MAC/20: Mines and Communities

Major Disaster Strikes Freeport-Rio Tinto Indonesian Mine

Published by MAC on 2003-10-11


Major Disaster Strikes Freeport-Rio Tinto Indonesian Mine

"Mining kills an awful lot of people in all parts of the world" - so commented Victor Flores of HSBC Securities last Thursday, as news reached the northern hemisphere of a major disaster on 9th October at the Freeport-Rio Tinto Grasberg in West Papua (see photos).

Two workers died, five were injured and six are still missing (at the time of writing). As the statement released by WALHI (Friends of the Earth Indonesia) points out, this is the second deadly "failure" at the mine in the past three years, and the worst. Freeport in the US issued a statement calling the incident "unfortunate" and reassured customers that, though part of the mine would be closed for two weeks customers needn't worry. WALHI has called for the mine's operations to be suspended; for its output to be drastically reduced and for the government to carry out an urgent review of all mining in the country.


WALHI Demands a Halt to Freeport Mine Operations

Press Release - 11 October 2003

WALHI - FoE Indonesia

Jakarta ­ Friends of the Earth Indonesia, (WALHI) demands the government halt operations at the Grasberg mine (known as “Freeport”) following a disastrous landslide on Thursday morning 9 October 2003. The Grasberg mine in West Papua is jointly owned by USA-based Freeport McMoran and UK/Australian mining company Rio Tinto Ltd.

“This event proves Freeport is not competent to handle the current high level of mining production. The government must immediately enforce a reduction in the Freeport production capacity” said Mr. Longgena Ginting, National Director of Friends of the Earth Indonesia (WALHI).

In 1997, the Indonesian government approved a request from Freeport to raise production capacity to 300 000 tons of ore per day. The increase in production capacity was funded in large part by Rio Tinto Ltd, in return for a share in the increased mine profits. Even at the lower production level, Freeport’s operations had resulted in huge environmental impacts. Destruction caused by the Freeport mining operation covers a vast area from the 4 000 meter high mountaintop all the way down to the coast and the Arafura Sea to Australia’s north.

Freeport Mining Indonesia always claims that various disasters which have occurred in its area of operations are the tragic result of natural events, such as the landslide of waste rocks at Lake Wanagon in 2000, which killed 4 of Freeport’s subcontract workers. * In fact, Freeport is well aware of the risk of it’s operation in an area with high rainfall and seismic activity, nevertheless this has not prevented the company from raising production capacity in the scramble for maximum profits.

“Now is the time for the House of Representatives to pressure the government to conduct a review of all mining contracts and improve the mining licensing system which up until now has given absolute rights to mining companies at the expense of the public” continued Longgena Ginting.

The government is also obliged to demand absolute responsibility from companies, based on the principle of strict liability as set out in Environment Management Law No.23 (1997), and must both compel the company to immediately repair environmental damage and demand responsibility from company executives for the disastrous loss of life.

* Note: In year 2000, WALHI filed a lwsuit against Freeport for not giving correct and accurate information about the incident in Lake Wanagon which had caused 4 casulaties. The first-tier court found Freeport guilty as charge. The case is now on the National Supreme Court.

Contacts:

Longgena Ginting (+62 (0) 811 927 038) Nur Hidayati (+62 (0) 21- 794 1672)

Nur Hidayati (Yaya)
Head of Campaign & Public Education
WALHI National Executive
Jakarta
Indonesia
Tel: +62 21 794 1672
Fax: +62 21 794 1673
www.walhi.or.id


Background:

Six missing in slippage in Freeport mine

October 10, 2003

Rendi A. Witular, The Jakarta Post

U.S.-based mining company Freeport-McMoran Copper & Gold Inc. announced on Thursday two of its employees were killed and six others were missing following a slippage at its Grasberg mine in the province of Papua. The slippage also injured five workers.

In a press release, Freeport said the slippage occurred on Thursday morning in a section of the Grasberg mine operated by its affiliate, PT Freeport Indonesia (FI). The mine is located in Tembagapura, Mimika regency. The company is probing the cause of the slippage. Freeport said efforts were ongoing to locate the missing workers and to ensure the safety of other FI workers and its operations. "Our first priority in responding to this unfortunate event is to take action to provide for the safety of our people, to care for those injured and to locate those who are missing," Freeport chairman and chief executive James R. Moffet and president Richard C. Adkerson said in a statement. "We extend our heart-felt sympathy to the families of those who perished. While the physical damages to our operations are not large, we reiterate our commitment to provide for the safety of our operations for all our employees."

The Grasberg mine is one of the world's largest gold mines. It also produces copper. Freeport said its plans for the fourth quarter of 2003 could be affected by the incident, which might force it to defer some production to 2004. However, the incident is not expected to affect FI's long-term plans for the mine, the company said.

FI is 81.28 percent owned by Freeport McMoRan, while the Indonesia government and PT Indocopper Investama Corporation each hold a 9.36 percent stake in the company.

The slippage at the Grasberg mine is the second deadly incident to occur there in the past several years. In May 2000, four workers of PT Petrosea and PT Graha Buana Jaya, subcontractors to FI, were killed when a large pile of waste collapsed. Following the incident, Freeport came under fire from several environmentalists and government officials, who urged the company to cut their production output and put in place a sufficient early warning system.

The chairman of the Indonesian Forum for the Environment, Longgena Ginting, said he regretted the incident and urged the government to conduct an environmental audit of the company. "Enough is enough. They must cut their production output or shut the site down immediately. How many more casualties do they (Freeport) want?" said Longgena.


Freeport-McMoRan Indonesia landslide kills two

October 9 2003

By Joseph A. Giannone, Reuters

New York - Two workers were killed, five were injured and six were missing in Indonesia after a section of the world's largest gold mine collapsed on Thursday, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX - News) said.

Freeport spokesman William Collier said the workers were killed when a section of the open-pit Grasberg mine in West Papua, Indonesia -- essentially a massive, terraced bowl carved into the ground -- collapsed onto workers in the pit. The Grasberg deposit, discovered by Freeport in 1988, has the world's largest gold reserves and the third-largest copper reserves.

The incident could increase tensions for the company in the region, human rights groups said. Freeport said the accident would dent fourth-quarter output but would not hurt long-term financial results. Its shares fell $1.51, or 4 percent, to $35.89 in afternoon trade.

Human rights and environmental groups say Freeport-McMoRan and other multinational companies have inflicted tremendous environmental damage in resource-rich Indonesia. Companies also have contributed to the repression of the indigenous people of West Papua by the Indonesian government, these critics charge.

Freeport, which has 18,000 employees worldwide, says its safety record is better than average among U.S. and international mining firms. Last year Freeport's lost-time-injury rate per 200,000 hours worked was 0.25, compared with the U.S. industry average rate of 2.10 in 2001.

But Mines & Communities Network, a London-based group that lobbies for residents of eight countries where global mining companies are active, said Freeport's Grasberg mine has a particularly poor environmental record.

"It's probably the most devastating mine I can think of anywhere in the world," said Roger Moody, coordinator of Mines & Communities. The group said Freeport's Grasberg mine dumps more than 285,000 tons of mining waste in local rivers every day. About two years ago, a Freeport waste-rock dump at a lake near the mine collapsed, drowning two workers and injuring others.

"Unfortunately it seems every year there's an incident that outrages people like us and I imagine there will be an outcry not just in West Papua but in Jakarta as well," Moody said. "Local groups have indicted this mine for years, more than any other enterprise in the country." Even so, HSBC's Flores expects the news will not hurt the company's standing, at least not on Wall Street.

"There might be some repercussions" locally, he said. "Not to be cold blooded, but this is an industry that kills an awful lot of people in all parts of the world.

Freeport said the landslide will result in the potential deferral of some output from the fourth quarter into 2004, New Orleans-based Freeport said. Still the company assured it does not expect the incident to impact the mine's long-term plans.

"It will probably affect fourth-quarter results, but not by much," HSBC Securities mining analyst Victor Flores said. "Only part of the mine's production comes from the open pit."

As part of the same news release, Freeport announced its third-quarter copper and gold sales have exceeded previous estimates. Copper sales for the third quarter reached about 345 million pounds, about 25 million pounds higher than forecast. Gold sales reached 764,000 ounces, about 120,000 ounces higher than expected.

Year-to-date, the company said it has completed 80 percent of its copper sales goals and 85 percent of targeted gold sales.

"While the physical damages to our operations are not large, we reiterate our commitment to provide for the safety of our operations for all our employees," Freeport Chairman and Chief Executive James Moffett said in a statement.


Freeport-part of Indonesia landslide mine is open

October 10 2003

Reuters

New York - Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX - News) said on Friday mining operations continued at the open-pit Grasberg mine in Indonesia in sections unaffected by a landslide that killed two workers, injured five and left six missing.

The company also said operations continue at its Deep Ore Zone underground mine, milling facilities and concentrate delivery systems at the site. The Grasberg deposit, in West Papua, Indonesia, was discovered by Freeport in 1988 and has the world's largest gold reserves and the third-largest copper reserves.


Indonesia's Freeport mine will shut for 2 weeks

October 10 2003

By Muklis Ali, Reuters

Jakarta - Indonesia's Mines and Energy Minister said on Friday that PT Freeport Indonesia will stop production from its open-pit gold and copper mine in Papua for two weeks, after a landslide killed two workers on Thursday.

However, U.S.-based Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX - News), whose unit PT Freeport Indonesia operates the mine, later clarified that only the parts affected by the incident would be closed.

Freeport-McMoRan spokesman William Collier said mining operations continue in "most" of the Grasberg open-pit mine, the world's largest gold mine. The company said another five workers were injured and six are missing after Thursday's landslide.

The company also said operations continue at its Deep Ore Zone underground mine, milling facilities and concentrate delivery systems at the site.

"We have sent a team to Freeport mine to investigate there," Mines and Energy Minister Purnomo Yusgiantoro told a news conference on Friday.

"Let's wait until the investigation team returns and then we will decide what we are going to do on policy."

Freeport Indonesia president director Adrianto Machribie said the company would still be able to meet export commitments using stockpiles and underground mines at Freeport's Papua complex.

He said Freeport has produced 80 percent of the copper and 85 percent of gold planned for 2003.

"We have stockpiles for seven days and we have underground mining," Machribie told the news conference. "We will fulfill our commitments until now."

Asked how long Freeport could meet its commitments, Machribie said: "It depends on how long (production is stopped)... If the minister says around two weeks, we feel no problem."

"We hope to repair the impact of this landslide as soon as possible. We are optimistic," he said.

The Grasberg deposit, discovered by Freeport in 1988, has the world's largest gold reserves and third-largest copper reserves.

Different from 2000

Freeport-McMoRan said in the United States on Thursday the accident would dent fourth-quarter output but not hurt long-term financial results. Its shares fell $1.41, or 3.77 percent, to end at $35.99 on Thursday.

Simon Sembiring, acting director general of geology and mineral resources from the Mines and Energy Ministry, said the incident differed from one in 2000 that led to a request to cut production.

"This is nothing to do with the company production," he said. In 2000, Indonesia had pressed Freeport to cut production following an accident at the company's Lake Wanagon waste dump that killed four workers and raised concerns about possible environmental damage.

Sembiring said senior officials from PT Freeport Indonesia had reported the incident to the mines and energy ministry on Friday morning.

Freeport McMoRan, based in New Orleans, Louisiana, mines and processes ore containing copper, gold and silver in Indonesia and smelts and refines copper concentrates in Spain and Indonesia.

The incident could increase tensions for the company in the region, human rights groups said, but a police official in the nearby town of Timika told Reuters by telephone on Friday that there were no signs of unusual activity.

Freeport has been subject to sporadic criticism on human rights and environmental issues, while Papuan pro-independence groups say not enough of the revenue the Indonesian government gets from Freeport and other multinational operations goes to the remote province, about 3,000 km (1,860 miles) east of Jakarta. (Additional reporting by Michael Erman in New York)


Government seeks to extend Freeport mine closure

MiningIndo

October 15, 2003

The Indonesian government could extend the partial closure of PT Freeport Indonesia's gold and copper mine in West Papua if an investigation finds that a fatal landslide last week at the mine was caused by overproduction, an official quoted by Dow Jones news wires said Wednesday (October 15).

"During the two-week closure, we will decide whether it can reopen or not," director general of mining at the Department of Energy and Mineral Resources, Wimpy S. Tjetjep told reporters.

PT Freeport Indonesia, a subsidiary of US-based Freeport McMoran Copper & Gold Inc (NYSE:FCX), which operates the giant Grasberg open pit in the remote province of Papua in Indonesia's east, has already closed for two weeks the section of the pit that collapsed burying 8 workers, 6 of whom are still missing.

Tjetjep added that overproduction would violate the production permit the government has given to the company, and the government will impose a penalty if the company is found to have violated the permit.

NGOs and environmentalists have often criticised the company for over-production that places in jeopardy workers safety and the natural environment.

Australia's Macquarie Bank estimated in a Monday report that around 20,000 metric tons of Freeport's copper production may be lost in the fourth quarter due to the current partial closure. However, other reports released this wek indicate the 3rd quarter output would remain on target.

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