Freeport Mine

This trip was the fastest one in terms of climbing, but the longest one in terms of access. So much time, money, and energy was wasted on issues that didn’t directly contribute to climbing, and Freeport Mine was the root source of all these stresses. I had thought that this is just what happens when you travel in a developing country, but one day I read in a local newspaper that the Freeport Mine actually belongs to a US company, and there were many complains about this business from local people. So I did some research, and felt it interesting enough to share my findings with people who might care how this influential American company — ordinarily subjected to rigorous scrutiny and restrictions in its home country — could adapt to, and even thrive in, a foreign business environment riddled with corruption, and operate in a remote area effectively under military law.

Freeport-McMoRan Copper & Gold Inc. (“FCX”), the world’s lowest-cost copper producer and one of the world’s largest producers of gold, is an international mining industry leader based in Arizona, USA. PT Freeport Indonesia is one of its principal operating subsidiaries, whose principal asset is the world-class Grasberg mine in the province of Papua in Indonesia, which contains the world’s largest single copper reserve and world’s largest single gold reserve.

Picture of Grasberg Mine from Wikipedia

1. Engineering Marvel

In a special investigative report, the New York Times noted that “Freeport has built what amounts to an entirely new society and economy, all of its own making. Where nary a road existed, Freeport, with the help of the San Francisco-based construction company Bechtel, built virtually every stitch of infrastructure over impossible terrain in engineering feats that it boasts are unparalleled on the planet.”

In developing its open-pit mining operation, Freeport has shaved off more than 120 meters of the 4,884 meter-high Puncuk Jaya Mountain, or what we called Carstensz Pyramid, by 1996. According to the Columbia Encyclopedia, Carstensz used to be16,503 ft, or 5,031 m.

The cost of building a mine on a mountain was 3 billion USD.

2. Security Coalition

In March 2003, Freeport disclosed to the US Securities and Exchange Commission that it paid the Indonesian Military $4.7 million in 2001 and $5.6 million for the employment of about 2300 “Indonesian government security personnel”. Between 1996 and 2004 at least $50 million was spent by Freeport, officially on providing vehicles, accommodation and food for Indonesian Military personnel. The NYT reported that company documents it had obtained revealed that some individual commanders received tens of thousands of dollars, in one case up to $150,000.

It is well known that in many areas where mining is being conducted, there is a very close relationship between the companies and the armed forces and police. The result is that when conflicts erupt between the mining corporations and local communities, the latter are at a great disadvantage. Same for Papua, in order to control “insurgents” and “local resistance”, Freeport justified the needs for directly-controlled security forces, which in turn intensified the tension. But, why would there be “insurgents” and “local resistance” against the mine operation? Let’s see what Freeport did to local communities.

3. Economic Contribution

The Freeport mine, the biggest in the world, boasts about $1 million per day in profits (in gold and copper ore). The company contributed $33 billion in direct and indirect benefits to the Indonesian government, approximately 2% of GDP, between 1992 and 2004. In some years, it has been the biggest source of revenue to the Indonesian government.

However, the West Papuan people have seen very little of this largesse. In particular, the indigenous people who lived in the mining concession area have suffered numerous injustices and humiliations. The several thousand Amungme and Kamoro people who lived in the area were relocated from their traditional lands into refugee settlements, as well as gravitating to the mining town of Timika, previously home to a small population.

“Now it is home to more than 100,000 in a Wild West atmosphere of too much alcohol, shootouts between the soldiers and police, AIDS and prostitution, protected by the military”, the New York Times reported. This has led to what some have called “cultural genocide”. Without access to their traditional land and with little prospect of employment, the local people are losing their social and cultural cohesiveness. Alcohol abuse and drug dependencies are more common.

Freeport was not required to compensate the local people for anything other than the dwellings they had lived in, and is allowed to exploit the natural resources of the area unhindered.

Only 13% of the 17,000 employees working at Freeport are people from West Papua.

4. “Eco Terrorism”

The vast Grasberg deposit ensures a long mine life, so it is most profitable for Freeport to process a huge amount of ore each day, wasting around 14% of the copper in the ore, which remains in tailings disposed of into the river. For the same reason, a large amount of copper-bearing rock has been excavated then dumped instead of processed, because the joint venture chose to pursue higher grade ore as quickly as possible.

The mine’s tailings, generated at a rate of 700,000 tons per day, are the subject of considerable environmental concern. The waste rock remains in the highlands, up to 900 feet deep and covering 3 square miles (8 km²), but its runoff and the finer material gets washed into the headwaters of the Ajikwa River and settles out all along the course of the river. This rate of heavy metal pollution is more than a million times worse than achievable with standard mining industry pollution prevention practices. The waste has also accumulated in the lowlands and has now buried 233 square kilometers of once-abundant wetlands as well as destroying at least 130 square kilometers of rain forest. The fish have nearly disappeared from the river. The mine’s management has warned local people not to drink water or eat plants growing near the river, but has not explained why.
It’s amazing how the company could operate such a vastly invasive mining operation in an area of such ecological and cultural significance, yet still pollute so irresponsibly with relative impunity. Unfortunately, the environmental law is not enforced by the Ministry of Environment due to the joint venture’s pervasive financial and political influence.

The environmental record of the Freeport mine is so bad that in 1995 the Overseas Private Investment Corporation (OPIC), which insures US companies against political risk, revoked Freeport’s insurance. No other company had ever been cut off before. The OPIC insurance policy was reinstated in April 1996, after Freeport threatened to file a protracted lawsuit against the federal agency, but then Freeport instead decided to cancel its insurance policies with both OPIC and the World Bank’s Multilateral Investment Guarantee Agency (MIGA) five months later. In so doing, Freeport avoided an imminent investigation by the World Bank agency into its mining operations.

5. “Cultural Genocide”

“Our environment has been ruined and our forests and rivers polluted by waste. The sago forests which serve as our primary food source have become dry, making it hard for us to find food. The animals we have hunted in the past have disappeared so we no longer know where to hunt…”

“Even the sacred mountains we think of as our mother have been arbitrarily torn up by them..” members of the indigenous Amungme tribe have literally watched their mountain disappear — mining has removed enough earth to lower the mountain by 400 feet within seven years.

For local people, the gold mine has been a nightmare – the dispossession of their lands, forced resettlement into malaria-ridden lowlands, pollution of rivers, and deprivation of the basic means of making a living. The environmental devastation wreaked by the mine and the lack of adequate compensation and benefits from the mine’s operations has fuelled support for the Free Papua Movement, which has waged a low-intensity guerrilla war for many years. It has also led to sporadic uprisings by local people, many which have been violently suppressed by the Indonesian military.

This entry was posted on November 29, 2007 at 8:43 pm and is filed under Carstensz Pyramid Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.