The year under review saw large changes in the Papua New Guinea and global economies and in Papua New Guinea Sustainable Development Program's personnel and work. The continued increase in the momentum of PNGSDP's development programme meant that it was helpfully stabilising in Papua New Guinea against the global financial crisis and recession. The international economic problems caused some setbacks for parts of PNGSDP's work.

Early in 2009, Directors and staff of PNGSDP Limited joined the Papua New Guinea and international communities in mourning the death of Sir Ebia Olewale. Sir Ebia had been a tireless advocate for Western Province and Papua New Guinea development and for high standards of corporate and national governance since he was appointed a Director of PNGSDP Limited by the Papua New Guinea Treasurer in 2003. His immense contributions to Papua New Guinea's educational development, to its democracy and to its standing in the international community were recognised in many statements at the time of his death. One of these is reproduced on page 40 of this report. Sir Ebia Olewale's wisdom and friendship are missed profoundly by all of us at PNGSDP.

In February, 2009, the Papua New Guinea Treasurer appointed Lawrence Acanufa to the Board of Directors. Mr Acanufa is a lawyer with considerable relevant commercial experience in Papua New Guinea. Lawrence is already making important contributions to the Board's deliberations. Along with Lawrence and my colleagues on the Board, I look forward to working together in the interests of sustainable development in Papua New Guinea.

I noted in last year's Annual Report that in March 2008, the founding Chief Executive Director of PNGSDP, Robert Igara, was succeeded by David Sode. David has built on the foundations of integrity that Robert had established in the management of the company, and has taken it to new levels of achievement.

There were important developments in each of the company's three areas of responsibilities: implementing the sustainable development programme; governing responsibly the Ok Tedi mine jointly with the State and the Canadian mining company Inmet, and managing the long term fund that will support sustainable development in Western Province after mine closure.

The sustainable development programme saw an increased level of activity on community projects in partnership with institutions in civil society with good track records on development; on community health programmes, notably in relation to HIV/AIDS; on National and Western Province road construction and rehabilitation, alone or in partnership with the World Bank; on rural energy, particularly in Western Province; on sustainable aquaculture in Western Province; and on the planning of model sustainable forestry projects; on agriculture, notably on village rubber in Western Province. Work in other areas continued on established tracks, including on the provision of microfinance facilities for people without access to other banking services in Western Province and nationally. I would like to thank in particular the three Directors who together undertook additional work when I was on leave for six months in 2008, completing my Report on Climate Change for the Heads of Government of Australia and the Australian States and Territories. Jim Carlton was Acting Chairman in my absence. Jacob Weiss was PNGSDP's nominee Director on the Board of OTML. Don Manoa took on additional responsibilities in providing week to week guidance to the Chief Executive and his management tea. Thank you Jim, Jacob and Don for taking on these additional responsibilities.

There has been strong focus over the past year, and increasingly as this year passes, on securing durable provision of infrastructure services and opportunities for incomes and employment in Western Province after the closure of the Ok Tedi mine. Three mutually supporting sets of projects are central to these efforts. One is to define and later to implement sustainable governance arrangements for the town of Tabubil and for a range of services currently provided to the town and surrounding rural communities by the mine. This will require the establishment of commercial activities that can prosper in Tabubil after mine closure. One of these is a sustainable Star Mountains Institute of Technology, building on and extending Ok Tedi Mining Limited's excellent trades training centre. The second is to survey and to plan for a possible road and gas pipeline infrastructure corridor. The Infrastructure Corridor would facilitate a range of new economic developments through all three districts within Western Province, including the commercialisation of the scattered but considerable natural gas resources of the province. The third is to explore the prospects and if feasible to promote the development of a deepwater port and adjacent industrial area in the South Fly, based on Daru. Success in this effort would enhance the prospects of virtually all commercial activities in the Province. All of these projects depend on the interest of private investors and purchases of services. The interest of commercial purchases of port services in particular will await the easing of the effects of the global financial crisis.

The most important development at the Ok Tedi mine during 2008 was the commissioning of a major project to extract environmentally damaging sulphur materials from the mine tailings, to transport them to and to store them safely at Bige, near Kiunga. The capital cost of the project was US$212 million, and the annual operating costs approximately US$48.4 million. This project materially reduces the risks of acid damage to the Fly River environment.

The Ok Tedi mine continued to generate good commercial results through 2008, although profits and dividends fell sharply after the global financial crisis and recession caused a large fall in copper prices in the September Quarter. PNGSDP’s share of the Ok Tedi dividends in the year came to a total of US$182 million, down 30 percent from 2007. Copper prices in 2009 continue at levels well below the levels of the resources boom that came to an end last year, and this is expected to lead to much lower dividends this year and for the foreseeable future.

PNGSDP has worked closely with OTML to identify a commercially viable and environmentally responsible path to extending the life of the Ok Tedi mine beyond the current planned closure in 2013. There is progress in this work, which will be taken further through the remainder of 2009.

The Long Term Fund was affected by the difficult global financial conditions in 2008. The fund's Papua New Guinea investments performed strongly, but the investments managed by international fund managers suffered losses. The overall return on the Long Term Fund was -2.62 percent. This reduces the weighted average return since the commencement of the fund in 2003 to 5.13%. The balance of the Long Term Fund at the end of the year was US$677.8 million, up 14% from US$594.2 million at the end of 2007.

PNGSDP has a challenging mission. That the company is making progress on that mission is the result of support and hard and good work from many people. I am grateful for the continued commitment from my fellow Directors, who make contributions well beyond the demands of the general run of corporate directorships. I thank the Chief Executive, David Sode, and other PNGSDP staff for dedication and hard work.

The company appreciates the support of the national government through several ministries. The cooperation with the Fly River Provincial Government reached new levels of cooperation over the past year, including with the cooperation on the introduction to provide river transport services.