TORONTO (miningweekly.com) - Canadian base-metals miner Inmet Mining has reached an understanding to exchange its 15% interest in Ok Tedi Mining Limited (OTML), which operates the Ok Tedi copper mine, in Papua New Guinea (PNG), in return for a 5% net smelter return royalty (NSRR) on revenue from the mine.

The transaction will be neutral on a net-asset-value basis and will insulate Inmet's interest in the mine from other activities pursued in the future by OTML, the company said.

The understanding has been reached with PNG Sustainable Development Programme Limited (SDPL), which owns 52% of OTML, but approval is required from the PNG government, which owns 30%, and diversified miner BHP Billiton, which was a majority owner of the mine before it ceded its stake to SPDL.

Inmet understands that SDPL has presented the nonbinding draft term sheet that reflects the understanding between it and SDPL to the government of PNG for approval and that the term sheet will be discussed as a matter of public record, the firm said.

If the transaction goes ahead, the royalty would apply to proceeds from the sale of all mineral products from the Ok Tedi mine as operated under the current mine plan, less treatment charges and penalties, insurance, freight and sampling/assaying costs as well as a royalty aggregating 2% of revenues that are presently paid by OTML to the government of PNG the Western Province and local landowners.

The term of the NSRR would be expected to begin on or about August 1, 2009 and, based on the current mine plan, the term is anticipated to continue until December 31, 2013.

LAS CRUCES

Meanwhile, Inmet also announced on Wednesday it has produced the first copper cathodes from its Las Cruces mine, in Spain.

Las Cruces resumed mining activities at the bottom of the mine pit on April 29, after receiving official approval to restart operations, and delivered the first truck load of ore to the crusher on May 26.

Over the coming months, Las Cruces will focus on ramping up production to reach the design capacity of 72 000 t/y of cathode copper, Inmet said.

In May last year, the Spanish water authority withdrew a key permit for the Las Cruces mine - the approval for the dewatering and reinjection system - and informed the firm that it would not be allowed to expose ore in the open pit until the permit was reinstated.

Over the following months, Inmet developed and implemented a plan to address the authority's concerns, and a resolution was issued by the regulator on April 7, to lift suspension.

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