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BHP Made Liable for Damage From Ok Tedi in Papua, ABC Says

BHP Billiton Ltd., the world’s biggest mining company, has been made liable by the Papua New Guinea parliament for environmental damage caused by the Ok Tedi copper mine, the Australian Broadcasting Corp. reported.

Mine waste, known as tailings, from Ok Tedi caused damage to the Fly River in the 1980s and 1990s. In 2002, BHP transferred its majority share of the mine to the PNG Sustainable Development Program Ltd., and in return was granted legal immunity. The mine has continued to operate.

Prime Minister Peter O’Neill yesterday said the decision to grant immunity was wrong, according to the ABC. The parliament also passed legislation to take control of the mine from the PNG Sustainable Development Program, which holds 52 percent of the mine and invests profits back into the region.

“It does show how keen the PNG government is for income,” Peter Rudd, resources and mining manager at Altitude Private Wealth in Melbourne, said by phone. “BHP absolved itself from all the environmental concerns or at least incorporated them into that trust and not part of BHP itself, so you’d think it would be sufficiently at arm’s length.”

Fiona Hadley, a spokeswoman for Melbourne-based BHP Billiton, declined to comment on the government’s decision regarding changes to Ok Tedi ownership and the company’s legal immunity. Companies with mining and energy assets in PNG include Newcrest Mining Ltd., Barrick Gold Corp., Exxon Mobil Corp., Oil Search Ltd. and Santos Ltd.

Raised Bed

Mine waste from the Ok Tedi mine has raised the river bed, causing flooding that’s damaging to local landowners on either side of the river system. The mine produces about 170,000 metric tons of copper and 500,000 ounces of gold annually from its Mt. Fubilan open-cut mine, Ok Tedi Mining Ltd. previously said on its website.

The government’s decision to claim ownership of the trust and revoke previous agreements made the Pacific nation riskier in the eyes of investors, said Michael Elliott, sector leader for EY LLP’s global mining practice.

“While the PNG government and those promoting projects may see this as an isolated case, many others who are providing the investment will be factoring it in,” Elliott said. “It’s hard to see how this doesn’t increase mining risk.”

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