* Ok Tedi copper mine in Papua New Guinea hit by drought
* Two more weeks without rain could lead to suspension, MD
By James Regan
SYDNEY, Dec 4 The Ok Tedi mine, one of Papua New
Guinea's largest operating copper mines, is two weeks away from
temporarily shutting down due to a drought that has brought
river transport to a halt and cut off fuel supplies, a company
official said on Tuesday.
The mine, which produces about 150,000 tonnes of copper in
concentrate a year, ships the material by a pipeline and barges
more than 1,000 km (600 miles) to silo vessels in the Gulf of
Papua, before it is loaded on to freighters.
Dry conditions have caused problems to shipping from Ok Tedi
a number of times in the past.
"We have maybe 14 days before halting production," Nigel
Parker, managing director of Ok Tedi Pty Ltd, told Reuters.
"We've already slowed down."
However, Parker said, the situation had yet to reach a stage
where the company needed to invoke the contractual clause of
force majeure to release it from the obligation to deliver
concentrate to buyers on time.
Ok Tedi sells the ore to 10 smelting companies in Asia and
Europe. "We haven't declared force majeure, not yet," he said.
Low water levels on the Fly River have stopped both the
transport of concentrate and the delivery of diesel fuel
supplies to the mine, Parker added. "We're still producing
concentrate, so our storage sheds are filling up."
In 2011, the mine, majority-owned by the PNG Sustainable
Development Program Ltd, was shut for a total of five weeks due
to separate incidents when a worker was killed and a pipeline
transporting concentrate ruptured.
Separately, Parker said Ok Tedi was close to signing off on
a plan to extend until 2025 the life of the mine, which is now
scheduled to shut permanently in 2014.
An extension, enabling the mine to produce at two-thirds its
current capacity, requires nine separate community groups
representing 150,000 residents around the operation to sign off
on compensation and other agreements.
Seven of the groups had already approved and the last two
were voting this week, according to Parker.
"We have no doubt this will go ahead," he said. "We've
already started working on the extension.
Ok Tedi was also looking at ways to acquire the neighbouring
undeveloped Frieda River copper project, which world number 4
copper producer Xstrata is considering to sell outright or in
part rather than develop, according to Parker.
"As (Ok Tedi) managing director I would love to (acquire
Frieda River), but there's a long way to go," Parker said. "It
makes sense geographically and I am pursuing that."
He said Frieda River represented a "national asset" for
Papua New Guinea that should not be allowed to wither.
Like other major miners under pressure to conserve capital
amid uncertainty over global growth, rising costs and falling
commodity prices, Xstrata flagged in June that it could slow
Chinese companies, possibly including Metallurgical Corp of
China (MCC), could be interested in Xstrata's stake,
analysts have speculated.
Frieda River has an estimated resource of 12 million tonnes
of copper and 18.5 million ounces of gold, and could produce
246,000 tonnes of copper a year, according to a pre-feasibility
study in 2010.