Inmet okays BHP-Billiton withdrawal from Ok Tedi

Inmet Mining (IMN-T) has approved a heads of agreement with BHP Billiton (BHP-N) and the government of Papua New Guinea outlining the withdrawal of BHP from the copper-gold mine in that country.

The Prime Minister of Papua New Guinea and the National Executive Council have already endorsed the move. All that remains is for BHP’s board of directors to give the nod.

BHP, the mine’s current operator, has long voiced its desire to get out of Ok Tedi, which has been a financial and environmental sore point. The mine has been the target of environmentalists and compensation claims from landowners who said that the mine polluted a nearby river and surrounding areas.

Under the heads of agreement, Inmet and the State of Papua New Guinea will continue to hold their respective 18% and 30% interests. BHP Billiton will transfer its 52% interest in Ok Tedi to an independent company, which will continue to operate the mine.

Papua New Guinea’s government has insisted that Ok Tedi continue to operate until the end of its projected life in 2010. The mine contributes about 10% to the nation’s gross domestic product and about 20% of its annual foreign exchange earnings.

Richard Ross, Inmet’s CEO said, "We are very pleased with the progress made to date but there is still some work to be done. We are confident that once the arrangements are finalized, much of the uncertainty surrounding our investment in Ok Tedi will be eliminated."

Ross said part of the arrangement for BHP’s exit was that a new environmental regime be put in place.

"That is something that needs to be legislated and it is up to the government to establish standards, but we are confident that working with them there will be a new environment regime that will let Ok Tedi operate as it is, and of course Ok Tedi is committed to minimize the environmental impact of the operations,” Ross said.

A definitive deal is expected shortly.