Posts made in December, 2015

The Freeport Mine

Posted by on Dec 14, 2015 in Uncategorized | 0 comments

The Freeport Mine

A Royal Dutch Shell geologist discovered the massive Ertsberg (Dutch for “copper mountain”) copper and gold deposit in the mountains north of Timika in 1936. In early-1960, Freeport Sulfur signed a contract with the Dutch East Borneo Company to develop Ertsberg. Freeport surveyed the site and confirmed the extensive mineral deposits, but mining activities were deferred due to the difficult terrain, lack of infrastructure and low-level hostilities between Indonesia and the Dutch. After the 1965-1966 turmoil, Freeport started negotiations with Major General Ibnu Sutowo, president-director of the small state oil company, Permina. The company entered into a formal contract in April 1967 after Jakarta passed the Foreign Investment Law. Freeport and the government renegotiated the contract in 1991 on more favorable terms to Indonesia after the nearby Grasberg (grassy mountain) copper-gold deposit was discovered. Grasberg dwarfed the original Ertsberg deposit. It was later determined Grasberg contained the world’s largest known gold and second largest copper reserves. Constructed at 3,700 meters altitude just south of the Equator in the remote mountains above Timika, bordered by impenetrable jungle, an area with 200 to 400 inches of rain each year, the mining project was a huge and expensive technological feat. Freeport hired Bechtel Corporation to build a road from Timika to the Ertsberg mining site, develop the necessary infrastructure, including the Tembagapura “copper town” to house thousands of workers, and construct a 100-kilometer pipeline to carry the mineral slurry to a coastal processing and shipping facility. The government appropriated the land for the massive project from the highland Amungme and lowland Kamoro tribes with modest compensation. In 1980, Freeport Sulfur merged with James Robert “Jim Bob” Moffett’s Louisiana oil company, McMoRan, to become Freeport McMoRan Copper and Gold. Even today, the open pit Grasberg copper and gold mine is among the world’s largest mining operations and a major revenue source for Jakarta. Freeport survived and flourished due to its close relationship with Soeharto’s  New Order regime although, during the succeeding decades, the company was dogged by complaints the native population had not been fairly compensated for the extracted mineral wealth and corruption allegations related to the company’s cozy arrangements with the Soeharto family. Over the years, the government made many demands on the mining concern, which, due to its huge revenues, became the nation’s largest taxpayer. Freeport was also the largest American investor in Indonesia. As soon as Freeport began to turn a profit, the government modified its tax agreement and asked for an 8.9 percent equity stake in the operation which was held in the Soeharto family-owned PT Nusamba conglomerate. [1] The company “contributed” large sums to the various Soeharto family “charitable” foundations and even helped fund the controversial transmigration program around its concession area. Along the way, company officials turned a blind eye to excesses by security forces, ostensibly deployed to protect the highly profitable mining operation. Chronic hostility from the neighboring Amungme community compelled Freeport’s dependence on Indonesian security forces for protection. The high-altitude mining operations effectively cut the top off of a local mountain peak. Tribal leaders later claimed the peak was a sacred mother earth figure and...

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