(c)(i)) (2012: end of 2015).


(L) FOREIGN CURRENCY TRANSLATION

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Kina, which is the Company’s functional and presentation currency.

Transactions denominated in foreign currency are translated at a rate of exchange which approximates the rate of exchange at the date of the transaction. Amounts owing to and by the Company denominated in foreign currencies at balance date are translated at exchange rates current at that date.

The rates used at 31 December 2013 for United States dollars and Australian dollars were 0.3955 and 0.4443 equal to one Kina respectively (31 December 2012 – 0.4775 and 0.4602 respectively).

Realised and unrealised foreign exchange variations on revenue accounts are recognised in the income statement.

(M) INCOME TAX

The Group provides for all taxes estimated to be payable on net profit for the year. It prepares and lodges its tax return using PNG Kina as the functional and presentation currency.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date, and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability settled.

Gains and losses on disposal of property, plant and equipment are brought to account in the determination of operating profit. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(s)).

Repairs and maintenance are charged to the profit and loss account during the financial period in which they incurred.

(G) PRE-PRODUCTION EXPENDITURE AND EXPLORATION EXPENDITURE

Pre-production expenditure represents the net cost incurred by the Company prior to the commencement of commercial production on 31 January 1985. Such expenditure is classified as a mine development asset and is being amortised on a straight-line basis over the life of the open pit mine (note 10).

All post-production exploration expenditure is expensed as incurred.

(H) DEFERRED STRIPPING COST

The company has adopted IFRIC 20 – stripping costs in the production phase of a surface mine. IFRIC 20 sets out the accounting for overburden and other mine waste materials during the operating phase of a surface mine where those stripping costs are incurred as part of a stripping campaign to access additional ore. This activity is referred to as development stripping. The directly attributable costs (inclusive of an allocation of relevant overhead expenditure) are initially capitalised as a mine development asset.

Capitalisation of development stripping costs ceases at the time that saleable material begins to be extract from the additional ore body associated with the stripping campaign. The stripping asset is then amortised over the life of the additional ore body accessed on a unit of production basis.

(I) RESTORATION AND REHABILITATION

A provision is raised for anticipated expenditure to be made on restoration and rehabilitation to be undertaken after the open pit mine closure (note 18).

These costs may include the costs of dismantling and demolishing of infrastructure or decommissioning, the removal of residual material, the remediation of disturbed areas and the relocation and retrenchment of employees under an agreed MCP. The amount of any provision recognised is the full amount that has been estimated based on current costs to be required to settle present obligations, discounted using a risk adjusted interest rate of 0.38 percent (2012: 0.38 percent).

The Mine Closure Code contained in the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001 requires the Company to contribute to a Mine Closure Fund (referred to as the Ok Tedi Financial Assurance Fund). The Ok Tedi Financial Assurance Fund is established to provide sufficient cash at mine closure for settlement of mine rehabilitation and restoration liabilities (note 25).

Where future economic benefits are probable a corresponding asset is raised and subsequently amortised using the straight line method (note 11).

The Group’s restoration, rehabilitation and environmental expenditure policy identifies the environmental, social and engineering issues to be considered and the procedures to be followed when providing for costs associated with the site closure. Site rehabilitation and closure involves the dismantling and demolition of infrastructure not intended for subsequent community use, the removal of residual materials and the remediation of disturbed areas. Community requirements and long term land use objectives are also taken into account.

(J) COMPENSATION

The Group has signed various compensation agreements with landowners and other surrounding communities affected by the mine. Compensation packages are denominated in the local currency and, in the majority of instances, are payable over the life of the open pit mine.

Where payments are contingent upon mine continuation, the anticipated amounts payable annually are accrued on a pro-rata basis. Where payments have to be made regardless of mine continuation, a full provision is created against future expected payments using the same principles as in note 1(i).

(K) INVENTORIES

Copper concentrate and product in process are physically measured or estimated and valued at the lower of cost or net realisable value. Cost is derived on an absorption costing basis which includes fixed and variable overheads and depreciation. Net realisable value is the amount estimated to be obtained from the sale of inventories in the normal course of business, less any costs anticipated to be incurred prior to sale.

Spare parts and consumables are valued at weighted average cost into store. An appropriate provision for stock obsolescence is raised in respect of slow moving inventory.





(M) INCOME TAX (CONTINUED)

Deferred income tax assets are recognised to the extent that it is probable that future taxable income will be available against which the temporary differences can be utilised.

Income tax expense in the income statement comprises the estimated tax payable and the movement in deferred tax balances.

Current and deferred tax balances attributable to amounts recognised directly in equity and also recognised directly in equity.

(N) EMPLOYEE BENEFITS

(i) Wages and Salaries, Annual Leave and Sick Leave

Liabilities for wages and salaries, annual leave are recognised, and are measured as the amount unpaid at the reporting date at current pay rates in respect of employees’ services up to that date, including on-costs.

(ii) Long Service Leave

Liability for long service leave is recognised, and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.

(iii) Termination Benefits

Termination benefits are payable when employment is terminated before the normal retirement date or when an employee accepts voluntary redundancy in exchange for those benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due after more than twelve months from the balance sheet date are discounted to present value.

The Group, as part of its MCP obligations (note 1(c)(iii)), has provided for comprehensive termination payments to all National employees (included as part of Restoration and Rehabilitation provision at note 18).

(iv) Profit-Sharing and Bonus Plans

The Company recognises a liability and an expense for bonuses and profit sharing (Share in Success Scheme), based on a formula that takes into consideration the profit attributable to the Company’s shareholders and available cash flows after certain adjustments. The Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. The Share in Success Scheme (SISS) ended in December 31, 2013, and going forward the Company will replaced SISS with a bonus scheme.

(O) RETIREMENT BENEFITS

The Group contributes to NASFUND, an independent defined contribution fund, on behalf of its citizen employees and contributions are charged direct to the income statement when payable. Once the contributions have been paid, the Group has no further payment obligations.

(P) ROADCO USER CHARGE

The total commitment under the Roadco agreement, for use of the Tabubil Kiunga road during the life of the open pit mine, was fully prepaid in August 1995. The prepayment is being charged to the income statement on a straight-line basis over the remaining life of the mine.

(Q) CASH AND CASH EQUIVALENTS

For the purpose of the statements of cash flows, cash and cash equivalents include cash at bank and on hand, net of overdraft, and deposits held on call with banks.

(R) FINANCIAL INSTRUMENTS

Financial instruments carried on the balance sheet include cash and bank balances, receivables, trade payables, derivative financial instruments and borrowings. These instruments are generally carried at their estimated fair value. For example, receivables are carried net of the estimated doubtful receivables. The particular recognition methods adopted are disclosed in the individual accounting policies associated with each item.

Where possible, financial assets are supported by collateral or other security. These arrangements are described in the individual accounting policies associated with each item.


(S) IMPAIRMENT OF ASSETS

Non-current assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Impairment of assets is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is measured as the higher of net selling price and value in use. Value in use for individual assets is calculated by discounting future cash flows using a risk adjusted pre-tax discount rate. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(T) BORROWING COSTS

Prior to the commencement of commercial production in 1985, the amount of interest costs eligible for capitalisation was based on the actual interest costs incurred because the borrowings were incurred to fund development of the mine property. Capitalisation of borrowing costs ceased following the commissioning of the assets upon commercial production. These pre-production borrowing costs are amortised using the straight line basis over the life of the mine. Borrowing costs incurred subsequent to the commencement of commercial production are expensed when incurred over the period of the borrowing, unless the borrowing relates to the construction of a qualifying asset, in which case the borrowing costs are capitalised. Interest is expensed using the effective interest method. Facility fees are amortised over the period of the facility.

(U) LEASES

Leases of property, plant and equipment, where substantially all the risks and benefits incidental to the ownership are assumed by the Group, are classified as finance leases. Finance leases are capitalised, recording an asset and liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are amortised over their useful lives. Lease payments are allocated between the reduction of the lease liability and the interest expense for the period.

Operating lease payments, where substantially all the risks and benefits remain with the lessor, are expensed as incurred over the period of the lease. Commitments for such leases are disclosed in note 22(d).

(V) TRADE RECEIVABLES

Trade receivables are recognised initially at fair value and subsequently, where required, reduced by provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the recoverable amount. The amount of the provision is recognised in the income statement. Subsequent recoveries of amounts previously written off are credited against expenses in the income statement.

(W) COMPARATIVE FIGURES

Comparative figures have been amended where appropriate to comply with changes in presentation adopted in the current year.


2013K’000

2012K’000

2013K’000

2012K’000

2(A) SALES REVENUECopper 1,602,557 1,959,634 1,602,557 1,959,634

Gold 1,091,218 1,351,942 1,091,218 1,351,942

Silver 45,143 52,182 45,143 52,182

Finalisation/revaluation adjustments (note 1(d))

(68,739) (4,188) (68,739) (4,188)

Total Sales Revenue 2,670,179 3,359,570 2,670,179 3,359,570

2(B) OTHER OPERATING INCOMEAirfares recoveries 53 37 53 37

Other 4,878 183 37,252 217

Total Other Operating Income 4,931 220 37,305 254

(X) DIVIDEND DISTRIBUTION

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the year in which the dividends are approved by the Company’s Directors.

(Y) TRADE AND OTHER PAYABLES

These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.





NOTE2013

K’0002012

K’0002013

K’0002012

K’000

3(A) OPERATING COSTSChanges in inventories of product on hand and in process (increase)/decrease 46,929 (89,176) 46,929 (89,176)

Operating costs, external charges and materials 79,868 78,956 79,868 78,956

Marketing costs 274,041 263,291 274,041 263,291

(Gain)/Loss on derivative financial instruments 26(b)(ii) 14,148 43,448 14,148 43,448

Salaries, wages & associated employee costs 28 582,912 332,000 584,422 332,000

Contractors and consultants 537,175 555,391 537,175 555,427

Consumables 437,235 554,546 437,235 554,546

Services and others 72,950 90,024 103,633 91,239

(Gain)/loss on sale of non-current assets (213) (95) (213) (95)

Net foreign exchange gain/(loss) (195,996) (20,081) (197,083) (20,893)

Depreciation of property, plant and equipment 9 566,044 244,761 566,044 244,761

Amort. of restoration and rehabilitation asset 11 42,199 49,703 42,199 49,703

Amortisation of Lower Ok Tedi compensation asset 182 463 182 463

Amortisation of pre-production expenditure 10 4,377 4,396 4,377 4,396

Total Operating Costs 2,461,851 2,107,627 2,492,957 2,108,066

Included in the operating profit before tax are the following items:

Auditor’s remuneration:

- Auditing services 645 476 842 476

- Other services 396 625 396 625

Charge to provision for employee benefits 17(a) 131,466 60,740 133,068 61,107

Charge to provision for obsolete stock 7(a) 39,237 10,195 39,237 10,195

Roadco user charge amortisation 1(p) 1,433 1,433 1,433 1,433

Charge to provision for compensation 17(b) 13,305 13,305 13,305 13,305

Charge to provision for doubtful debts 6(c) - 2,163 - 2,163

Donations 1,151 1,277 1,151 1,277

Charge to provision for CMCA 15(a) 72,594 55,151 193,924 55,151

Royalties 30,143 38,703 30,143 38,703

Production levy 5,990 7,741 5,990 7,741

Legal fees 3,806 2,109 3,806 2,109

Operating lease expenses 210,509 213,956 210,509 214,214

3(B) FINANCE INCOME AND COSTS

Interest income 3,071 6,306 3,164 6,711

Realisation of discount on long term provisions:

- Restoration and rehabilitation (4,976) (14,126) (5,132) (14,126)

Total Net Finance Costs (1,905) (7,820) (1,968) (7,415)



NOTE2013

K’0002012

K’0002013

K’0002012

K’000

4. INCOME TAX EXPENSE

The prima facie tax charge on the profit for the year is reconciled to the income tax expense as follows:

Profit for the year 211,354 1,244,343 212,556 1,244,343

Prima facie tax on the profit for the year at 30% 63,406 373,303 63,767 373,303

Tax effect of permanent differences:

Non-deductible items 36 112 36 118

Non-taxable income 1,485 (4,238) 1,485 (4,238)

Double deduction – staff training (1,075) (1,320) (1,075) (1,320)

Dividend payment exchange - (1,591) - (1,591)

Unrealised exchange (gain)/loss (34,315) 6,634 (34,604) 6,823

Under/(over) provision in prior years 1,073 (42,007) 1,073 (42,007)

Income Tax Expense 30,610 330,893 30,645 331,088

Tax expense comprises:

Income tax - current year 14 116,592 304,044 115,720 304,239

Deferred tax - current year 16(a) (87,055) 68,856 (87,759) 68,856

Prior year adjustment 1,073 (42,007) 2,684 (42,007)

Total Income Tax Expense 30,610 330,893 30,645 331,088

5. CASH AND CASH EQUIVALENTSCash on hand 117 71 119 73

Cash at bank 170,443 101,129 217,423 142,923

Short term deposits 252,910 346,724 353,360 347,114

Total Cash and Cash Equivalents 423,470 447,924 570,902 490,110

6. TRADE AND OTHER RECEIVABLES (CURRENT)Accounts receivable – trade 277,051 198,026 277,051 198,026

Accounts receivable – sundry (a), (b) 18,693 17,519 21,687 19,580

295,744 215,545 298,738 217,606

Less: Provision for doubtful debts (c) (580) (3,784) (580) (3,784)

Total Current Receivables 295,164 211,761 298,158 213,822




6. TRADE AND OTHER RECEIVABLES (CURRENT) (CONTINUED)The Company’s and the Group’s exposure to credit risk is discussed in note 26 (c) (i).

(A) IMPAIRED RECEIVABLES

As at 31 December 2013, trade and other receivables of the Group with a nominal value of K580,000 which are over six months overdue (2012: K3,784,000) are considered to be impaired. The amount of impairment provision was K580,000 (2012: K3,784,000). The individually impaired receivables mainly relate to employee, local, overseas and PNG sundry receivables. It was assessed that a portion of the receivables was expected to be recovered. There were no impaired trade receivables in 2013 or 2012.

(B) PAST DUE BUT NOT IMPAIRED

As at 31 December 2013, sundry receivables of K3,213,000 (2012: K2,930,000) were past due but not impaired. These relate to employee, local, overseas and PNG sundry receivables for whom there is no recent history of default and/or regular partial payments are being received. The ageing analysis of these sundry receivables is as follows:

60 DAYS 90 DAYS 120 DAYS >120 DAYS

2013 K’000 938 540 533 1,202

2012 K’000 351 1,645 96 838

(C) PROVISION FOR DOUBTFUL DEBTS


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

Opening balance 3,784 1,911 3,784 1,911

Increase in provision 3(a) - 2,163 - 2,163

Write-offs applied against provision (3,204) (290) (3,204) (290)

Closing Balance 580 3,784 580 3,784

(D) FOREIGN EXCHANGE RISK

Information about the Group’s and the Company’s exposure to foreign currency risk in relation to Trade and Other Receivables is provided in note 26(b)(i).

(E) FAIR VALUE

Due to the short-term nature of the receivables, their carrying amount is assumed to approximate their fair value.


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

7. INVENTORIES (CURRENT)

CONSUMABLES:

Spare parts and consumables 320,397 274,765 320,397 274,765

Less: Provision for obsolete stock (a) (98,566) (87,398) (98,566) (87,398)

Goods in transit 102,539 92,295 102,539 92,295

Total Consumables 324,370 279,662 324,370 279,662

CONCENTRATE:

Product in process 40,792 24,755 40,792 24,755

Product on hand 115,733 178,699 115,733 178,699

Less: Provision for high flourine (28,069) - (28,069) -

Total Concentrate 128,456 203,454 128,456 203,454

Total Current Inventories 452,826 483,116 452,826 483,116

(A) PROVISION FOR STOCK

Opening balance 87,398 77,203 87,398 77,203

Provisions created 3(a) 39,237 10,195 39,237 10,195

Closing Balance 126,635 87,398 126,635 87,398



2013K’000

2012K’000

2013K’000

2012K’000

8. OTHER ASSETS (CURRENT)

Prepayments 24,301 24,330 24,301 24,330

Home Ownership Scheme loans receivable 15,309 5,933 15,309 5,933

Total Current Other Assets 39,610 30,263 39,610 30,263

NOTE

BUILDINGSK’000

PLANT,MACHINERY AND

EQUIPMENTK’00

CAPITALWORKS IN

PROGRESSK’000

TOTALK’000

9. PROPERTY, PLANT AND EQUIPMENTOpening cost 1 January 2013 316,168 2,698,675 744,562 3,759,405

Opening accumulated depreciation (295,836) (1,941,914) - (2,237,750)

Opening net book value 20,332 756,761 744,562 1,521,655

Additions – Per Cash Flow - - 389,719 389,719

Transfer from capital works in progress 20,388 697,524 (717,812) -

Disposals and adjustments - (917) - (917)

Depreciation charge 3(a) (15,638) (550,406) - (566,044)

Closing Net Book Value 31 December 2013 25,082 902,962 416,369 1,344,413

Closing Cost 31 December 2013 336,661 3,318,953 416,369 4,071,983

Accumulated depreciation (311,579) (2,415,991) - (2,727,570)


Opening cost 1 January 2012 312,373 2,592,634 392,463 3,297,470

Opening accumulated depreciation (289,484) (1,709,143) - (1,998,627)

Opening net book value 22,889 883,491 392,463 1,298,843

Additions – Per Cash Flow - - 467,903 467,903

Transfer from capital works in progress 3,795 112,009 (115,804) -

Disposals and adjustments - (330) - (330)

Depreciation charge 3(a) (6,352) (238,409) - (244,761)


Closing Cost 31 December 2012 316,168 2,698,675 744,562 3,759,405

Accumulated depreciation (295,836) (1,941,914) - (2,237,750)


In accordance with the Mining (Ok Tedi Agreement) Act, the State has the right, after the closure of the mine, to acquire certain infrastructure fixed assets. The accounting net book value of these fixed assets is K25,082,000 (2012: K20,332,000). At the time that these accounts were prepared the Company has not received, and does not expect to receive, notice that the State intends to acquire any of the assets concerned.

The schedule above do not include the OTDF property, plant and equipment which has a closing net book value of K172,000 (2012: K212,000).

There are no conditions that indicate impairment of property, plant and equipment as at 31 December 2013 and 31 December 2012.




PRE-PRODUCTION

EXPENDITUREK’000

DEFERREDSTRIPPING

COSTK’000

TOTALK’000

10. MINE DEVELOPMENTOpening cost 1 January 2013 392,710 147,812 540,522

Accumulated amortisation (379,600) - (379,600)

Opening net book value 13,110 147,812 160,922

Additions - 318,472 318,472

Amortisation (4,377) - (4,377)

Closing Net Book Value 31 December 2013 8,733 466,284 475,017

Closing cost 31 December 2013 392,710 466,284 858,994



Opening cost 1 January 2012 392,710 - 392,710


Opening net book value 17,506 - 17,506

Additions - 147,812 147,812

Amortisation (4,396) - (4,396)


Closing cost 31 December 2012 392,710 147,812 540,522




NOTE2013

K’0002012

K’0002013

K’0002012

K’000

11. RESTORATION AND REHABILITATION ASSETOpening net book value 120,621 169,527 120,621 169,527

Adjustment to cost 18 - 798 - 798

Amortisation 3(a) (42,381) (49,704) (42,381) (49,704)

Closing Net Book Value 1(i) 78,240 120,621 78,240 120,621

Cost 476,464 475,666 476,464 475,666

Adjustment to Cost - 798 - 798

Accumulated amortisation (398,224) (355,843) (398,224) (355,843)

Net Book Value 78,240 120,621 78,240 120,621



NOTE2013

K’0002012

K’0002013

K’0002012

K’000

12. OTHER ASSETS (NON-CURRENT)Roadco prepayments 1,433 2,866 1,433 2,866

Advances to suppliers 60,994 - 60,994 -

Home Ownership Scheme loans 14,835 11,080 14,835 11,080

Lower Ok Tedi - compensation asset - 182 - 182

Total Non-Current Other Assets 77,262 14,128 77,262 14,128

13. TRADE AND OTHER PAYABLES (CURRENT)(Unsecured)

Accounts payable – trade 227,218 133,851 227,248 133,775

Accounts payable – other 134,560 22,639 140,626 30,681

Total Current Trade and Other Payables 361,778 156,490 367,874 164,456

14. INCOME TAX PAYABLEOpening balance refundable (49,443) (72,932) (48,304) (72,881)

Prior year adjustment 4,758 (42,007) 3,016 (42,007)

Tax expense 4 116,592 304,044 115,720 304,239

Interest withholding tax/Tax credit scheme (44,155) (9,075) (43,553) (8,182)

Payments (104,966) (229,473) (104,966) (229,473)

Closing Balance refundable (77,214) (49,443) (78,087) (48,304)

15. PROVISIONS (CURRENT)Employee entitlements 17(a) 11,408 36,699 12,817 37,719

Community Mine Continuation Agreements (a) 8,827 5,872 130,157 5,872

Compensation provision 17(b) 14,718 14,056 14,718 14,056

Employee Incentives (SISS) provision 24(b) 19,404 53,461 40,998 71,155

Production levy 3(a) 5,990 7,741 5,990 7,741

Total Current Provisions 60,347 117,829 204,680 136,543

(A) COMMUNITY MINE CONTINUATION AGREEMENTS (CURRENT)

Opening balance 5,872 4,875 5,872 4,875

Provision created 3(a) 72,594 55,151 193,924 55,151

Less: Payments made against the provision (69,639) (54,154) (69,639) (54,154)

Closing Balance 8,827 5,872 130,157 5,872





NOTE2013

K’0002012

K’0002013

K’0002012

K’000

16. DEFERRED INCOME TAX (NON-CURRENT)Deferred Income Tax comprises:

Deferred Tax Asset:

Provisions & employee benefits 215,901 210,014 215,901 210,081

Others 3,125 (5,536) 2,738 (3,669)

Total Deferred Tax Assets 219,026 204,478 218,639 206,412

Deferred Tax Liability:

Prepayments / consumables inventory 80,054 62,205 80,054 62,205

Property, plant and equipment 114,171 110,173 114,171 110,173

Hedge liability - (5,301) - (5,301)

Others 64,462 162,121 67,133 166,188

Total Deferred Tax Liabilities 258,687 329,198 261,358 333,265

Net Deferred Tax Liabilities 39,661 124,720 42,719 126,853

(A) MOVEMENT IN DEFERRED INCOME TAX (ASSET)/LIABILITY

Opening balance 124,720 70,024 126,853 74,001

Prior year adjustment (3,305) (25,051) (1,676) (26,895)

Charged to income statement 4 (87,055) 68,856 (87,759) 68,856

Charged to equity 5,301 10,891 5,301 10,891

Closing Balance 39,661 124,720 42,719 126,853

17. PROVISIONS (NON-CURRENT)Employee entitlements (a) - 22,909 - 22,909

Compensation provision (b) - - - -

Employee incentives (SISS) provision 24(b) - - - 17,694

Total Non-Current Provisions - 22,909 - 40,603

(A) EMPLOYEE ENTITLEMENTS (CURRENT AND NON-CURRENT)

Opening balance 59,608 57,497 60,628 58,172



Closing Balance 11,408 59,608 12,817 60,628

Current 15 11,408 36,699 12,817 37,719

Non-current - 22,909 - 22,909

Closing Balance 11,408 59,608 12,817 60,628

(B) COMPENSATION PROVISION (CURRENT AND NON-CURRENT)

Opening balance 14,056 14,248 14,056 14,248



Closing Balance 14,718 14,056 14,718 14,056

Current 15 14,718 14,056 14,718 14,056

Non-current - - - -

Closing Balance 14,718 14,056 14,718 14,056



NOTE2013

K’0002012

K’0002013

K’0002012

K’000

18. PROVISION FOR RESTORATION AND REHABILITATION Opening balance 476,221 483,792 476,221 483,792

Adjustment to cost 1 - 798 - 798

Impact of change in exchange rate on provision 95,947 (22,495) 95,947 (22,495)

Interest charged 3(b) and 25 4,976 14,126 4,976 14,126

Closing Balance 1(c)(iii) and 1(h) 577,144 476,221 577,144 476,221

19. ORDINARY SHARESIssued and paid up capital

192,700,000 shares (2012: 192,700,000 shares) 195,102 195,102 195,102 195,102

During the year, the Company cancelled 122,200,000 ordinary shares held by PNGSDP and issued new shares to the Independent State of PNG (note 27).

CAPITAL RISK MANAGEMENT

The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group and the Company monitor capital on the basis of its gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total financial liabilities (including trade and other payables and derivative financial instruments as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the balance sheet plus debt.

The gearing ratios at 31 December 2013 and 31 December 2012 were as follows:


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

Trade and other payables 13 361,778 156,490 367,874 164,456


Less: Cash and cash equivalents 5 (423,470) (447,924) (570,902) (490,110)

Net debts (61,692) (273,982) (203,025) (308,202)

Equity 2,801,129 2,606,822 2,799,046 2,603,609

Total capital 2,739,437 2,332,840 2,596,018 2,295,407

Gearing Ratio -0.02 -0.12 -0.08 -0.13

The decrease in the gearing ratio during 2013 resulted primarily from higher trade and other payables as at balance date.




20. DIVIDENDS DECLARED AND PAID

As defined in the Company’s Constitution, the Available Cash Flow of the prior financial year determines, without the need for declaration, the level of ordinary dividends payable each year.

The Constitution provides that the Board may vote to:

- pay dividends as in the judgment of the Directors that the position of the Company justifies; and

- reduce or increase the amount or delay the payment of an ordinary dividend.

Furthermore, as defined in the Fifth Restated Shareholders Agreement, the declaration and amount of any dividend will be in accordance with the Constitution and otherwise at the sole discretion of the Board.

The Board did not declare and pay any dividends during the year:


2013K’000

2012K’000

2013K’000

2012K’000

First interim dividend - 308,008 - 308,008

Second interim dividend - 207,469 - 207,469

Final dividend - 207,469 - 207,469

Total Dividends Declared and Paid - 722,946 - 722,946

Dividend distributions to the Company’s shareholders are recognised as liability in the Company’s financial statements in the year in which the dividends are approved by the Company’s Directors.

21. CONTINGENCIES(A) GUARANTEES

ANZ 3,391 3,559 3,391 3,559

Total Guarantees 3,391 3,559 3,391 3,559

(B) LITIGATION

The Company is subject to various claims and litigation. The Directors however consider that the probability of significant loss from these claims is remote.

(C) MINE CONTINUATION

The agreement that led to the dismissal of proceedings in relation to environmental damage included an undertaking by the Company to use best endeavours to include the villages that supported the actions in the CMCA process. There is no obligation for the inclusion of these villages to add to the total amount paid under the existing CMCAs.

22. COMMITMENTS

(A) COMPENSATION PAYMENTS

The Mining (Ok Tedi Restated Eighth Supplemental Agreement) Act 1995 (No. 48) of Papua New Guinea was enacted in August 1995 and required the Company to make annual payments to compensation trusts over the remaining life of the mine. Required payments have been made by the Company and current liabilities are recognised in the accounts.

The Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001 (No. 7) was enacted in 2001 and required the Company to make annual payments initially aggregating to K161.5 million over the life of mine.

A requirement of the agreement was to have a mid-term review which addressed many factors including an assessment of whether predicted environmental impacts are being exceeded. This occurred during 2006 and agreements were successfully concluded during the second quarter of 2007 with the formal signing of the CMCA Review Memorandum of Agreement between the delegates of the CMCA regions and shareholders of the Company. The communities downstream of the mine will benefit from the agreed increased compensation deal.

The new benefits provided by the Company are approximately four times the amount of the previous package. The total benefits package,

including those to be provided by the other key stakeholders (PNGSDP and the PNG Government), are estimated to total K1.01 billion (USD342 million) over the seven years from 2007 to 2013, of which the company is responsible for K324 million.

With the agreement signed by the nine CMCA impacted regions for the MLE, total benefits agreed were approximately 85% of the existing package.

(B) ENVIRONMENTAL MONITORING COSTS

In OTML’s 2009 Detailed MCP, which was submitted to the PNG Office of Environment and Conservation and the Mineral Resources Authority in December 2009 which was approved by the Minister for Mining on 7th May 2012, the Company has undertaken to monitor key environmental aspects for a 30 year period following closure of the open pit mine. The Detailed MCP included a detailed estimate of the cost of this Post Closure Environmental Monitoring Programme (PCEMP) which totalled USD34.1 million. This comprises: Monitoring Activities which are aimed at the performance of the cover on the Bige stockpiles and, throughout the riverine system, ARD, water quality, fish biology and hydrography; Support Programmes which cater for labour, equipment, travel and access logistics, and operating, management and reporting costs; and Contingency and Escalation Costs which allow for both pre closure and post closure cost movements.


(C) CAPITAL EXPENDITURE

As at 31 December 2013, the Company had contracted for capital commitments totalling K667,859,000 which are not provided for in the accounts (31 December 2012: K720,772,000).

(D) OPERATING LEASES

Payments due under operating leases for property and equipment not provided for in the accounts are:


2013K’000

2012K’000

2013K’000

2012K’000

Due within 1 year 141,942 184,749 141,942 184,749

Due within 1-2 years 31,003 118,477 31,003 118,477

Due within 2-5 years 27,425 79,052 27,425 79,052

Total Operating Leases 200,370 382,278 200,370 382,278

(E) FRONTIER RESOURCES LIMITED

In May 2010 OTML entered into Farm-in and Joint Venture Agreements with Frontier Gold (PNG) Limited and Frontier Copper (PNG) Limited in relation to five exploration licences. Under these agreements, OTML could earn an 80.1% interest in the three licences held by Frontier Copper (PNG) Limited and a 58% interest in the two licences held by Frontier Gold PNG Limited. OTML was also to act as manager of the joint venture.

OTML has entered into the above arrangements as trustee and on behalf of PNGSDP as beneficiary. PNGSDP funded the above transactions under a flow through arrangement set out in the Trust and Funding Deed. OTML had an option to assume the legal and beneficial ownership to the property and rights under the joint venture and farm-in agreements, at which time OTML will reimburse PNGSDP for the full costs incurred. OTML did not exercise this option.

In September 2013, through the recommendation of OTML and as approved by PNGSDP, OTML have withdrawn from the Farm-in and Joint Venture Agreements with Frontier Gold (PNG) Limited and Frontier Copper (PNG) Limited.

23. INSURANCEThe Company places insurance cover with insurers of high credit rating. The insurance policies cover the usual risks that are able to be transferred to insurers under property, liability and transit insurance policies.

At the time of renewing its major insurance coverage, on 1 July 2008, OTML changed the basis of indemnification for Business Interruption (BI) insurance from reimbursement of profits to reimbursement of fixed costs and increased the cover from USD100,000,000 to USD400,000,000 (both values are inclusive of self-insured retentions).

Self-insured retentions (ISR) include: Property Damage – USD25,000,000; Business Interruption – first 30 days after insurable event plus USD2,500,000 at various layers of the cover.

24. INVESTMENT IN SUBSIDIARIESThe holding company’s investment in subsidiaries comprises shares at cost.

ORDINARY SHARES

% SHAREHOLDING

Ok Tedi Development Foundation Limited (a) 3 75%

OTML Shares in Success Limited (b) 2 100%

Ok Tedi Australia Pty Limited (c) 10,000 100%

(A) OK TEDI DEVELOPMENT FOUNDATION LIMITED (OTDF)

OTDF was established pursuant to the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001. Before mine closure, the Company is under an obligation to transfer its shares in OTDF to four reputable organisations engaged in development activities in Papua New Guinea consistent with the objects of OTDF. If the Company does not transfer its shares prior to mine closure, OTDF must be wound up. During 2011, one share was transferred to PNG Sustainable Development Program Limited.

The objects of OTDF are to pursue the promotion of sustainable social improvement and economic activity in the Western Province and Telefomin district of the Sandaun Province for the well being of persons resident in these provinces. OTDF must act solely in pursuit of these objects.

OTDF have a break-even operating result for the year (31 December 2012: break-even). OTDF is exempt from PNG income tax and supplies to OTDF do not attract GST. Further, moneys paid or the cost of assets contributed to OTDF is an allowable deduction to the person making the payment or contribution in the year of payment or contribution.




24. INVESTMENT IN SUBSIDIARIES (CONTINUED)

(B) OTML SHARES IN SUCCESS LIMITED (SISL)

SISL is the Trustee of OTML (SISS). SISS was established to provide rewards to Company employees for their individual and collective contributions to improving the productivity and profitability of the Company and to those employees who provide their services until mine closure.

The Company is required to pay SISL an annual amount of 5.2 percent of Available Cash Flow (denominated in US dollars and translated based on the year end exchange rate). The contributions made to SISL by the Company are held on trust for the employees. SISL also manages the funds it holds on trust for the employees.

As at 31 December 2013, the following liabilities existed:


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

Opening balance 53,461 81,403 88,849 134,873

Provision created 28 18,827 53,297 18,827 53,297


Less: Exchange variance - (1) - (1)

Total SISL Liability 19,404 53,461 40,998 88,849

Current 15 19,404 53,461 40,998 71,155

Non-current 17 - - - 17,694

Total SISL Liability 19,404 53,461 40,998 88,849

The SISS ceased on 31 December 2013 with fund distribution to be paid in early 2014.

(C) OK TEDI AUSTRALIA PTY LIMITED (OTAPL)

OTAPL was incorporated on 19 June 2008 as a wholly owned subsidiary of OTML. The objects of OTAPL are to provide marketing and logistics services to OTML.

As at 31 December 2013, the Company’s investment in OTAPL at cost is as follows:

Opening balance 26 26 - -

Shares - - - -

Total Investment 26 26 - -

25. OK TEDI FINANCIAL ASSURANCE FUND The Mine Closure Code contained in the Mining (Ok Tedi Mine Continuation (Ninth Supplemental) Agreement) Act 2001 requires the Company to contribute to a Mine Closure Fund (referred to as the Ok Tedi Financial Assurance Fund). The Ok Tedi Financial Assurance Fund has been established with Standard Bank Offshore Trust Company (Jersey) Ltd acting as independent Trustee. The Fund covers costs of (a) deconstruction and cleanup, (b) revegetation, (c) environmental monitoring and maintenance, (d) employee retrenchment, (e) dredging after closure and (f) post closure monitoring which are valued on USD based on current cost with contingency and escalation considered up to mine closure.

The Ok Tedi Financial Assurance Fund is established to provide sufficient cash at the open pit mine closure for settlement of mine rehabilitation and restoration liabilities (refer note 1(i)). The Company’s updated estimate contained in the 2009 Detailed MCP submitted in December 2010 which was approved by the Minister for Mining on 7th May 2012, is that the Fund should contain USD227 million by 2013. As 31 December 2013, the Company have already met the fund required and ceased the semi-annual payments. The Funds are held by the Trustee to be applied in assisting both the Company and the State to comply with their respective MCP obligations under the Mine Closure Code.

The assets of the Ok Tedi Financial Assurance Fund are legally separate from the Company and are not available to meet the claims of creditors in any winding up of the Company. They are irrevocably dedicated to funding open pit mine closure costs and cannot be used for any other purpose. Contributions to the Fund are initially recorded at cost and the Company recognises its receivable from the Fund at fair value.

In accordance with accounting practice, the Ok Tedi Financial Assurance Fund is considered to be a special purpose entity controlled by the Company and it is consolidated in the Group financial statements. The assets of the Fund at 31 December 2013 comprised a portfolio of investments, valued at balance date at K577 million (USD228 million). These investments are accounted for as a financial asset at fair value through profit or loss.


Total contributions by the Company to the Fund and the consolidated Fund equity are summarised as follows:

COMPANY

(RECEIVABLE FROM THE FAF)

CONSOLIDATED(CASH, CASH EQUIVALENTS AND AVAILABLE FOR SALE

INVESTMENTS AT FAIR VALUE)

2013K’000

2012K’000

2013K’000

2012K’000

Opening balance 482,584 462,214 482,584 462,214

Payment - 14,484 - 14,484

Portfolio return - current year (4,976) 14,126 (4,976) 14,126

Exchange variance 99,209 (8,240) 99,209 (8,240)

Closing balance 576,817 482,584 576,817 482,584

Without considering the Ok Tedi Financial Assurance Fund and the Restoration and rehabilitation liability, the Company Financial Position would be:


2013K’000

2012K’000

2013K’000

2012K’000

Total Assets 3,482,268 3,244,337 3,633,326 3,289,565

Total Liabilities 680,812 643,878 833,913 692,319

26. FINANCIAL RISK MANAGEMENT

(A) FINANCIAL RISK FACTORS

The Group’s activities expose it to a variety of financial risks including market risk (consists of currency, price and interest rate risk), credit risk, liquidity risk and fair value risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by the Group’s treasury section under policies approved by the Board of Directors.

The Company and the Group hold the following financial instruments:


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

FINANCIAL ASSETS:

Cash and cash equivalents 423,470 447,924 570,902 490,110

Trade and other receivables 295,164 211,761 298,158 213,822

Financial assurance fund 576,817 482,584 576,817 482,584

1,295,451 1,142,269 1,145,877 1,186,516

FINANCIAL LIABILITIES:

Trade and other payables 361,778 156,490 367,874 164,456


361,778 173,942 367,874 181,908




26. FINANCIAL RISK MANAGEMENT (CONTINUED)

(B) MARKET RISKS FACTORS

(i) Foreign Exchange Risks

The Company operates internationally and is exposed to foreign exchange risks arising from various currency exposures, primarily with respect to the US Dollar and the Australian Dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

The Company’s revenues are in US dollars and a significant proportion of costs are in US dollars and Australian dollars. Therefore the Company’s operations are exposed to substantial foreign exchange risk. It is not the Company’s policy to hedge foreign exchange risk.

At 31 December 2013, if the Kina had moved by 5% against the US dollar with all other variables held constant, the net profit after tax (NPAT) for the year would have an effect of K68.7 million (31 December 2012: K58.3 million) higher/lower, mainly as a result of foreign exchange gains/losses on translation of US dollar denominated provision for restoration & rehabilitation, trade receivables and cash at bank.

Monetary assets and liabilities denominated in foreign currencies, at balance date, are as follows:


2013K’000

2012K’000

2013K’000

2012K’000

ASSETS:

Cash – US Dollars 310,749 258,425 332,351 293,821

– Australian Dollars 54,129 105,770 55,666 106,710

Receivables – US Dollars 277,051 198,026 277,079 197,981

Financial Assurance Fund receivable – US Dollars 576,817 482,584 576,817 482,584

LIABILITIES:

Payables – US Dollars 68,289 18,196 68,289 18,212

– Australian Dollars 21,101 44,195 21,477 44,103

Provision-Shares in Success – US Dollars 19,404 53,461 40,998 71,155

Provision-Restoration & Rehabilitation – US Dollars 577,144 476,221 577,144 476,221

Derivative Financial Instruments – US Dollars - 17,452 - 17,452

(ii) Price Risks

The final settlement price received by the Company for the sale of its copper/gold concentrate is usually specified in sales contracts as being based on the average London Metal Exchange (LME) price for a defined future period generally three to five months after arrival of shipments at the customers’ facilities (refer note 1(d)).

At 31 December 2013, a fluctuation of USD110 per tonne (USD0.05/pound) in the price of copper would have an effect of K20.4 million (USD8.1 million) on the NPAT. A fluctuation of USD10/ounce in the price of gold would have an effect of K6.1 million (USD2.4 million) on NPAT. These sensitivities assume all other variables remain constant.

The Company completed hedging of gold in June 2013.


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

Current Liabilities

Forward contracts 19 - 17,452 - 17,452

Non-current Liabilities

Forward contracts - - - -

Net Derivative Financial Instruments - 17,452 - 17,452


Hedging is undertaken in order to avoid or minimise possible adverse financial or cash flow effects of movements in commodity prices.

The gold forward contracts, which were entered into with ANZ Bank in March 2007, were completed/closed in June 2013 and no outstanding hedge at balance date.

All commodity contracts are settled other than by physical delivery of the underlying commodity. On maturity, the contracted price is compared to the spot price on that date and the price differential is applied to the contracted quantity. A net amount is paid or received by the Company.

No future derivative financial instrument gross income is expected as the hedge was completed/closed during the year (2012: K18 million).

Included in operating profit for the year is derivative financial instrument income (losses) of:


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

Gold hedging - Realised gain/(loss) (14,148) (35,754) (14,148) (35,754)

- Unrealised gain/(loss) - (7,695) - (7,695)

Total Hedging Gain/(Loss) 3(a) (14,148) (43,449) (14,148) (43,449)

The Ok Tedi Financial Assurance Fund (note 26) is not expose to price risks as such is contributed/denominated in USD currency and the same currency being held offshore.

(iii) Interest Rate Risks Exposures

For the year ended 31 December 2013, the Company had an average of USD190 million (2012: USD238 million) cash at any given time. On average 70% (USD133 million) of these funds were invested in Short-Term Deposits (1 to 90 days) and earned an average of 0.3% per annum. The Company had no borrowings during 2013.

At 31 December 2013, if interest rates had changed by 100 basis points from the year-end rates with all other variables held constant, NPAT for the year would have been USD0.2 million lower/higher, mainly as a result of higher/lower interest incomes from cash and cash equivalents.

(C) CREDIT RISKS EXPOSURES

The credit risk on financial assets of the Company which have been recognised on the balance sheet is generally the carrying amount, net of any provisions for doubtful debts.

For derivatives, credit risk arises from the potential failure of counter parties to meet their obligations under the respective contracts. With respect to commodity contracts outlined above, the Company has an exposure to loss in the event counter parties fail to settle on contracts which are favourable to the Company.

For trade receivables and financial commitments, the Company only deals with counter parties with a credit rating of BBB - or better. Since trade sales are spread over a number of customers the Company believes that no significant concentration of credit risks exists and it is not the Company’s policy to hedge credit risk.

The Company has policies in place to ensure that sales are made to customers with an appropriate credit history and requires letters of credit from the majority of its buyers. Management does not expect any losses from non-performance by counterparties.

(D) LIQUIDITY RISKS EXPOSURES

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Company manages liquidity risk by maintaining sufficient bank balances to fund its operations and the availability of funding through a committed credit facility.

Management monitors rolling forecasts of the liquidity reserve on the basis of expected cash flows.




26. FINANCIAL RISK MANAGEMENT (CONTINUED)

(D) LIQUIDITY RISKS EXPOSURES (CONTINUED)

Forecast liquidity reserve as of 31 December 2013 is as follows:

2014 K’000

2013K’000

Opening balance for the year 418,706 447,924

Operating proceeds 2,466,095 4,111,336

Operating cash outflows (1,492,291) (2,490,667)

Investing outflows (708,191) (1,437,955)

Financing outflows - -

Foreign exchange movements - -

Closing Balance For The Year 684,319 630,638

The table below analyses the Company’s financial liabilities which will be settled on a net basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

1 YEAR AND 2 YEARS AND 5 YEARS 5 YEARS

K’000 K’000 K’000 K’000

At 31 December 2013

Derivative Financial Instruments - - - -

Trade and other payables 361,778 - - -

At 31 December 2012

Derivative Financial Instruments 17,452 - - -

Trade and other payables 156,470 - - -

The table below analyses the Company’s derivative financial instruments, which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contract maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

LESS THAN 1 YEAR

BETWEEN 1 AND 2 YEARS

BETWEEN 2 AND 5 YEARS OVER 5 YEARS

K’000 K’000 K’000 K’000

At 31 December 2013

Forward sale contracts – inflow/(outflow) Gold - - - -

At 31 December 2012

Forward sale contracts – inflow/(outflow) Gold (17,258) - - -

(E) FAIR VALUE ESTIMATION

The fair value of derivative financial instruments is determined by an independent external party based on dealer quotes and market conditions existing at each balance sheet date. Quoted market prices or dealer quotes are used for long-term debt.

The fair value contract prices by settlement date used by the Company in respect of its hedges of copper and gold were as follows:

GOLDLESS THAN

1 YEARBETWEEN 1

AND 2 YEARSBETWEEN 2

AND 3 YEARS OVER 3 YEARS

$US/OUNCE $US/OUNCE $US/OUNCE $US/OUNCE

At 31 December 2013 N/A N/A N/A N/A

At 31 December 2012 1,688 N/A N/A N/A


27. RELATED PARTY TRANSACTIONS

(A) OWNERSHIP

Shareholders and their respective shareholdings are as follows:

ORDINARY SHARES % HOLDING

Independent State of Papua New Guinea 169,200,000 87.8

Minerals Resources Ok Tedi No. 2 Limited 23,500,000 12.2

192,700,000 100

On September 19, 2013, the PNG Parliament have passed the 10th Supplemental Agreement cancelling the 122,200,000 shares of PNGSDP and issuing a 122,200,000 new share to the State, making the Company a 100% State Owned Enterprise (SOE).

Transactions with the Independent State of Papua New Guinea predominantly comprise the payment of taxes and other statutory payments. The following related party transactions were between the Company and PNGSDP:

Amounts receivable from related party

Total amounts receivable at 31 December 2013 totalled K84,600 (2012: K K40,600).

(B) TRANSACTIONS DURING THE YEAR

The total reimbursement made by PNGSDP to OTML to-date for the Frontier Exploration programme costs amounts to K51.6 million (equivalent to USD24.0 million)

(C) KEY MANAGEMENT COMPENSATION

2013K’000

2012K’000

Salaries and short-term employment benefits 13,709 16,193

Post employment benefits 192 227

Total Compensation 13,901 16,420

Key management comprise the Managing Director, General Managers and Managers.

28. EMPLOYEE BENEFITSThe average number of people employed by the Company during the year was 2,049 (2012: 2,176).


NOTE2013

K’0002012

K’0002013

K’0002012

K’000

Staff costs comprise of the following:

Salaries and wages 235,856 221,318 237,002 221,318

Redundancy costs 224,150 - 224,150 -

Contribution to retirement benefit funds 20,152 13,837 20,152 13,837

Other employee on-costs 80,218 43,548 80,582 43,548

Shares in Success (b) 22,536 53,297 22,536 53,297

Total Staff Costs 3(a) 582,912 332,000 584,422 332,000


28. EMPLOYEE BENEFITS (CONTINUED)

(a) The Company terminated all employee contracts as at 31 December 2013 and paid out all entitlements to annual leave, sick leave and long service leave together with the approved redundancies payments. Certain employees were then offered new contracts with the Company on new terms and contracts.

(b) The Shares in Success incentive scheme (note 24 (b)) is a mechanism established to enable the Company to attract and retain employees by allowing them to share in the financial success of the Company.

In accordance with the Deed of Settlement, OTML is required to pay the Scheme an annual amount of 5.2% of its Available Cash Flow (denominated in US dollars and translated at the month end exchange rate), which is held on trust for the benefit of OTML employees.

The Scheme is required to maintain separate funds for Part A and Part B scheme employees, with criteria for employee eligibility and benefits payable from the Part A and Part B schemes set out in the Scheme Rules. Prior to 3 March 2009, the Scheme was required to allocate 40% of its Net Cash Inflow to each of the Part A and Part B Employment Funds, and 10% to each of the Part A and Part B End of Mine Life (EML) Bonus Funds. Amounts credited to the Part A Employment Funds are paid out in the following year to permanent employees of OTML at the end of each year, however for Part B, the amounts were spread over the Employment Contract Period of the employees. The amounts credited to Part A and Part B EML Bonus Funds were accumulated to be paid out to remaining employees during the final years of mine life.

The Deed of Settlement was revised effective 3 March 2009 in respect of contributions during the 2008 fiscal year and subsequent years. The Scheme is now required to allocate 50% (of the 5.2% of OTML’s Available Cash Flow) each to the Part A and Part B Employment Funds.

In respect to the Part B Employee Fund, the amounts will no longer be vested over the Employment Contract Period of the respective employee, rather the full amount will be paid out each year, similar to the Part A Employee Fund. No further contributions will be made to the EML Bonus Funds. The Part A and Part B EML Bonus Funds prior to the change will be retained and paid out to employees as at 31 December 2008 who are still with OTML during the final few years of mine life.

The Board has declared 2013 as the End of Mine Life for SISS purposes, and amendments to the SISS rules were approved by the majority of the members of Part A that allows eligible employees of Part A as at 31 December 2008 to receive their entitlements in full from Part A EML Bonus Fund if their employment ceases prior to 31 December 2013.

The scheme ceased at 31 December 2013 with final entitlements to be paid in early 2014.

29. INCORPORATION AND REGISTERED OFFICEThe Company is incorporated in Papua New Guinea. The Registered Office and Address for Service of Notices is 1 Dakon Road, Tabubil, Western Province, Papua New Guinea.

30. POST BALANCE DATE EVENTSOn 24 January 2014, in a court action brought by parties outside of the CMCA agreement, the High Court issued an ex parte injunctive order for the Company to stop riverine dumping of mine waste and tailings, which would effectively shut the mine. An application for a stay of these orders was granted by the National Court on 28 February 2014. The mine continues to operate normally and management are confident that the plaintiffs have no arguable case against the Company and that the orders will be dissolved.




GENERAL STANDARD DISCLOSURESGENERAL STANDARD DISCLOSURES GRI DESCRIPTION REPORT SECTION - PAGE NUMBER/S

STRATEGY AND ANALYSIS

G4-1 Statement from the CEO MD/ CEO report - pp 8, Chairman reports, pp 12

G4-2 Key impacts, risks and opportunitiesMD report - pp 8-11, Materiality - pp 28, Governance - pp 21 and 2013 Performance and Targets - pp 22-25

ORGANISATIONAL PROFILE

G4-3 Name of organisation Company profile - pp 4

G4-4 Primary brands, products, and services Company profile - pp 4

G4-5 Location of organisation’s headquarters Company profile - pp 4

G4-6 Number of countries where the organisation operates Company profile - pp 4

G4-7 Nature of ownership and legal form Business - pp 26

G4-8 Markets served Business - pp 26

G4-9 Scale of the organisation Business - pp 26

G4-10 Total number of employees People - pp 46-47

G4-11 Percentage of total employees covered by collective bargaining agreements People - pp 46

G4-12 Organisation’s supply chain. Describe the organisation’s supply chain Business - pp 27

G4-13 Significant changes during the reporting periodGovernance - pp 18, Supply - pp 27, Mine Continuation Studies - pp 30

G4-14 How the precautionary approach or principle is addressed by the organisation Governance - pp 20

G4-15 Externally developed principles or initiatives to which the organisation subscribes Governance - pp 30, People - pp 46

G4-16 Memberships of associations & national or international advocacy organisations Governance - pp 30

IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES

G4-17 Entities included in the organisations consolidated financial statements PWC statements - pp 91-124

G4-18 Process for defining the report content and the Aspect Boundaries Company profile - pp 5

G4-19 List all material aspects identified in the process for defining report content Materiality - pp 28

G4-20 For each material aspect, report the aspect boundary within the organisation Materiality - pp 29

G4-21 For each material aspect, report the aspect boundary outside the organisation Materiality - pp 29

G4-22 Report the effect of any restatements of information provided in previous reports Company profile - pp 5

G4-23Report significant changes from previous reporting periods in the Scope & Aspect Boundaries

Company profile - pp 5

STAKEHOLDER ENGAGEMENT

G4-24 List of stakeholder groups Materiality - pp 28

G4-25 Basis for identification and selection of stakeholders Materiality - pp 28

G4-26 Approaches to stakeholder engagementMateriality - pp 28, Mine Continuation Studies - pp 30, Social Responsibility - pp 68-70

G4-27 Key stakeholder topics and concerns Social Responsibility - pp 70, Materiality - pp 29

GLOBAL REPORTING INITIATIVE


GLOBAL REPORTING INITIATIVE CONTINUED

GENERAL STANDARD DISCLOSURESGENERAL STANDARD DISCLOSURES GRI DESCRIPTION REPORT SECTION - PAGE NUMBER/S

REPORT PROFILE

G4-28 Reporting period Company Profile - pp 5

G4-29 Date of most recent previous report Company Profile - pp 5

G4-30 Reporting cycle Company Profile - pp 5

G4-31 Contact point for the report Inside cover - pp 1

G4-32 Report the ‘In accordance’ option Company Profile - pp 4

G4-33 Organisations policy and current practice with regard to seeking external assurance Company Profile - pp 4

GOVERNANCE

G4-34 Governance structure Governance - pp 16

G4-37 Processes for consultation between stakeholders and the highest governance body Governance - pp 16, Social Responsibility - pp 68, 73

G4-45 Highest governance body’s role Governance - pp 16

G4-46Report the highest governance body’s role in reviewing the effectiveness of the organisation’s risk

Governance - pp 17, 21

G4-47Report the frequency of the highest governance body’s review of economic environmental and social impacts risks and opportunities

Governance - pp 16, 21

G4-48Highest committee or position that formally reviews and approves the organisation’s sustainability report

Governance - pp 17

G4-49 Process for communicating critical concerns to the highest governance body Governance - pp 17

G4-50Nature and total number of critical concerns that were communicated to the highest govt. body

Governance - pp 18

ETHICS AND INTEGRITY

G4-56 Mission and values statement, codes of conduct and principles. Governance - pp 19, Vision and Mission - pp 6-7


SPECIFIC STANDARD DISCLOSURES INCLUDING MINING AND METALS SUPPLEMENTDMA ANDINDICATORS GRI DESCRIPTION PAGE NUMBER/S

CATEGORY: ECONOMIC

MATERIAL ASPECT: ECONOMIC PERFORMANCE

G4-DMA Generic Disclosures on Management Approach Materiality - pp 28-29

G4-EC1 Direct economic value generated and distributedSocial Responsibility - pp 81 Finance - pp 86

G4-EC4 Financial assistance received from government Social responsibility - pp 86

MATERIAL ASPECT: MARKET PRESENCE

G4-EC5Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation

People - pp 46

G4-EC6 Proportion of senior management hired from the local community at significant locations of operation People - pp 46

MATERIAL ASPECT: INDIRECT ECONOMIC IMPACTS

G4-EC7 Development and impact of infrastructure investments and services supported Social Responsibility - pp 80-84

G4-EC8 Significant indirect economic impacts, including the extent of impacts Social Responsibility - pp 68-85

MATERIAL ASPECT: PROCUREMENT PRACTICES

G4-EC9 Proportion of spending on local suppliers at significant locations of operation Social Responsibility - pp 84

CATEGORY: ENVIRONMENTAL

MATERIAL ASPECT: ENERGY

G4-EN2 Percentage of Materials used that are Recycled Input Materials Environment - pp 61-65

G4-EN3 Energy consumption within the organisation Environment - pp 61

G4-EN4 Energy consumption outside of the organisation Environment - pp 61-62

G4-EN5 Energy intensity Environment - pp 61-62

G4-EN6 Reduction of energy consumption Environment - pp 61-62

MATERIAL ASPECT: WATER

G4-EN8 Total water withdrawal by source Environment - pp 61-62

G4-EN9 Water sources significantly affected by withdrawal of water Environment - pp 61

G4-EN10 Percentage and total volume of water recycled and reused Environment - pp 61-62

MATERIAL ASPECT: BIODIVERSITY

G4-EN11Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

Environment - pp 60

G4-EN12Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

Environment - pp 60

G4-EN13 Habitats protected or restored Environment - pp 60

G4-MM1 Amount of land disturbed or rehabilitated Environment - pp 62

G4-MM2 Number & % of total sites identified as requiring biodiversity management plans Environment - pp 60

MATERIAL ASPECT: EMISSIONS

G4-EN15 Direct greenhouse gas (GHG) emissions (Scope 1) Environment - pp 61-62

G4-EN21 NOX, SOX, and other significant air emissions Not reported - no data



MATERIAL ASPECT: EFFLUENTS AND WASTE

G4-EN22 Total water discharge by quality and destination Environment - pp 61-62

G4-EN23 Total weight of waste by type and disposal methodEnvironment - pp 65 (some data only)

G4-EN24 Total number and volume of significant spills Environment - pp 62, 65

G4-EN25Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally

Environment - pp 65

G4-EN26Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the organisation’s discharges of water and runoff

Environment - pp 60

G4-MM3 Total amounts of overburden, rock, tailing, and sludge and their associated risks Environment - pp 62

MATERIAL ASPECT: COMPLIANCE

G4-EN29Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Environment - pp 57

MATERIAL ASPECT: TRANSPORT

G4-EN30Significant environmental impacts of transporting products and other goods and materials for the organisation’s operations, and transporting members of the workforce

Environment - pp 61

MATERIAL ASPECT: OVERALL

G4-EN31 Total environmental protection expenditures and investments by type Environment - pp 56, 64-65

MATERIAL ASPECT: ENVIRONMENTAL GRIEVANCE MECHANISMS

G4-EN34Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms

Environment - pp 65

CATEGORY: SOCIAL

SUB-CATEGORY: LABOR PRACTICES AND DECENT WORK

MATERIAL ASPECT: EMPLOYMENT

G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender and region People - pp 44-47

MATERIAL ASPECT: OCCUPATIONAL HEALTH AND SAFETY

G4-LA5Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advise on occupational health and safety programmes

OHS&W - pp 51

G4-LA6Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

OHS&W - pp 51

G4-LA7 Workers with high incidence or high risk of diseases related to their occupation OHS&W - pp 52-54

G4-LA8 Health and safety topics covered in formal agreements with trade unions OHS&W – Not formalised

MATERIAL ASPECT: TRAINING AND EDUCATION

G4-LA9 Average hours of training per year per employee by gender, and by employee category People - pp 48

G4-LA10Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

People - pp 44, 48

G4-LA11Percentage of employees receiving regular performance and career development reviews, by gender and by employee category

People - pp 47

GLOBAL REPORTING INITIATIVE CONTINUED



MATERIAL ASPECT: DIVERSITY AND EQUAL OPPORTUNITY

G4-LA12Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

People - pp 47

MATERIAL ASPECT: EQUAL REMUNERATION FOR WOMEN AND MEN

G4-LA13Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation

People - pp 46

MATERIAL ASPECT: LABOR PRACTICES GRIEVANCE MECHANISMS

G4-LA16Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms

People - pp 46

G4-MM4 Number of Strikes and lockouts exceeding one week duration People - pp 46

SUB-CATEGORY: SOCIETY

MATERIAL ASPECT: ARTISANAL AND SMALL SCALE MINING

G4-MM8 Number & % of company operating sites where artisanal & small scale mining takes place Social Responsibility - pp 72

MATERIAL ASPECT: RESETTLEMENT

G4-MM9 Sites where resettlement took place Social Responsibility - pp 72

MATERIAL ASPECT: CLOSURE PLANNING

G4-MM10 Number and % of operations with closure plans Environment - pp 64

SUB-CATEGORY: PRODUCT RESPONSIBILITY

MATERIAL ASPECT: MATERIALS STEWARDSHIP

G4-MM11 Programmes relating to materials stewardship Finance - pp 87

SUB-CATEGORY: HUMAN RIGHTS

MATERIAL ASPECT: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING

G4-HR4Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and measures taken to support these rights

People - pp 46

MATERIAL ASPECT: SECURITY PRACTICES

G4-HR7Percentage of security personnel trained in the organisation’s human rights policies or procedures that are relevant to operations

OHS&W - pp 54

MATERIAL ASPECT: INDIGENOUS RIGHTS

G4-MM5 Total number of operations taking place in or adjacent to Indigenous People’s Territories Social Responsibility - pp 68

MATERIAL ASPECT: LOCAL COMMUNITIES

G4-SO1Percentage of operations with implemented local community engagement, impact assessments, and development programmes

Social Responsibility - pp 68

G4-SO2 Operations with significant actual and potential negative impacts on local communities Social Responsibility - pp 68-73

G4-MM6 Number & description of significant disputes relating to land use, customary rights Social Responsibility - pp 72

G4-MM7 Extent to which grievance mechanisms were used to resolve disputes relating to land use Social Responsibility - pp 72-73

MATERIAL ASPECT: COMPLIANCE

G4-SO8Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

Governance - pp 20 Environment - pp 57


ABBREVIATIONS

% Percent

APD Asset Protection Department

AER Annual Environmental Report

Ag Silver

AGI Algal Growth Inhibition

AIDS Acquired Immune Deficiency Syndrome

ANC Acid Neutralising Capacity

ANZECC Australian and New Zealand Environment and Conservation Council

ANZFA Australian and New Zealand Food Authority

ARD Acid Rock Drainage

ASL Above Sea Level

AS Australian Standard

Au Gold

AUD Australian Dollar

AusAID Australian Agency for International Development

BAHA PNG Business Coalition Against HIV/AIDS

BGI Bacterial Growth Inhibition

CEO Chief Executive Officer

Cd Cadmium

CGM Community Grievance Mechanism

CHS Catholic Health Services

CMCA Community Mine Continuation Agreement

CODE Centre of Distance Education

CO2-e Carbon dioxide equivalent

CRD Community Relations Department

CSR Corporate Social Responsibility

Cu Copper

dCu Dissolved copper

DEC PNG Department of Environment and Conservation

DLIR Department of Labour and Industrial Relations

DMA Disclosure of Management Approach

DMCP Detailed Mine Closure Plan

DMT Dry Metric Tonnes

DPhL Diwai Pharmaceuticals Limited

DWU Divine Word University

EAP Environment Action Plan

EBIT Earnings Before Interest and Taxes

ECPNG Evangelical Church Papua New Guinea

EHWP Employee Health and Wellness Programme

EIA Environmental Impact Assessment

EITI Extractive Industries Transparency Initiative

EMS Environmental Management System

ERT Emergency Response Teams

FAF Financial Assurance Fund

Fe Iron

FIFO Fly-In-Fly-Out

FPIC Free Prior Informed Consent

FRPG Fly River Provincial Government

g/t Grams per tonne

GDP Gross Domestic Product

GDS Graduate Development Scheme

GHG Greenhouse Gas Emissions

GIS Geographical Information System

GRI Global Reporting Initiative

GWh Gigawatt hour

ha Hectare

HEO Health Extension Officer

HIV Human Immunodeficiency Virus

HSE Health, Safety and Environment

IBC Intermediate Bulk Container

ICAM Incident Cause and Analysis Method

ICDMS Integrated Community Development Management System

ICMM International Council for Metals and Mining

IFC International Finance Corporation

IFRS International Financial Reporting Standards

ILO International Labour Organisation

IMIU International Mining Industry Underwriters

IPBC Act Independent Public Business Corporation Act

IRR Internal Rate of Return

JORC Joint Ore Reserves Committee

km2 Square kilometres

kt Kilotonnes


LTIFR Lost Time Injury Frequency Rate

m Metre

M Million

m3 Cubic metres

m3/t Cubic metres per tonne

Ma Million years

MCH Maternal and Child Health

MD Managing Director

MDGs Millennium Development Goal (United Nations)

ML Megalitres

MOA Memorandum of Agreement

Moz Million ounces

MPA Maximum Potential Acidity

MRA Mineral Resources Authority

Mt Million tonnes

Mtpa Million tonnes per annum

MWh Megawatt hour

MWTP Mine Waste Tailings Project

NAF Non Acid Forming

NAPP Net Acid Production Potential

NDoH PNG National Department of Health

NEC National Executive Council

NFDHA North Fly District Health Administration

NFHSDP North Fly Health Services Development Programme

NGO Non-Government Organisation

NPV Net Present Value

NRMH Net Revenue per Mill operating Hour

NSR Net Smelter Return

OHS Occupational Health and Safety

OHS&E Occupational, Health, Safety and Environment

OHSW Occupational, Health, Safety and Wellness

OHSW&T Occupational Health, Safety, Welfare and Training

OTDF Ok Tedi Development Foundation Limited

OTFRDP Ok Tedi Fly River Development Programme

OTML Ok Tedi Mining Limited

oz Ounces

PAD Preferred Area of Development

PAF Potentially Acid Forming

Pb Lead

PCon Pyrite concentrate

PGK Papua New Guinea Kina

PJ Petajoule

PNG Papua New Guinea

PNGSDP Papua New Guinea Sustainable Development Programme Limited

PPE Personal Protective Equipment

QA/QC Quality Assurance/Quality Control

R and R Restoration and Rehabilitation

RAM Rotarians Against Malaria

SAG Semi Autogenous Grinding

SAP Systems Applications & Products

SHEAP Safety, Health and Environment Action Plan

SIFR Significant Injury Frequency Rate

SISS Shares In Success Scheme

SOE State Owned Enterprise

SR Social Responsibility

S&TC Safety and Technical Committee

STI Sexually Transmitted Infections

t tonnes

TB Tuberculosis

TCS Tax Credit Scheme

TPP Tailings Processing Plant

TRI Total Recordable Injuries

TRIFR Total Recordable Injury Frequency Rate

TSF Tailings Storage Facility

TSS Total Suspended Solids

ug/L Microgram per litre

USD United States Dollar

VDO Voluntary Departure Offer

VPC Village Planning Committee

WHO World Health Organisation

WPPDTF Western Province People’s Dividend Trust Fund

Zn Zinc


CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATIONCertain information contained in this Annual Review 2013, including any information as to the Company’s strategy, projects, plans, future financial or operating performance and other statements that express management’s expectations or estimates of future performance, constitute “forward-looking statements”. All statements, other than statements of historical fact, are forward-looking statements. The words “aim”, “believe”, “expect”, “will”, “should”, “anticipate”, “contemplate”, “target”, “plan”, “project”, “continue”, “budget”, “may”, “intend”, “estimate” and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Company, that may cause the actual financial results, performance or achievements of the Company to be materially different from the Company’s estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows, changes in the worldwide price of gold, copper or certain other commodities (such as silver, fuel and electricity), possible variations of ore grade or recovery rates, failure of plant equipment or processes to operate as anticipated, ability to profitably produce and transport the Company’s product, demand for the Company’s product, fluctuations in foreign currency markets, risks arising from holding derivative instruments ability to successfully complete announced transactions and integrate acquired assets, legislative, political or economic developments in the jurisdictions in which the Company carries on business including increases in taxes, operating or technical difficulties in connection with mining or development activities, employee relations, availability and costs associated with mining inputs and labour, the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves, changes in costs and estimates associated with the Company’s projects and the risks involved in the exploration, development and mining business. There can be no assurance that forward-looking statements and information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements and information due to inherent uncertainty. All forward looking statements and information made herein are qualified by this cautionary statement and speak only as at the date of issue of this Annual Review 2013. The Company disclaims any intention or obligation to publicly update, revise or review any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable laws or regulations.

CONTACT

ANZ BANKING GROUP LIMITEDANZ Building, Harbour City

Poreporena Freeway

Port Moresby, NCD

Papua New Guinea

BANK OF SOUTH PACIFIC LIMITEDDakon Road

Tabubil, Western Province

Papua New Guinea

INTERNAL AUDITORDeloitte Touche Tohmatsu

Riverside Centre

Level 25

123 Eagle Street

Brisbane, Queensland

Australia

EXTERNAL AUDITOR/ TAX CONSULTANTPricewaterhouseCoopers

Level 6

Credit Corp Building

Cuthbertson Road,

Port Moresby, NCD

Papua New Guinea

LAWYERSAllens Linklaters

Level 6

Mogoru Moto Building

Champion Parade

Port Moresby, NCD

Papua New Guinea

OK TEDI MINING LIMITEDPO Box 1

Dakon Road, Tabubil

Western Province

Papua New Guinea

Phone: +67 5 649 3000 or

+67 5 649 3311

Fax : +67 5 649 9199


Hoawaginai Drive, Kiunga

Western Province

Papua New Guinea

Phone: +67 5 649 3724

Fax: +67 5 649 1046


Musgrave Street

Port Moresby, NCD

Papua New Guinea

Phone: +67 5 321 3522

Fax: +67 5 320 1308

OK TEDI AUSTRALIA PTY LIMITEDPO Box 535

Hamilton Central QLD 4007

936 Nudgee Road

Northgate, Queensland

Australia

Phone: +61 7 3363 9900

Fax: +61 7 3363 9999

WWW.OKTEDI.COM

This 2013 Annual Review has been printed on environmentally friendly paper stocks. The cover has been printed on Sovereign Offset, which is FSC certified and considered to be one of the most environmentally adapted products on the market. Containing fibre sourced only from responsible forestry practices, this sheet is ISO 14001 EMS accredited and made with elemental chlorine-free pulps. The text pages have been printed on Sun Offset, which is FSC certified and made with elemental chlorine-free pulps.

WWW.OKTEDI.COM

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