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Freeport-McMoRan Indonesia landslide kills two

Published by MAC on 2003-10-09

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.

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