MAC: Mines and Communities

Indonesia Update

Published by MAC on 2006-03-28

Indonesia Update

28th March 2006

March 2006 has been a month of protest, arrests, shootings, and death around American owned gold and copper mines in Indonesia. Freeport McMoRan and Newmont Nusa Tenggara are some of the world's richest mines, Freeport McMoRan's Chief Executive Officer Jim Bob Moffett himself raked in millions from the Papua goldmine this year. But the Papua and Sumbawa communities living around this exploitation of gold and copper reserves suffer some of the highest rates of poverty and disease in Indonesia.

Four people from Ropang Village in Sumbawa, the site of Newmont exploration, have been confirmed shot by police. is reporting the arrests of twelve people in connection with the burning of the Newmont Nusa Tenggara exploration camp in the Dodo Rinti protected forest.

Four treated after being shot over Newmont attack

Panca Nugraha, The Jakarta Post, Mataram

29th March 2003

Four suspects in an attack on an exploration camp run by U.S. mining giant Newmont in Sumbawa, West Nusa Tenggara, are being treated at separate hospitals after being shot by police Sunday after they resisted arrest, police said Tuesday.

Two of the four victims are being treated at Kemala Hikmah Police Hospital in Mataram, while the other two are at Sumbawa General Hospital in Sumbawa Besar regency, West Nusa Tenggara Police spokesman Adj. Sr. Comr. HM Basri said.

Basri said the two victims being treated in Mataram had been identified as Kasim and Asmaun. Though the two are being treated for gunshot wounds to the chest, Basri denied reports they are in critical condition.

Kasim was admitted to the hospital Sunday, while Asmaun was transferred there Monday evening, Basri said.

"No one is allowed to take photos of the patients so as not to incite anger in Sumbawa. Their condition is improving," he said, adding that the two victims treated in Sumbawa Besar had been identified as Ali and Syamsudin.

Basri said Monday that after questioning a number of witnesses about the March 19 attack, police sent summonses to dozens of people believed to have been involved in the incident. When the summonses were ignored, police went to pick up the suspects, including several in Lebuin village.

Police detained up to 12 suspects, but when they attempted to take others into custody hundreds of residents attacked officers with bows and arrows, spears and stones, Basri said, adding that a clash could not be avoided.

"The police officers were forced to fire warning shots. However, when the angry residents failed to heed the warning, officers were forced to shoot the four suspects," Basri said.

Four police officers were also injured during Sunday's action on Sumbawa island, he said. One was injured by an arrow, while the three others were hit by rocks thrown by the villagers.

Two other key suspects escaped arrest during a raid on Ropang village, near the exploration camp that was attacked, according to AFP.

The attack and torching of the Newmont camp, located around 60 kilometers from the company's main gold and copper mining site, led to exploration work being suspended but mining continued as usual.

The company had received reports of the planned attack so had evacuated its 135 workers. No one was injured.

Press reports have said that local residents were demanding Rp 10 billion (US$1.1 million) from the company for community development programs.

Indonesian police arrest 12 over attack on Newmont camp in Indonesia

by AFX News Limited, JAKARTA (AFX)

28th March 2006

Indonesian police said they have arrested 12 people suspected of involvement in an attack on an exploration camp run by a local unit of US mining giant Newmont.

Four police and four civilians were injured during Sunday's raid on Sumbawa island as villagers resisted arrest and attacked police with arrows, spears and stones, a provincial police spokesman told Agence France-Presse.

One of the policemen was seriously injured, he said.

Two other key suspects escaped arrest during the raid at Ropang village, near the camp site which was attacked, the spokesman said.

The attack and torching of the Newmont camp, located around 60 kilometers from the company's main gold and copper mining site, led to exploration work being suspended but mining continued as usual.

The company had received reports of the planned attack so had evacuated its 135 workers. No one was injured.

Police arrest 12 suspects over attack on Newmont mining camp

by The Jakarta Post, JAKARTA (AP)

28th March 2006

Police have arrested a dozen people suspected of setting fire last week to a camp owned by U.S.-based Newmont Mining Corp. in West Nusa Tenggara, officials said Tuesday.

The 12 were captured during a raid Sunday at Ropang village on Sumbawa Island in which eight people including four policemen were injured, said West Nusa Tenggara provincial police spokesman Adj. Sr. Comr. Muhamad Basri.

He said the suspects resisted arrest, throwing stones, arrows and spears, at the police, seriously wounding one officer.

But two key suspects in the March 19 attack managed to escape the police raid, Basri said.

Last week's attack on the camp by about 50 villagers caused no injuries, but about 20 buildings were burned down. All 135 workers at the camp had already been evacuated before the attack.

The assailants were demanding Rp 10 billion (US$1.1 million) in compensation for community development from Denver-based Newmont – one of the world's largest gold mining companies.

The incident underscores the difficulties facing foreign companies working in remote corners of Indonesia and comes amid rising anger at Western mining and energy interests in the country.

Ethics test miners' mettle

Sydney Morning Herald

1st April 2006

As Australia's resource giants spread their operations into more remote regions, overcoming political and civil unrest is paramount. But when does a social welfare program become a bribe? Jamie Freed reports.

ANGRY locals are rioting at the mine's gates. The government is investigating environmental violations. And just as the situation seems to calm slightly, a landslide kills three workers.
It's a mining company's worst nightmare, but for Freeport McMoRan Copper & Gold, operator of the Grasberg mine in Indonesia's Papua province, this scenario is an unfortunate reality and no amount of royalty payments to the government or gifts to local schools and hospitals has managed to pacify the situation.

Within the mining industry, the Freeport crisis is not unique. Indonesian locals recently torched one of Newmont Mining's exploration camps. The American company has also settled a civil suit over allegations of environmental violations at an Indonesian mine.

In well-publicised disasters in Papua New Guinea, BHP Billiton and Rio Tinto were forced to abandon the Ok Tedi and Bougainville Copper mines respectively.

As deposits in traditional mining provinces like Australia, North America and South Africa are depleted, it's only going to get tougher.

"It's becoming one of the big questions facing the board and CEOs," says Alex Gorbansky, the managing director of Frontier Strategy Group, a consulting firm in Boston.

"Not only the below-ground issues, such as what is the amount of oil or gold in the ground, but what is the environment in a political and social perspective?"

Managing geopolitical risk factors is becoming so important, Gorbansky says, that it could eventually determine the mining industry's winners and losers.

BHP executives have made it clear they have learned from past mistakes and that country risk - including the ethical and financial implications - is a serious consideration before a new project is approved.

When working in some of the world's most dangerous regions, this involves a careful balancing act. But after incidents like Bougainville and Ok Tedi, Australian and British investors have increasingly called for BHP and Rio to be industry leaders in sustainability.

BHP's head of minerals exploration, Ian Maxwell, grapples with such dilemmas daily. Since joining BHP in late 2004, the former mining analyst has spent half his time travelling overseas to visit some of the company's 200 or so exploration projects in about 30 countries.

Deciding to enter a country is not a decision BHP takes lightly. "You can't make a judgement call on an African country, based out of Melbourne, if you've never visited that country and never visited the project site," Maxwell says.

"The days of management not knowing what is going on are long gone. You have to be in touch with the programs and with what is happening on the ground."

Assessing the operating environment isn't always easy. Maxwell must find out if BHP can enter a country without compromising internal business conduct standards that strictly prohibit bribes. BHP has avoided certain countries for this reason. "Every country has its own way of doing business which is quite different from every other country," he says. "BHP Billiton has a way it would like to do business according to its conduct guide."

Determining the difference between a bribe and a gift that is meant to foster goodwill can be difficult.

A bribe is technically defined as a payment made to an official in return for a favour, but Gorbansky deems it a fairly indistinct line.

Testifying at the Cole inquiry into the Australian Wheat Board last month, the former BHP chief executive John Prescott shed some light on the differences between gifts and bribes. "It's common practice to make gifts in communities where companies operate … or hope to operate," he said.
Referring to a $US5 million wheat donation BHP made to the Iraqi Government to foster "goodwill" in 1996, Prescott said the company was not assured it would have access to oilfields once United Nations' sanctions were lifted, and there was no suggestion the gift would line the pockets of officials.

The former legal counsel for BHP Petroleum, Jim Lyons, likened the wheat shipment to a philanthropic gesture. "People - some well-known, high-profile people - give substantial donations to charities such as hospitals, etc," he said. "Maybe at some point they receive … maybe they expect to receive - but maybe even if they don't expect it, they receive some favourable treatment at some point."

Ten years later, under a new regime at BHP, Maxwell admits that business practice issues can be tricky to manage. "You're obviously aware with what's going on with AWB," he says. "We obviously place a lot of store on trying to get that right."

Apart from the ethical arguments, some investors may be surprised to learn that paying bribes is often not in a company's financial interest. Bribes may allow access to a seemingly lucrative project, but once officials receive payments they are likely to ask for more. Eventually, extortion could make the project unjustifiable in economic terms compared with other opportunities.
And as Freeport, BHP and Rio have learned the hard way, keeping a local community happy can be just as important as pleasing officials.

"It's not just about building a fluffy corporate responsibility image, it's about dealing with the problems that are going to arise," says Elizabeth Maitland, who teaches a course on geopolitical risk management at the University of NSW's School of Organisation and Management.
Managing risks from the start helps a company protect investments worth hundreds of millions of dollars that could be jeopardised by civil unrest like that seen at Grasberg and Bougainville.
Many risks can be dealt with, but there are some beyond the control of natural resource companies. In many developing nations, governments are vulnerable to coups.

The government of Mauritania - a West African nation in which Woodside Petroleum and Hardman Resources have large investments - was overthrown last August. When the new government came to power, the former oil minister was sacked and accused of accepting bribes from foreign companies in exchange for waiving certain taxes and charges.

There has been no evidence that Woodside was involved with the scandal, but it was drawn into a dispute with the new government to ensure production-sharing contracts signed under the purview of the former oil minister were not modified to the company's detriment.

Woodside and Hardman yesterday agreed in principle to make some changes to the agreements to settle the dispute. The companies will reportedly pay the Mauritanian Government an immediate $US100 million ($140 million) bonus once the final deal is signed.

"It's $US100 million you can say is somewhat lost, but at the end of the day keeping good relations with the government is important, given the potential that exists in the region." ABN Amro oil analyst Aiden Bradley says.

Coups and civil wars are not the only source of political instability placing projects at risk. Governments sometimes decide to change mining legislation virtually overnight.
In Zimbabwe, the government led by the international pariah, Robert Mugabe, last month proposed seizing a majority stake in the country's mines. "It would be disastrous for the mining industry. No question," says Zimplats' chief executive, Greg Sebborn, who is based in Harare.

The Australian-listed Zimplats and other Zimbabwean miners have discussed the proposal with the government and are hopeful it will be abandoned, or at least watered down significantly - and without bribes.

"I think there will be a situation we can live with," Sebborn says . "I think sanity will prevail." He says Zimplats has never paid bribes, or even been asked for them by high-level officials.
Sebborn is fairly confident his mine will not be nationalised because Zimplats' interests and those of the Zimbabwean Government are in many ways aligned. If the proposal to expropriate the country's mines is approved, Zimplats will likely leave the country, depriving Zimbabwe of a lot of revenue and potentially destabilising the cash-starved government.

Most governments which depend heavily on mineral revenues are loath to see international mining companies quit their country, but citizens in communities surrounding the mines often feel differently.

Much of the civil unrest at Grasberg, Ok Tedi and Bougainville Copper results from the capital cities, Jakarta and Port Moresby, reaping the financial benefits while locals in the far-flung provinces near the mines are left with the social and environmental damage.

By now, mining companies are well aware of the so-called "resource curse" and are working together to combat the problem. BHP, Rio and Freeport are members of the International Council of Mining and Metals, an industry organisation which researches sustainable development issues.
The ICMM's secretary general is Paul Mitchell, a former chief executive of CARE Australia. He says research has shown that community support is crucial for the security of mining investments over the longer term.

In some countries, it may not be possible for a company to run a sustainable operation due to political or social issues, he says, citing Zimbabwe, the Democratic Republic of Congo, Indonesia and the Philippines among the more difficult operating environments.

"Where there is weak governance, there is only a limited amount that companies operating independently can do," Mitchell says.

Other countries are trying to use the minerals sector to turn around their economy in a constructive manner which benefits communities near the mine and the nation as a whole.

Chile has already done so over the past 15 years. In contrast to neighbouring Peru - a country that has had a lot of mining but little reduction in poverty because of the way royalties are distributed - Chilean copper mines have helped transform the country into South America's economic powerhouse.

Investments in the minerals sector have created a mining province that can increasingly rely on local expertise. Five years ago, BHP employed about 80 expatriates at its Escondida copper mine in Chile, but that has fallen to three as the country has produced its own geologists, mining engineers and services companies.

"You have to make that transition," says BHP's chief organisation development officer, Marcus Randolph. "We're progressively seeing ourselves transfer from being a very Western-dominated company to one that has a substantial influence of locally empowered employees that are connected to the culture of the areas where we will develop projects."

Ideally, within a few decades Madagascar could prove a similar success story to Chile under Rio's leadership.

The company spent years studying political, social and environmental issues before committing to the development of a $US585 million mineral sands project in the former French colony off the coast of southern Africa last year.

At the moment, working in Madagascar is not easy. The country lacks decent infrastructure, and the health-care system could be considered sub-standard at best. Rio's project represents the largest investment in Madagascar's history.

Once, remote Madagascar might have escaped the attention of non-governmental organisations, but in today's globalised world, Rio had to modify portions of the project following pressure from environmentalists, who argued the mine would irreparably damage a coastal forest and its unique wildlife. In response, Rio created conservation zones to help alleviate fears of some, if not all, of the project's critics. Additionally, Rio decided to make the port it is building available to the public. Because Madagascar's infrastructure is so lacking, the port has the potential to be crucial to the country's economic future. It will allow locals to export products and could help support a burgeoning tourism industry by allowing cruise ships to dock there.

The mine will also bring typical economic benefits, such as 600 jobs for locals and annual payments to the government of more than $US20 million.

Importantly, 70 per cent of the royalties will be paid to the region surrounding Rio's mine, and the company will provide extra health-care services in the area.

The idea is that if Rio deals with the situation properly at an early stage, it can avoid later complaints that could destabilise the project.

Alison Kitchen, a partner with KPMG in Melbourne who advises the mining industry, says community welfare is an important consideration before a company commits to a new project.
"Mining companies very clearly understand they have a licence to operate from the local community, and the local community is a very important stakeholder," she says. "The mining companies are one of the better industries at not doing the rhetoric [but] at doing the reality."

The increasing importance that mining companies like BHP and Rio are putting on sustainable development programs is starting to attract notice from the industry's traditional critics.
The Mineral Policy Institute is an Australian NGO that works to combat environmentally and socially destructive mining. Its director, Techa Beaumont, says: "On an isolated basis, there are positive examples we look towards", noting Newmont's successful program with traditional landowners surrounding its Tanami goldmine in the Northern Territory and BHP's efforts at its Tintaya mine in Peru.

However, Beaumont adds that impoverished locals in the developing world are not always assured positive outcomes.

"From some of the communities we work with, there's a lot of cynicism when companies give children books and pens, which is a nice PR exercise," she says. "[Environmental impact] questions are sidelined with baubles and mirrors … and we receive more complaints than we can deal with."

It is common practice for mining companies to contribute about 1 per cent of revenues to local communities, yet this isn't always enough to avoid civil unrest.
Since riots caused $US3 million of damage at Freeport's Grasberg mine in 1996, the company has donated nearly $US200 million to a community development fund in Papua and has built two hospitals on the island.

Some of this money has gone to local schools, although an independent audit of the facilities by the International Center for Corporate Accountability on behalf of Freeport last year found them wanting.

On a visit to the mine, inspectors found the dormitories had not had electricity for several months, the kitchens did not have running water, the bathrooms did not have doors and there was no security for the girls' dormitories.

"The program must be considered as [an] unequivocal failure, both from [an] operational and fiscal management perspective," the report says.

Rioting locals have more serious grievances than inadequate schools and hospitals. At the same time as Freeport was donating money to social programs, it paid more than $US20 million in kickbacks to Indonesian military and police officials, a detailed investigation by The New York Times found last year.

As well, the Grasberg mine has produced billions of tonnes of waste which has polluted a nearby river in a similar manner to the Ok Tedi mine abandoned by BHP in 2002.

"It would have to be one of the worst current mining operations in the world," Beaumont says of Grasberg.

Although the mine is operated by Freeport, Rio has a 40 per cent stake in reserves discovered after 1998 and it contributed $US232 million towards Rio's profits last year.

Even though the strong criticism of Grasberg often overshadows Rio's efforts at sustainable development, the company has no plans to abandon its investment in the troubled mine.
In contrast, after exiting Ok Tedi, BHP clearly stated that it would no longer be involved with mines that dumped tailings into rivers without a proper storage dam.

Environmentalists can take comfort in the fact that their efforts have had a noticeable effect on BHP's plans in the past few years.

A nickel project on Gag Island off the coast of Papua became the target of a public opposition campaign fronted by the television personality Andrew Denton in 2003. BHP is still studying Gag Island, but there are no firm development plans.

"We continue to consult with the local community, local government and our Indonesian partner as these studies progress," BHP says. "As we have said previously, we will not use deep sea tailing placement and we will not proceed with any development on Gag Island if it is gazetted as a world heritage area."

Other mining companies with projects in Indonesia are carefully monitoring the political situation to help avert protests before they start.

"It's always on our radar screen," says Newcrest's chief financial officer Jeff Smith, whose company owns the Toguraci goldmine in Indonesia.

With companies like BHP moving into remote, risky areas like the Democratic Republic of Congo and Angola to explore for diamonds, it's clear the operating challenges will not go away.
Risk-management experts like UNSW's Maitland warn that excuses will no longer pacify stakeholders, so companies that have learned from their mistakes will be the ones best placed to manage potential problems.

"[When disaster strikes] it's kind of increasingly hard for companies to say, 'We didn't expect that to happen'," she says.

"The more that you've built up expertise in dealing with risks, the less time you are dealing with crisis management."

Jim Bob rakes in millions from Papua goldmine

by Jamie Freed

24th March 2006


AUSTRALIA'S top mining executives earn millions of dollars a year but, apparently, a lot less than some of their American counterparts.

Freeport McMoRan Copper & Gold, owner of the troubled Grasberg mine in Indonesia's Papua province, paid its two top executives a combined $US83 million ($115.7 million) last year.

Freeport's annual earnings rose to $US995.1 million from $US202.3 million last year due to record commodity prices. But the New Orleans company has since faced heavy criticism of its environmental and security practices in Papua.

Freeport's colourful chairman, James "Jim Bob" Moffett, pocketed $US47 million, while chief executive Richard Adkerson was paid $US36 million, according to filings made to the US Securities and Exchange Commission yesterday.

Mr Moffett's base salary was $US2.5 million but he received a $US19 million bonus, $US21.5 million worth of stock options and various other forms of compensation to take the total to $US47 million.

By comparison, BHP Billiton chief executive Chip Goodyear received a $US5 million salary package in 2005, while Rio chief executive Leigh Clifford earned $US6.7 million.

BHP has a market value of $US102 billion, making the diversified resources behemoth 10 times as large as Freeport, which is a one-mine company worth $US10 billion. Mr Goodyear served as Freeport's chief financial officer in the mid-1990s before joining BHP in 1999.

Freeport's Grasberg mine is the biggest goldmine in the world and the second largest copper mine. Rio sold its 13 per cent stake in Freeport for $US882 million in March 2004 but has a 40 per cent interest in Grasberg's copper and gold reserves discovered after 1994.

A detailed report in The New York Times last year said Freeport has paid local military and police at least $US20 million for questionable purposes since 1998 and allowed waste to seep into surrounding groundwater.

The problems have intensified in recent weeks. Two people were killed and four others injured in a landslide yesterday, according to wire reports. The Indonesian Government has given Freeport two to three years to fix the environmental problems at the mine.

Additionally, four security officers were killed and dozens of demonstrators injured in a protest at the mine earlier this week.

Despite the troubles at Grasberg, Freeport said Mr Moffett's $US47 million compensation package was justified because he "has been and continues to be instrumental in fostering our company's relationship with the government of Indonesia".

Freeport added Mr Moffett was a talented geologist and understood the "important issues pertaining to our work with the local people in Papua".

Jakarta tells Freeport, 'Start following rules'

by Peter Gelling International Herald Tribune

24th march 2006

The Indonesian government warned the U.S. operator of the world's largest copper mine Thursday to clean up its environmental practices or face court action.

As a result of a government's investigation, Environment Minister Rachmat Witoelar said he expected Freeport-McMoRan to receive the worst environmental rating possible.

He also issued a series of recommendations to improve the mine's standards.

The government did not issue a deadline for Freeport to meet these standards but said it should take no longer than two or three years. Another team will be sent to the mine in May to assess progress, he said.

Court action will not be taken immediately, the minister said, because this is the first serious investigation by the government.

"We want Freeport to start following the rules here," he said. "Freeport shouldn't be its own country within a country. There are 500 other companies like Freeport here that follow the rules."

A spokesman for Freeport, Siddharta Moersjid, said the company would fully cooperate with the Indonesian government.

"We will continue to work with the ministry, as we have the same common objective in trying to minimize the impact to the environment from our activities," he said.

The government's investigation, carried out by a team of 24 independent experts, found an alarming amount of waste being pumped into Papuan rivers - thousands of tons a day.

Witoelar said the company urgently needed to establish an alternative method for disposing of mine waste that used more efficient technology.

The warning came hours after a landslide ripped through an area surrounding the mine in Indonesia's remote province of Papua, killing 3 people and injuring more than 20 others.

Moersjid said the land fell from a ridge of a mountain near the mine at 1 a.m. A wall of mud crashed into a cafeteria serving personnel from the mine, he said.

Witoelar, however, emphasized that the landslide was not a result of mining activities.

The government issued its report a week after protesters in Papua, calling for the mine to be closed, clashed with the police.

Five police officers and one soldier were killed in the confrontation. Protests have spread recently to other cities across Indonesia, including the capital, Jakarta.

The Indonesian government announced Wednesday that it was sending hundreds more officers to patrol Papua Province.

Protesters, the media and local politicians have condemned Freeport in recent months for its environmental practices, as well as its treatment of local Papuans and its involvement with the Indonesian military, which provides security for the site.
Indonesia's military has been widely cited for abuses against the local populace.

Newmont, another U.S. mining company operating in Indonesia, has also been the subject of recent protests and attacks.

The company closed an exploration camp on the island of Sumbawa after protesters attacked and then set fire to the camp. Newmont settled out of court with the Indonesian government in February on charges it had polluted Buyat Bay in North Sulawesi.

Freeport's mine waste is discarded in the Ajkwa River. About a third of that waste is then carried to a coastal estuary, a breeding ground for marine life.

Witoelar said that Freeport had no legal permit to dispose of its tailings in this way and that under Indonesian law that system of disposal had been prohibited since 1990.

The Forum for Environment, also known as Wahli, an environmental watchdog group in Indonesia, said the government's investigation would have little effect on the mine's operations.

"We think it is a waste of time," said the group's deputy director, Farah Sofa. "Freeport has long been on the wrong side of the law. There needs to be direct consequences for the company's actions."

Miner Freeport hit by double-whammy in Indonesia

by Steve James , NEW YORK (Reuters)

23rd March 2006

U.S. mining giant Freeport McMoRan Copper & Gold Inc. <FCX.N>, a recent target of protesters in Indonesia, was hit with more bad news on Thursday when a landslide killed three workers there and a government study criticized some of its environmental practices.

"Obviously this is a difficult time for us, but we are working to resolve all the issues," spokesman William Collier told Reuters.

The New Orleans-based company, which has been mining in Indonesia for decades, has been in the headlines for a variety of reasons recently since a fatal landslide at its Grasberg mine in Papua in 2003 disrupted production for nearly a year.

Grasberg, run by Freeport's Indonesian unit, has been a lightning rod for criticism and has been at the center of sometimes violent demonstrations in recent weeks.

Some environmental groups charge its waste pollutes rivers and streams and kills wildlife. However, the Indonesian government report, although it highlighted some problems over waste storage and called for stricter measures in managing acid water from the mine, did not mention any large-scale damage. It did say that tailings, or refuse after ore has been processed, had flowed through the nearby Ajkwa river.

The Grasberg pit, about 2,200 miles east of Jakarta, has also been a source of controversy over the share of revenue going to Papuans, the legality of payments to Indonesian security forces who help guard the site, and whether such an operation should be run by a foreign company.

Four policemen and a soldier were killed last week in the Papuan capital, Jayapura, in clashes with protesters demanding closure of the mine, one of a series of demonstrations in recent weeks across Indonesia that have criticized Freeport.

Thursday's mudslide came from a mountain above a service area adjacent to the pit and killed three contract workers. Mine production was not affected, company spokesmen said.

Spokesman Collier noted that, despite everything that has happened in the last few months, Freeport only lost three days of production at Grasberg.

Of the Indonesian environment ministry report, he said: "They acknowledged the effectiveness of our environmental management in some areas, but they also recommended improvements in others areas.

"We continue to improve our environmental efforts and have a very close relationship with the ministry."

On the recent protests, some of which involved native tribesmen armed with bows and arrows, as well as environmentalists, students and some illegal gold miners, he said: "They have been characterized in the press as being 'anti-Freeport,' but there are a number of issues."

These include not only environmentalists, but a pro-Papua independence movement and groups opposed to the Jakarta government.

"It is a complicated situation and clearly other agendas are involved," said Collier.

Mining analyst Victor Flores, of HSBC Securities, said that in the long-run, such negative events would likely have little effect on Freeport's operations.

"The landslide is regrettable, but it didn't affect operations. Mining is an industry where, unfortunately, people get killed," he said.

He noted that at the time of the 2003 landslide in which eight workers died in the Grasberg pit itself, Freeport's stock was not hurt too badly.

On Thursday, it was actually up $1.04, or 2.01 percent, at $52.72 in afternoon trading on the New York Stock Exchange.

The environmental issue was more problematic.

"I would hope it doesn't indicate some sort of pattern," said Flores, noting another U.S. gold miner, Newmont Mining Corp. recently settled with Jakarta over allegations of pollution.

"It appears that some environmental people may be on a crusade. (But) at the end of the day, Freeport has had a close relationship with the Indonesian government, which has been profitable for both of them.

"Freeport has been operating in the country efficiently for many years and I don't see it changing," he added.

(Additional reporting by Yoga Rusmana, Telly Nathalia and Muklis Ali in Indonesia)

Indonesian police detain 11 more after Papua clashes

by Reuters, JAKARTA

20th March 2006

Indonesian authorities have detained another 11 people in Papua province after three policemen and a soldier died in clashes with protesters demanding closure of a giant U.S.-run mine, police said on Saturday.

Fifty-seven people had already been detained after Thursday's violence in the provincial capital, Jayapura, on the northeastern shore of Papua, about 3,500 km from Jakarta.

The clashes sparked fears of more protests against U.S. firm Freeport-McMoran Cooper & Gold Inc, which runs the mine.

Tensions have been running high in the area in recent days and, on Friday, police fired shots into the air as they patrolled the city. Three people were hurt in the incident.

Last month mine operations were halted for four days before protesters, mostly illegal miners, left the site near the town of Timika, about 500 km southwest of Jayapura.

The mine has been operating normally this week.

"The number of people detained has increased from 57 to 68," Papua police spokesman Kartono Wangsadisastra said on Saturday.

"Our team is still searching for those responsible for the criminal activities ... We have found the perpetrators' identities and formed an investigating team to hunt for them."

He said 10 people had been declared suspects, but gave no details.

President Susilo Bambang Yudhoyono has rejected demands for the immediate closure of the mining operation, the country's largest taxpayer, but said he would assign ministers to examine social grievances related to the mine.

There have been sporadic protests, both in Papua and Jakarta, since the February shutdown. Issues range from illegal miners seeking access to the mine area to the demands for closure of the mine, believed to have the world's third-largest copper reserves and one of the biggest gold deposits.

Illegal miners often enter mining areas in Indonesia, a sprawling archipelago with huge deposits of such metals as copper, gold and tin.

The Freeport operation has been a frequent source of controversy over its environmental impact, the share of revenue going to Papuans, and the legality of payments to Indonesian security forces who help guard the site.

INDONESIA: Mining group warns resources sector in peril

by Asia Pacific, Radio Oz

21st March 2006

Indonesia's peak mining body says it's worried about investor confidence in the sector after a series of violent incidents targetting foreign companies. But the disruptions caused by angry protests seem to be the last thing on the minds of multinational resource and energy companies. New laws currently before the Indonesian parliament will limit the licences and contracts for exploration and exploitation.Experts and industry leaders say the future of Indonesia's resources sector is in peril.

Presenter/Interviewer: Emily Bourke
Speakers: Priyo Pribadi, Indonesian Mining Association; Peter Fanning, chairman International Business Chamber; Noke Kiroyan spokesman PT Newmont Pacific Nusa Tengarra

BOURKE: Western mining companies with major projects across the Indonesian archipelago have been the subject of increased protest action in recent weeks.

The American company Newmont, the largest global gold producer, has suspended exploration at a site on Sumbawa island after an alleged arson attack at the weekend.

Last week, several security officers were killed in Papua province by protestors demanding closure of a gold mine owned by another US company Freeport McMoran.

The Indonesian Mining Association is a non-government organisation that tries to encourage investment in the resources sector.

The Association's Priyo Pribadi says incidents at the mine sites and repeated clashes with local communities are influencing investor confidence.

PRIBADI: Absolutely there will be a negative impact. Even though the mineral resources are quite good and interesting, but if the cases are not handled carefully, the other investors will not come into Indonesia.

BOURKE: He says the government holds the key to boosting foreign investment in the sector.

PRIBADI: The government has to give the investment climate and then the protection security to the mining companies to make sure the mining operations are not disturbed. And the central government has to change some of the articles in the new law because that is also why there is no investment coming. The new laws are not reflecting the guarantee of the long term investment.

BOURKE: Peter Fanning is the Chairman of the International Business Chamber in Jakarta.

He says there's a heavy cloud of caution hanging over investment opportunities in Indonesia.

FANNING: Foreign investors have a mixed reaction to the climate at the moment. Generally everybody has a lot of hope and optimism, in relation to the intentions and influence of the current government. From there what they are concerned about is whether that ionterest and good intention flows through to the bureacracy, which it clearly doesn't.

BOURKE: According to Mr Fanning that optimism will be sabotaged by draft legislation aimed at watering down long-term mining contracts.

He says the comfort of traditional long-term contracts that cover conditions and tax arrangements, have been crucial to the success and profitability of mining developments.

And he says the proposed laws will do the opposite of what the Indonesian government has been trying to do - encourge western investment and boost economic growth.

FANNING: What the new law, the proposed new law is doing is ignoring the value of mining by contract and simply depending on mining by concession. And that's successive concession, not continous. In other words, you may get a concession to explore and then yuo may get a concession to exploit and then you may get a concession to export and transport. The degree of comfort from those contracts is missing from these new laws and that has the danger of absolutely destroying the backbone of Indonesia's income.
BOURKE: Do you think that will happen?

FANNING: There is no indication that it won't at this point. And so there is every likelihood that the mining industry will be destroyed.

BOURKE: Mining company Newmont, despite an attack on one of its sites and the closure of one of its exploration camps, is suprisingly upbeat about its prospects in Indonesia.

And Newmont's Noke Kiroyan is confident the government will implement a law that nurtures the industry.

NOKE: I would say the government is very much concerned about investment, the government is trying to get as much investment as possbile into the country The mining industry will certainly look at Indonesia again because Indonesia is geologically interesting if the mining law is also attractive and attractive means that there will be contracts in the future.

Elang Dodo Exploration: Proof of Newmont's Destructive Power of Expansion

A press release by Mining Advocacy Network, Indonesian Forum for Environment, and Life Management Institute.

Press Release Jatam -- Walhi -- Loh

19th March 2006

Jakarta, Sumbawa. Hundreds of people in Ropang village, Ropang District, Sumbawa Regency, are putting a blockade in an exploration site owned by Newmont Nusa Tenggara Ltd. which is located in the area of Elang Dodo protected forest. People are demanding that Newmont stop its exploration and cancel its mining plan in Elang Dodo area. They do not want their productive areas to be destroyed and their livelihood to be endangered by mining activities.

Villagers in Ropang and its surrounding areas have several times put up blockades and taken Newmont's machines, vehicles, and even employees, as hostages. The villagers are upset as Newmont has never shown goodwill to sit together and negotiate on land conflicts and other problems that have emerged since exploration began. Newmont didn't even attend a hearing session facilitated by the Regional Parliament of Sumbawa Regency in early March of 2006.

Since Newmont started its exploration two years ago in the Elang Dodo protected forest area, villagers in Ropang and other surrounding areas lost access to sources of income from forest products such as honey, palm sugar, and spices. They were prohibited from entering their own ancestors' forest by the company's security forces claiming it as Newmont's concession area.

Apart from that, since Newmont's exploration began, people have been complaining about the shrinking amount of their agricultural crops. Some plantations of rice, pumpkin, and cucumber are no longer productive. Therefore, people stated that they will not allow any mining activities in Dodo and Rinti areas because they are worried that the destruction will get worse just like in the case of the Batu Hijau mining area. Newmont's exploration area includes Dodo (5,100 ha) and Rinti (7,539 ha) protected forests.

Responding to the people's blockade, Yani Sagaroa, director of Life Management Institute (LOH) in Sumbawa stated, "LOH has been for long time rejecting the attempts of the government and Newmont Ltd. to open a mining site in Elang Dodo protected forest. The government should have firmly refused the unfair mining concession in Elang Dodo area. Newmont must immediately stop all activities in Elang Dodo, fully rehabilitate the impacts of its exploration, and return the products of its exploration, such as gold, silver, and copper, to the local people and the regional government of Sumbawa."

"It is people's basic right to prevent their productive areas from being destroyed by mining. JATAM supports the efforts of Ropang villagers to resist Newmont's mining in Dodo Rinti protected forests. Security officials should guard the peaceful action and should not respond with any repressive and exaggerated actions against the people's protest," commented Siti Maimunah, national coordinator of the Mining Advocacy Network (JATAM).

"If Newmont is finally able to operate its mining activities in Dodo Rinti, it's guaranteed that the area's destruction will be aggravated and expanded to Ropang and other surrounding villages. People of the Batu Hijau mining circle have previously felt Newmont's destructive power since it started operating in 2000," said Torry Kuswardono, mining and energy campaigner of Indonesian Forum for Environment (WALHI).

Backgrounder on Elang/Dodo by JATAM and WALHI

Jakarta, Indonesia

20th March 2006


Newmont Nusa Tenggara Ltd. is operating on the Indonesian island of Sumbawa with a Generation IV Contract of Work signed with the government of Indonesia in 1986. Newmont’s original concession area covered three fourths of the Sumbawa Island. The company’s current concession area has been reduced to 96,400 hectares and is divided into six blocks. One of these blocks is located on Lombok Island while the other five blocks are found on the island of Sumbawa. One of the five blocks on Sumbawa is the Elang block, which is 25,938 hectares in area and covers the Dodo and Rini forest area.

Newmont mining in the Sumbawa area has adversely affected the lives of the Tongo Sejorong people and those of surrounding areas. Many people in Sumbawa suffer from obscene poverty. Local communities affected by the mining operations are met with intimidation when they attempt to question or seek redress for lost rights. A divided community has replaced a once peaceful and harmonious community. They feel their culture has been degraded.

Now, Newmont wants to further its exploitation into the Elang/Dodo Rinti forests, an area with protected forest status. Problems have already arisen in the two years of exploration in the area. Mining forays in this area have been met with community resistance as illustrated by the following actions:

1. September 2003 -Six village heads from the Ropang Regency in Sumbawa, West Nusa Tenggara (NTB) threatened to boycott the expansion of the mining area if Newmont Nusa Tenggara did not accommodate the people’s demands. These six villages are Lantung Ai Mual, Lantung Sepukur, Ropang, Lebin, Labangkar, and Lawin. Thousands of villagers from the six villages were prepared to join the boycott.
2. October 2005 –Ropang villagers, who are mainly farmers, concerned about the devastating impact that the mining operations would have on their water supply, resorted to taking several Newmont employees as hostages.
3. November 2005 –Newmont’s exploration camp at Elang/Dodo was occupied by community members protesting Newmont’s failure to keep its promises to the community.
4. March 2006 - Early this month, the people of Ropang, Moyo Hulu, and Moyo Hilir blockaded a Newmont Nusa Tenggara’s mining road. Newmont’s vehicles were held in protest of the company’s absence from a hearing with the Regional Parliament in the Sumbawa District. Mining contractors mobilized an opposing mass as they were worried that their business would be disturbed by the people’s blockade.1

Since March 18, 2006, citizens have returned to occupying Newmont’s exploration area in Elang-Dodo. They will continue the action until Newmont withdraws all of its machines and cancels its exploration in Dodo Rinti. Thousands of villagers from Ropang Village joined the action. They were supported by people from surrounding villages such as Lebangkar, Lantung, Moyo Hilir and Moyo Hulu. They made it clear that they would not leave the area until Newmont declared its withdrawal from Dodo Rinti.

Newmont’s Problems in Dodo Rinti

1. Unfair Land Acquisition

The Labangkar (other village adjacent to Ropang) citizens were forced to sell their land at a cheap price, far below its current value. Newmont paid only 60 million Rupiah for one hectare or 6 thousand Rupiah (0.50 USD) per square metre. Similar tactics were used at Batu Hijau where negotiations with the community were done after their land had been taken away.

Not only did Newmont determine the land price unilaterally, community members said they felt intimidated during the land process. The Sumbawa Regent went so far as to make threats against those who did not want to sell their land.2

2. The Loss of Livelihoods from the Forest

The Newmont Nusa Tenggara mining operations in Dodo-Rinti cover an area where the Ropang people used to make their living. The majority of people in the area lives an agrarian lifestyle and depend on forest products like honey and rattan for their income. The citizens have lost access to these forests and the forest products that they depend on for their livelihoods. The Tongo people experienced the same fate when Newmont Nusa Tenggara began mining in Batu Hijau. They lost access to the forest and were forced to give up their livelihood of gathering forest products.

Many local people in the Dodo-Rinti area reject mining activities because of the impact on water levels. They fear a drought will occur, similar to the drought that happened in the Batu Hijau area after mining began there. The farming community fear that their fertile crops will be degraded with mining, and rice, vegetables and fruits will become difficult to grow.

3. Protected Forests and Sacred Land

At least 5100 hectares of Newmont’s exploration area in Dodo and 7539 hectares in Rinti are classified by the Indonesian government as protected forests.3 Destruction caused by exploration drilling in the last two years is feared to impact water supply in the local area. According to local people, the water supply in the Ropang area used to be abundant. Now, the people are worry they are facing a water crisis that will wreak havoc on their crops.

Dodo Rinti is also a sacred area for the people of Ropang. Vice Chairperson of Ropang Village, Asraruddin Rahmat, stated that people are unwilling to hand over the area to be destroyed for mining because it is the community’s ancestral lands.4

Long before Indonesia’s independence, Dodo was a residential area populated by the ancestors of the Ropang Village people. Archeological treasures remain there such as houses, mosques, graves, as well as jackfruit and coconut plantations. In 1930s, the community was relocated from the Dodo area to Ropang District. But since then, they still go to Dodo forest to seek forest products while respecting it as an area where their ancestors are buried.

4. Birth of Social Conflicts

Instead of listening to community demands to end exploration activities, Newmont has sowed seeds of conflict in the community, employing divide and conquer tactics commonly used by mining companies. Newmont established the Elang Rinti Foundation (YERI) through its Senior External Manager, Malik Salim, in cooperation with Ropang Subdistrict Head, Sulaeman S.Sos6. However, the purpose of the YERI Foundation has never been clear. The YERI Foundation has, however, generated much conflict within the community and turned the community’s attention away from scrutinizing the mining operations. The YERI Foundation was formed during a time of heightened community resistance to the mining operations.5

Conflicts have also happened between people and government officials, whereas before Newmont came, government had acted more on the side of the community. Now, there are conflicts between those in favor and those against mining in the area whereas before there was harmony in the community.

5. More Mining and Processing Means More Environmental and Social Impacts

More gold and copper being mined from Elang-Dodo would mean an increase in processing at the Batu Hijau plants and thus an increase in associated environmental and social impacts. The Elang-Dodo area would also be left scarred. Elang-Dodo is expected to contain more reserves than Batu Hijau. The impact of the exploitation of this reserve is expected to be massive and beyond rehabilitation.

Even with only its gold and copper ore processing operation in Batu Hijau, Newmont’s impacts have been highly destructive to farmers and fishermen in Tongo Sejorong and Labuan Lalar, particularly in the Residential Centers SP 1 and SP 2.

Since Newmont started its operations, farmers have experienced difficulties with access to water for their rice fields. Those in Taliwang Regency lost an average 40 % of their agricultural crops in the first cultivating season due to dry conditions. Meanwhile, in Residential Centers SP1 and SP2, and Tongo Sejorong, at least 75 % of rice fields dried up in the first cultivating season of 2005. Due to the water crisis, people who have previously been food independent are now suffering from a food crisis. They have been forced to apply for rice assistance available for the poor from the central Government because of their inability to produce rice any longer.

The drought was caused by the damming of two main rivers in the Sekongkang Regency, Brang Sejorong and Brang Tongo. The two rivers are main irrigation sources to rice fields. Since the mine in Batu Hijau was built, water from the two rivers has been used by Newmont for its ore processing operations.

Newmont has also impacted the people in the coastal area of Tongo Sejorong by dumping its tailings waste into Senunu Bay. Up to 120,000 tons of tailings are dumped in Senunu Bay each day. This amount is sixty times more than the amount dumped into the now infamous Newmont mine waste dumping site in Buyat Bay, North Sulawesi, Indonesia. Between approximately 76 to 100% of the fishermen in Tongo Sejorong, Benete, and Lahar areas have reported decreases in their income since Newmont began discharging its tailing waste in Senunu Bay (Survey of Ministry of Environment, September 2004). In Labuan Lalar, Sumbawa, hundreds of fishermen also suffer huge economic losses due to depleted marine products such as fish, young milkfish, and shellfish. Income levels are decreasing by billions of Rupiah every month.


Despite the large-scale Batu Hijau mining operations active since the year 2000, research in the area shows that poverty is rampant among the local people. The 2004 UNDP National Human Development Report in Indonesia states that the life expectancy rate in the West Nusa Tenggara (NTB) province where Newmont operates is the lowest in the country.6 The people of this province spend the shortest time in formal education than anywhere else in Indonesia, an average of 5.8 years. This means that many people do not even finish elementary education. The province’s Human Development Index is also ranked at the bottom of Indonesia’s thirty provinces. This poverty occurs in the same province that Newmont has been operating and extracting and processing mineral riches for five years. Further Newmont mining forays into Elang Dodo are expected to only bring further environmental destruction, poverty for the local people, and conflict.

Newmont suspende actividades en en la isla indonesia de Sumbawa tras incendio provocado

Europa Press


La minera estadounidense Newmont Mining Corp. anunció hoy la suspensión de sus actividades de exploración en la isla indonesia de Sumbawa, después de que el área sufriera un incendio provocado. 'Newmont está decepcionada por el acto ilegal que un pequeño grupo de gente ha provocado', dijo en un comunicado la multinacional, que advirtió que el cierre causará la pérdida de los negocios y puestos de trabajo creados en la isla.

El incendio se produjo el domingo, un día después de que los trabajadores de la mina fueran evacuados debido a las amenazas recibidas por la dirección. La Policía ha abierto una investigación para buscar a los culpables.

Este es el último de una serie de ataques contra las compañías mineras internacionales que operan en el archipiélago indonesio.

Residentes de Minahasa, al norte de las Célebes y de Timika, al oeste de Papúa, se han enfrentado recientemente a mineras de capital estadounidense por considerar que las explotaciones no repercuten en el bienestar de la comunidad y provocan graves daños medioambientales.

Al menos tres policías y un militar murieron y decenas de civiles y agents policiales resultaron heridos el pasado jueves en Jayapura, la capital de Papúa, en una protesta contra la multinacional Freeport-McMoran Copper & Gold Inc.

Ante la avalancha de protestas, el ministro coordinador de Política y Seguridad, As Widodo, anunció que el Gobierno realizará auditorías para averiguar si las compañías 'han beneficiado o no a la comunidad local'.



Mining Advocacy Network, Indonesian Forum for Environment y Life Management Institute


Jakarta, Sumbawa. Cientos de pobladores de la Villa de Ropang, en Sumbawa (Indonesia), realizan un piquete en un área de exploración minera propiedad de Newmont Nusa Tenggara Ltd., enclavada en la reserva forestal de Elang Dodo. Los manifestantes demandan que Newmont detenga los trabajos y cancele sus planes en la zona. Ellos no quieren que sus áreas productivas sean destruidas, ni ver amenazado su modo de vida tradicional.

Los pobladores de Ropang y zonas cercanas se han manifestado muchas veces contra Newmont: realizando piquetes o tomando su maquinaria, vehículos e incluso hasta empleados, como rehenes. Ellos están enojados porque Newmont nunca mostró buena voluntad para sentarse a negociar por los conflictos con la tierra y otros problemas que han aparecido luego del comienzo de los trabajos de exploración. La empresa minera ni siquiera asistió a una audiencia informativa propuesta por el Parlamento Regional de Sumbawa, a comienzos de marzo de 2006.

Desde que Newmont comenzó sus exploraciones en la reserva forestal de Elang Dodo, los pobladores de Ropang y otras zonas cercanas perdieron ingresos y acceso a recursos que obtenían del bosque, como miel o especias. Las fuerzas de seguridad de Newmont les impidieron el ingreso al bosque de sus ancestros, alegando que se trataba ahora de un área consecionada.

A parte de allí, desde que comenzaron las eploraciones, los pobladores están denunciando que sus cosechas se han visto reducidas. Algunas plantaciones de arroz, calabaza y pepino ya no son productivas. Por eso, han declarado que no permitirán actividad minera en las zonas de Dodo y Rinti, preocupados porque la situación empeore, como ya ha ocurrido en el area minera de Batu Hijau. Las conseciones de Newmont incluyen las reservas forestales de Dodo (5,100 ha) y Rinti (7,539 ha).

En respuesta a los piquetes contra Newmont, Yani Sagaroa, director de la organización Life Management Institute (LOH) de Sumbawa, solicitó que "Newmont detenga toda actividad minera en Elang Dodo, repare todos los impactos que ya ha causado, y devuelva los productos que ha extraido en sus exploraciones, como oro, plata y cobre, a la población local y al gobierno regional de Sumbawa".

"Es un derecho básico de la población el prevenir que sus áreas productivas sean destruidas por la minería. JATAM apoya a los pobladores de Ropang en su resistencia a las actividades de Newmont en las reservas forestales Dodo y Rinti. Las autoridades de seguridad deberán custodiar esa acción pacífica, sin responder a ella con represión o fuerza exagerada", comentó Siti Maimunah, coordinador nacional de la Red de Defensa Contra la Minería (JATAM).

"Si se permite que Newmont opere en Dodo y Rinti, se está garantizando que la destrucción se agrave y expanda a Ropang y otras villas cercanas. Los pobladores del área minera Batu Hijau ya han sentido en carne propia el poder destructivo de Newmont, desde que inició sus operaciones en la zona en el año 2000" declaró Torry Kuswardono, integrante de la campaña sobre minería y energía del Foro Indonesio del Medioambiente (WALHI).

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