Ok Tedi suffers production snag

Inmet Mining‘s (IMN-T) 18%-owned Ok Tedi copper mine in Papua New Guinea will operate at a minimum of half-capacity for at least the next two months, following the failure of one of two semi-autogenous grinding (SAG) mills.

The operating company, also named Ok Tedi, is investigating the cause of the failure and the extent of the repairs required. The mine’s other SAG mill, which was substantially rebuilt in early 2003, remains unaffected.

During the recent fourth quarter, Ok Tedi produced 43,000 tonnes copper and 110,300 oz. gold. Cash costs came in at US$1,100 per tonne copper. With low water levels in Ok Tedi and Fly Rivers hampering concentrate shipments, the operation cut mill throughput and mined lower-grade parts of the open pit to limit the amount of concentrate that would have to be stored.

Inmet figures the expected production loss at Ok Tedi represents about 3% of its expected overall copper production for 2004.

Shares in Inmet were off 85, or more than 5% of value, at $15.66 in late afternoon trading in Toronto following the news on Jan. 27.

Ok Tedi’s other shareholders are the government-held company PNG Sustainable Development Program, with 52%, and the national PNG government, with 30%. (This 30% comprises 15% held directly by the PNG government, 12.5% by the Western Province and 2.5% by landowners in the mine area.)

In February 2002, BHP Billiton divested its 52% shareholding in Ok Tedi to the PNG Sustainable Development Program.