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26. PNG Sustainable Development Program Company begins planning community programs
As reported previously, in February 2002 we transferred our 52 per cent equity in Ok Tedi Mining Limited in Papua New Guinea (PNG) to PNG Sustainable Development Program Company. Establishment of the company has progressed well during the year. Program Company now receives all dividends that would formerly have flowed to BHP Billiton. The dividends will provide a sound basis for supporting investments in community development programs in the Western Province and in PNG more broadly, during and beyond the remaining life of the mine.
Our withdrawal from the OK Tedi operation occurred because we were unable to gain agreement from the other shareholders in Ok Tedi Mining Limited - the PNG Government and Inmet Mining Corporation - for early closure of the mine. We sought early closure because of concerns about the environmental impacts of the mine. The government preferred to continue operation of the mine because of the significant social and economic benefits it provides to Papua New Guinea. We recognised the importance of those benefits and respect the wishes of the PNG Government. The exit arrangements we put in place were designed to maximise these benefits while limiting the potential for further environmental impacts.
Program Company has been established with a strong emphasis on governance arrangements. Incorporated in Singapore, it has an independent Board of Directors comprising Dr Ross Garnaut (Chair appointed by BHP Billiton), Donald Manoa (appointed by the PNG Chamber of Commerce and Industry), Sir Ebia Olewale (appointed by the PNG Minister for Treasury), Dr Jacob Weiss (appointed by the Bank of PNG), The Hon Jim Carlton (appointed by BHP Billiton), Patricia Caswell (appointed by BHP Billiton) and Lim How Teck (appointed by the Program Company Board). The company has produced its first public annual report and held a public meeting to discuss the report on 12 June 2003.
To date, the company has received dividend payments totalling US$41.5 million. These funds have been invested in short-term, low-risk investments pending commencement of the program implementation phase. Under the terms of the company arrangements, two-thirds of the dividends, after meeting taxation and administrative costs of the company, are to be invested in a long-term fund. This will enable the contribution of the company to continue beyond the life of the mine for a period of at least four decades. The remaining one-third of the dividends, after meeting company costs, is to be spent on current development programs in PNG, one third in the Western Province and two thirds elsewhere in PNG.
The establishment of the development program is progressing well, with a number of projects identified for possible support. These include rehabilitation of the Highlands Highway, and development of sustainable rubber, oil palm, cocoa and other agricultural industry in the Western Province and several other provinces. Also under consideration are eco-forestry and tourism projects and the generation of power from domestic gas, geothermal and hydro resources to support economic production and social services. Other projects have been identified in the areas of education, health and capacity building at the local level.
The company has six full-time staff in Port Moresby, Papua New Guinea. The establishment of partnerships with international aid agencies, government agencies, churches, other NGOs and private enterprise will facilitate implementation of the company's community development programs.
The company's annual report is available via PO Box 1786, Port Moresby, Papua New Guinea.
