In 1968 Kennecott Copper Corporation geologists confirmed the existence of a major gold and copper deposit on the southern slopes of Mount Fubilan, 20 kilometers east of the Indonesian border, in the Star Mountains, Western District. Kennecott explorations continued until 1975 when the company withdrew from the project. In 1976 the Australian company Broken Hill Pty Ltd (BHP) led the formation of an international consortium which presented an open-cut mining feasibility study to the PNG government in 1979. In 1981 Ok Tedi Mining Ltd was incorporated in PNG to operate the project and production began in 1984. In 1987 it was the third most productive gold mine in the world. In 1990 the upper gold deposit was exhausted and copper became the major earner. Ore concentrate is piped to the port of Kiunga where it is dried before being transported out of the country down the Fly River. The mining township of Tabubil, 20 kilometers southeast of the mine, is connected to Kiunga by 137 kilometers of road. Rugged terrain and very high rainfall make extraction of the ore difficult and expensive.
Until October 1993 the two largest shareholders in Ok Tedi were BHP Minerals Holdings Pty Ltd and Amoco Minerals (PNG) Company, each with 30 percent. The PNG government owned 20 percent, and the remaining 20 percent was held by a German consortium of Metal Mining Corp. (7.5 percent), Degussa AG (7.5 percent), and Deutsche Investitions-und-Entwicklungsgesellschaft MBH (5 percent). In October 1993 BHP announced that it was lifting its shareholding to at least 50 percent and that under proposed new ownership arrangements the PNG government would hold 30 percent of shares, and Metall Mining Corporation (a Canada based subsidiary of Metallgesellschaft AG) and other German interests 20 percent. In January 1994 Metallgesellschaft AG was in serious financial difficulties. In 1990 Ok Tedi accounted for all of PNG’s copper exports and 45 percent of its gold exports. In 1991 it contributed K27.4 million to Government revenue (3.3 percent of total internal revenue). Ore is exported to Japan, Finland, Germany, South Korea and the Philippines. In 1992 Ok Tedi employed 2,000 workers of whom 85 percent were PNGans, including 30 percent from the local area.
The local people, the provincial government and the national government have complained that Ok Tedi’s failure to deal with poisonous waste effluent from the mine is polluting the Fly River. In 1984 the national government twice threatened to close down the mine unless it could resolve this problem. The PNG government has established environmental standards with which the company is expected to conform. There has been concern, both inside and outside PNG, that the standards are inadequate and are not being enforced. In September 1993 Pari Zepi, member for South Fly and Minister for the Environment, took over the task of environmental monitoring from the Minister for Minerals and Energy and announced that he intended to enforce environmental safeguards. In May 1994 the leader of a local clan (but claiming to represent 7,000 members of other clans) lodged a claim in the Supreme Court of Victoria, Australia, against BHP, sole manager of the mine since 1987, for $A4 billion for alleged environmental damage caused by Ok Tedi mining operations.