The Prime Minister, together with officials from the Ministries of Environment, Lands and Provincial Development, along with the iTaukei Land Trust Board, presented the legal and administrative issues in relations to the NJV operations.

The Prime Minister highlighted that the current operations of NJV are based on a prospective license, and that before any decision is made to grant the company a mining license, an Environmental Impact Assessment (EIA) will need to be completed.

Following an exchange of views between all parties and a full airing of concerns, it has been agreed that the landowners, the Prime Minister and relevant officials, and NJV will meet again on Tuesday, January 31 to address any and all outstanding issues and misinformation.

By Simon Montlake

Sitting on a concrete floor just before the holiday at a modest home in Timika, Indonesia surrounded by dense, mountainous jungle, a warehouseman named Yonatan Iyai invites me to partake in a lunch and hear about life in the Grasberg copper mine. “This is a risky job,” says the 33-year-old, in outlining why he and 8,000 colleagues had completed a three-month strike that will result in a phased-in 40% wage hike (Iyai’s current pay: $460 a month), “and we deserve a better salary.”

Fate underscores his point. As we share fish curry and steamed cassava in the valley, violence erupts in the clouds, where Grasberg, at 14,000 feet elevation, rests in perpetual fog. A helicopter ferrying workers and their families to Christmas vacation runs into a hail of bullets, wounding two women. The company promptly suspends flight services for a week, forcing employers to travel on a 72-mile access road that snakes up the mountainside. Last year at least six workers, including two security personnel, were shot dead along this route, which is off-limits to outsiders. Two more contract workers were killed in another roadside attack on Jan. 9.

Remote locations, labor unrest, violence—this is the fracturing foundation on which the mine’s owner, Freeport-­McMoRan Copper & Gold, is building its future. “These issues have posed risks for the company throughout its over 40 years of operations in Papua,” Freeport’s CEO, Richard Adkerson, says via e-mail when I ask him about this. “Freeport has successfully managed these risks and developed the Grasberg mine as a highly profitable operation. We have confidence in our ability to manage the current issues.” And even though the stock cratered 37% in 2011, as once booming copper prices slumped on fears of a slowdown in China, many analysts predict a share price turnaround for Freeport, which mines copper, gold and molybdenum on four continents. It earned $4.6 billion last year, up from $4.3 billion in 2010. “In my view the stock is significantly undervalued,” says David Gag­li­ano of Barclays Capital.

That’s easy to say from New York or Phoenix, where Freeport is officially based. But make no mistake: Freeport is an Indonesian company—it derives 45% of its income from there. And as I crisscrossed the region I came away with an impression very different from Adkerson’s or Gagliano’s, one that has nothing do with higher wages for workers like Iyai and that will remain even if the price of copper rebounds.

Boiled down, Freeport has a Papua problem. Indonesia tries mightily to pry eyes away from this heavily militarized home of the Grasberg mine. It’s difficult for foreign journalists to report freely from Timika or for tourists to get a permit to visit; restrictions for Jakarta-based diplomats were recently tightened. Locals who speak their mind run a risk: Human Rights Watch says that 90 are currently in jail for peaceful political activities.

But the company’s story is interwoven with that of this tenuous territory, a former Dutch colony in the western half of New Guinea, the world’s second-largest island. (The eastern half is now Papua New Guinea.) The native population is racially and culturally distinct from the rest of Indonesia, more akin to Pacific Islanders than East Asians.

Until the 1930s tribes in Papua’s rugged interior lived a Stone Age existence, unknown to the Europeans who stuck to the mangrove-ringed coastline. Yet their remote highlands held a glittering prize, which a Dutch geologist discovered in 1936: a mountain of ore at 14,000 feet, just shy of the highest peak (16,000 feet) east of the Himalayas. It was like finding “a mountain of gold on the moon,” he wrote. And there the ore stayed for 30 years.

It took the technical know-how, political savvy and risk appetite of Freeport to crack open the safe. By then Papua had been handed over to Indonesian rule with the support of President Kennedy and the promise of a popular referendum. Australian Prime Minister Robert Menzies warned Kennedy that it would be “the substitute of brown colonialism for white colonialism.” But a self-ruled Papua, a dream that persists today, wasn’t in the cards. In 1966 General Suharto ousted left-leaning president Sukarno and began courting foreign investors. Freeport was the first to sign a contract, the start of a long and deep relationship with the regime. Papuans living around the mine had no say in the matter. A farcical UN-observed 1969 referendum to confirm Indonesia’s sovereignty unfolded “like a Greek tragedy, the conclusion preordained,” cabled a U.S. diplomat.

Freeport brought rapid development to Papua, building roads, schools and hospitals in the poverty-stricken area. But tax revenues largely stayed in Jakarta, where Suharto and his clan hosted Freeport executives and cooked up a back-scratching deal. Now democracy has unleashed Papuan ­resentment at the exploitation of their resources and their ­paltry return. “This is their worst crisis in over 40 years,” says Kevin O’Rourke, a political analyst in Jakarta. “And that’s saying something.”

Much of Freeport’s workforce, and the majority of senior staff, are Indonesians from other islands. Laborers like Iyai complain that they’re stuck on the bottom rung. Former employees say racism is common among Javanese managers, who see Papuans as primitive. Company spokesman Eric Kinneberg says over 500 staff-level managers are Papuans.

For every job at the mine, another 37 are added locally. But Papuans say this mostly benefits carpetbaggers, not the native-born who make up roughly half of the 3 million people in the California-size territory. The rest are newcomers, including migrants resettled by the government from other islands. “Migrants dominate the economy, and locals are marginalized on their own land,” says Socratez Sofyan Yoman, the chairman of Papua’s Alliance of Baptist Churches.

While officials blame separatist rebels for attacks like the helicopter shooting, many Papuans point the finger at Indonesian paramilitary police and military units who are paid by the company to guard the mine. The apparent motive: squeeze more money from Freeport by justifying their deployment in the area. “If there’s no conflict, there’s no money,” says Reverend Yoman. “It’s like an ATM.”

Indonesian forces have been implicated in a sabotage of Freeport’s pipelines last October. The pipelines, which transport copper and gold slurry, were cut at multiple points parallel to the access road to Timika. Sources close to Freeport say that aerial photos show Indonesian troops supervising the cutting by gangs of illegal miners, who then extract the concentrated gold. When engineers later went out to repair the pipelines they came under fire. In some cases, these sources say, acts of sabotage occurred within earshot of police checkpoints, yet no arrests were made.

A military spokesman in Jakarta denied any military  involvement in the violence. He noted that armed civilian groups often wear army fatigues. He said swift action would be taken against any soldiers if there were firm evidence against them, and he invited human rights groups to report their findings to the military. “If we find our men were guilty, we’ll take action. We will enforce the law. We will send them to military court,” says Rear Admiral Iskandar Sitompul.

Whoever is doing the shooting and looting, Freeport’s security budget is rising. As well as paying Indonesian troops for protection, a controversial yet common practice in the mining industry, Freeport spent $28 million in 2010 on its own security force, up from $22 million in 2009. It has also brought in Triple Canopy, a private security firm staffed by former U.S. Special Forces that replaced Blackwater in guarding U.S. missions in Iraq. While such costs are relatively small compared with the lode emerging from those mountains, it’s hard to have security certainty if security expenditures just lead to more chaos.

Freeport must also deal with the freelancers. In the last decade thousands of small-scale miners have flocked to the area, tracking the upward march of gold. Timika, a dusty town of 120,000 people, has over 40 gold shops where specks are weighed and sold. While some miners pan for grams in lowland rivers, others travel closer to the mine, where higher concentrations are found in the waste rock. Far from deterring the trade, Indonesian security forces allegedly organize the transport of miners and supplies to camps inside restricted zones, taking their cut from the rich pickings.

For Freeport the surge in illegal miners adds the risk that they will start using mercury for extraction, posing a severe health risk to themselves and to the river system. Some gold shops already use mercury. Freeport is working with local authorities to discourage the practice and educate miners and merchants about the dangers, according to Kinneberg. It has installed monitoring devices in Timika and along the river.

Arguably the biggest risk of all emanates from Jakarta, 2,000 miles and two time zones away. As Indonesia’s economy revs up, politicians are playing hardball with foreign companies in the resources sector. Under a 2009 mining law foreign entities must divest to local partners 20% of equity in new mines within five years of production. Government officials now propose raising this level to 51%, effectively handing over control to the locals. They argue that the law also allows for the renegotiation of existing contracts to bring them into line, which is anathema to mining executives.

As Indonesia’s largest taxpayer, Freeport should enjoy some goodwill in Jakarta. Since 1991 it has paid over $12 billion into Indonesian coffers. But as with its security headaches, money can’t buy you love. To its critics Freeport remains a tainted symbol of foreign privilege under the 32-year dictatorship of President Suharto, which ended in 1998. Environmentalists accuse it of despoiling a pristine landscape. Rights activists in Papua see it as a partner of an occupying military. And politicians are jumping on the bandwagon, calling on Freeport to stop complaining and start renegotiating.

“We’re not Bolivia or Venezuela. We’re quite nice. We just ask them to be nicer than before,” says Satya Yudha, a lawmaker on a mines and energy commission. One provision in the mining law that could apply to Freeport requires miners to process more metals at the source. “Let them keep it and be the operator. No nationalization. But in return for that, build a smelter here,” says Hashim Djojohadikusumo, a blue-blooded tycoon whose brother leads an opposition party.

In fact Freeport already smelts 25% of its copper at a plant in Indonesia. What really perks up politicians and their backers is the prospect of a compulsory divestment of the mine. A troubled asset could be on the market, with a potential windfall for the lucky buyer. “Everyone is using [the mine] as a battleground,” says Tony Wenas, an executive of the Indonesian Mining Association and former legal counsel for Freeport.

Kinneberg says Freeport isn’t required to divest equity in two locally incorporated units, though it has offered to sell shares in one unit to Papua’s provincial government (the central government has a 9% stake in the other). He says Indonesia has “consistently indicated” that it will honor existing contracts. “We believe our contract is fair to all parties,” Kinneberg says via e-mail.

Surrender is not an option. Grasberg’s copper and gold reserves are so immense that Freeport is spending $600 million a year to build a vast network of tunnels below its open-pit mine. It knows it can keep digging profitably in Papua for decades. The richness of the ore explains its low production costs: $0.60 per pound of copper in Papua, compared with $1.25 in Peru and Chile. “The geology is the easy part. The regulatory side is multidimensional chess, with electrical shocks for the wrong move,” says a Jakarta-based consultant to U.S. ­corporations.

The vice minister of mines and energy, Widjajono Partowidagdo, insists that Freeport must be flexible on buying local content and equity divestment. He acknowledges, though, that foreign companies don’t want to give up control. “Fifty-one percent [divestment] is our first position, and then we can go in the middle. We have to acknowledge the needs of our nation, and we should also consider the needs of foreign investors,” he says.

There’s a precedent for this game of chicken. In 1991 Freeport signed a new 30-year contract, with options for two 10-year extensions, subject to government approval. (“They have a very good deal,” notes Widjajono.) The agreement was sealed shortly after the company sold a 10% stake in the mine to the politically connected Bakrie family for $213 million, of which $173 million was financed by Freeport. A year later the Bakries sold half of the shares back to Freeport for $212 million, effectively giving them a free 5% stake that they sold in 1996 at a substantial profit.

Could this formula work again? O’Rourke says that the highly leveraged Bakries may be ready to buy another cheap stake in Freeport, in return for using its political clout to resolve its regulatory risk. Analysts say the Bakries would face competition from other tycoons in the resources sector, if Freeport took this route. Asked if any Indonesian companies had made approaches, Kinneberg declined to comment.

A discounted equity sale would be bad for Freeport shareholders. It’s also not clear that it would end the insecurity at the mine, which remains hostage to political and ethnic tensions. The sins of the past, some of which Freeport had a hand in, many of which it did not, now represent a risk premium on the company’s stock. At this point, there isn’t much Freeport can do but keep digging and hope for the best.

The man who shut the mine

One evening I slip out of my hotel to visit Sudiro, the mechanic who led the strike. It’s nearly midnight, and several burly guards wait just inside the gate. Inside the house I meet a trim, soft-spoken 43-year-old Javanese in shorts and a black Freeport polo shirt. As a TV plays in the background, he describes his journey from tae kwon do champion to union firebrand who defied a mighty U.S. corporation.

Born into a military family, Sudiro (one name) joined Freeport in 1992. One of his trainers at the mine was a U.S. pilot from the Vietnam War, who praised him for his work ethic. He rose to the highest grade as a mechanic, worth $615 a month in basic pay. In October 2010 he was elected union leader and began researching wages at Freeport’s South American mines. He decided that Indonesians were being underpaid, and last July he made a dramatic demand: an eightfold wage hike. When Freeport brushed him off, he staged a walkout of 8,000 workers in September.

Three months later Sudiro sat across from Freeport CEO Richard Adkerson in a Jakarta boardroom to discuss a revised pay deal. Adkerson, who had called the initial demands “excessive and unreasonable,” adopted a friendly tone, says Sadiro. “He told us, ‘Please help our company to survive.’” Sudiro replied that he hoped Adkerson had come “to provide a solution to our problems.” The deal was signed later that day, and Sudiro flew overnight to Timika, where thousands of Papuans were waiting at the airport to give him a hero’s welcome.

Why did the strike succeed? Sudiro says he drew on his strict military upbringing to lead the workers and press their demands. A Muslim from Java, he invoked Jesus to rally Papuans, who are mostly Christian. His ethnicity also made it harder for authorities to label unionists as separatists and crack down, though shots were fired at his house and car. “If the strike was started by Papuans it would have been crushed a long time ago,” says a rights activist in Jakarta. One miner offers his own explanation. “We had the power of God behind us,” he says. Freeport should be so lucky.

The Hidden Valley mine is owned and operated by Newcrest Mining and Harmony Gold.

Mr Zibe who is the Member for Huon Gulf electorate told a mining workshop at the Lae International Hotel in July last year that he would be bringing in scientists from Germany through the German Lutheran Church to conduct an independent study on the effects of the Hidden Valley gold mine on the Huon Gulf waters.

Mr Zibe was the former Minister for Health and HIV/AIDS in the Somare Government. To date, nothing has been heard of the scientists or whether they have carried out the studies Mr Zibe said they would do.

Yesterday Councillor Douglas Gedisa from Ward 5 of the Wampar Local Level Government called on Mr Zibe not to mislead his people about the effects of the mine on their lives.

“Sasa Zibe made a huge public commitment to help us with the scientific study and we are still waiting for him to come forward with the scientific report,” Councillor Gedisa said.

The Watut, Bulolo and other rivers in the Bulolo/Wau areas flow into the Markham River which empties into the vast Huon Gulf waters where Mr Zibe’s voters live.

The Watut River passes the Lower Watut area where the Huon Gulf electorate borders the Bulolo Open electorate on the south-western side of the Markham River. From there, it empties into the Markham and down to the Huon Gulf waters.

The Watut people have experienced elevated sedimentation of the river as well as dieback.

Peter Namus who is the Wampar Local level Government president comes from the Lower Watut area and expressed concern about this at last year’s Hidden Valley Mine Inter-agency Environment Advisory Committee Stakeholder Engagement workshop in Lae.
Mr Namus called for an independent study on the effects of the Hidden Valley mine on the Wampar LLG people who include the Labu people who live at the mouth of the Markham River on the south west side of Lae City. Mr Namus wanted the investigation to include the Labu people whose traditional fishing grounds will be severely affected if there is confirmed scientific evidence of chemicals in the Markham River and the waters of the Huon Gulf.

The presence of dangerous chemicals could have a serious effects on the livelihood of the Labu people as well as other communities further down the Huon coast whose fishing grounds would be destroyed as a result.

After listening to the results of studies conducted into the effects of the mine on his people, Mr Zibe said then that he was not entirely satisfied and announced he was inviting independent German scientists to conduct another study for the benefit of the Huon Gulf people. He said he had identified the experts and would be bringing them into PNG through the German Lutheran Church.

“Therefore, I called on him on behalf of the 27 wards in Wampar to produce the report and not take us for a ride. We don’t want empty promises…we are still waiting for Mr Zibe,” Mr Gedisa said.

The Australia’s largest mining giant in statement on Tuesday attributed the fall of gold production in line with its recent forecast, dented by heavy rains in PNG and lower ore grades in the second quarter of its 2011 fiscal year.

It also attributed that a groundfall at an open-pit mine in Australia has also compounded the fall.

The report indicated that gold output fell to 579,073 ounces in the December quarter of 2011 from 722,783 ounces a year earlier.
Newcrest said it expected December quarter production to be between 575,000 and 585,000 ounces.

The miner did not indicate as to how much the 20% fall of gold output translates to monetary value.

An email to Newcrests Melb-ourne head office and Port Moresby office for comments and deliberation on the fall were unsuccessful.

The Melbourne-based company, Australia’s top gold producer by output and the world’s third-largest by market value, last month trimmed its production forecast for the year through June.

Newcrest reiterated that full-year output was likely to be between 2.43 million and 2.55 million ounces, and said it was sticking with its original guidance on copper output, capital expenditure and operating costs.

Separately, the company said it expected to list on the Toronto Stock Exchange by March, and that it had lodged an application for a secondary listing with the TSX in December.

Newcrest completed the sale of two mining assets in Australia in early November.

The yield from the company’s flagship Lihir Island mine in the New Ireland Province would fall 100,000 ounces under budget in part because of heavy rains at the mine site, the company said.

“It is unlikely this production will be recovered during the remainder of this financial year,” Newcrest said in a statement in December 2011 while announcing the cut in its gold ore production.

Production at its Telfer mine — one of the biggest in Australia — would fall short by about 50,000 tonnes because the ore contained less gold than originally believed,”

James Cook University student Raymond Unasi said:

“It is very encouraging and timely to read that the O’Neill government, through the Minister for Environment and Conservation Thompson Harokaqveh, has fulfilled the promises to repeal the amendments of the Environment Act 2000.”

Unasi, who is doing his master of science (natural resource management), said the process of community consultation, stakeholder opinion reviews and professional sound advice to the former government against amending the Act had been hijacked from the very beginning.

He said communities, villagers, learned men and women of law, science, society and the common sense of every living citizen of this country were bashed and nailed to the wall when the last government bulldozed the amendment just to please an entity in the name of community development and economic gain.

“During the modern times of social media freedom and internet age there is simply no space to bulldoze or shove things down people’s throats, the very entity every elected leader and government stands to represent,” he said.

Unasi said that amendment put PNG on the map as one of the most reckless and uncaring countries in the world as regards protecting the environment despite preaching much about carbon emissions and trading.

“From a systematic point of view, every procedure or process that moves a stone, rock or grass from the surface of the land and/or sea floor needs to have a very effective and strategic mitigation monitoring and social effect determined.

“The Environmental Impact Assessment (EIA) processes in every independent country are a tool to determine developers have a path way or road map in which resources, infrastructure or foreign obstacle are placed within a natural precinct.

“The EIA stages to which this amendment threatened and did resolve to relinquish power to a single desk (director) was insane and devilish,” he said.

Women at Gordons market (Catherine Wilson/IPS)

Although Papua New Guinea is known as a resource-rich country, 85 percent of the population depends on the informal economy for a living.

The need for a grassroots-led economic enterprise to aid equitable and sustainable development is nationally recognised, but awaits better governance, infrastructure and facilities.

Meanwhile, the majority of PNG’s population of 6.6 million people practice subsistence agriculture in rural communities, many in locations remote from road and transport networks and public service delivery.

More than half of all income sources, including fresh food production, are part of the informal economy.

But informal agriculture is not confined to the rural provinces. In the capital, Port Moresby, fresh produce markets are growing, supplied by an expanding network of small farms and food gardens in the city’s outer suburbs and villages within commuting distance.

Bire Nikil moved to Port Moresby from Chimbu Province in the highlands to start a food garden several years ago. At Gordons Market, he is surrounded by five of his relatives who assist him with growing and selling kaukau (sweet potato), bananas, aibika (Pacific cabbage), pineapples, peanuts, watermelon, mangoes and coconuts, all transported in by public minibus.

Nikil’s weekly income of K300 (142 dollars) supports 20-25 people, including relatives in Chimbu province.

For many market vendors, who are also growers, this is their only source of income and open markets their main outlets.

Ruth Williepore supports herself and her four-month-old daughter by selling freshly grown food at the market every day. She lives on the city’s northern outskirts, where cultivation of fresh produce is collectively organised with families given specific crops to grow and produce taken to market by public transport.

“If we sell 100 bags (of food) per day,” Williepore said, “we earn K2000-3000 (953-1,429 dollars) which pays for food, water, household items, school fees, clothes and power bills.”

“More people are buying and more people are selling,” Williepore added, surrounded by several hundred fellow vendors and an abundance of fruit and vegetables piled on wooden benches, in plastic tubs and on every spare bit of ground.

The ‘2008 Feeding Port Moresby’ study, by PNG’s Fresh Produce Development Agency, revealed that the total supply of fresh food to the city each year is around 57,780 tonnes, with an overwhelming 50,350 tonnes sourced from local urban production and 7,430 tonnes from other provinces and international imports.

Agriculture accounts for 32.2 percent of PNG’s gross domestic product, while industry contributes 35.7 percent.

But revenue from the minerals and resources industry, which has contributed to rising national growth over the last half decade, has failed to generate economic benefits or public services for most people. 

Nalau Bingeding, Research Fellow at the National Research Institute, claims that the biggest obstacles to the resource boom transforming the pace of development are “corruption in politics and the public service, and a weak public service mechanism.”

The informal economy has expanded with the doubling of the population in one generation, while 37 percent remain below the poverty line. Further factors include the decline of the statutory minimum wage, and the kina, the national currency, in the 1990s, which has raised prices of imports.

Globally the informal economy accounts for 60 percent of employment in developing countries. Many informal workers, according to the International Labour Organisation, possess business acumen, creativity and innovation that could be unleashed if conditions of vulnerability and marginalisation are removed.

In 2011 the National Informal Economy Policy was launched to promote “the informal economy as the ‘grassroots expression’ of the private sector and a partner in the formal economic system of Papua New Guinea.”

The policy advocates growth of and greater civil participation in the informal economy, regardless of gender, urban or rural location, and ultimately socio-economic inclusion for all involved.

Strategies to empower workers include an enabling regulatory environment, financial inclusion through microfinance and provision of improved infrastructure, facilities, education and training, social protection and political representation. Thus, it is hoped to link “the economies of rural and urban areas and to reduce inter-regional, as well as inter-personal, income inequalities.”

At Gordons Market, where there is currently no power, public water supply, inadequate sanitation and refuse management, vendors would like to see changes.

“I would like to see improvements, especially more benches for vendors and power supply,” said Miriam, from Babiko village, who works at the market with her mother and two sisters.

“We would also like to see good services for road transport, as sometimes when public transport is not available, we are not able to get to market in time to sell enough.”

The size and resilience of the informal agricultural economy is testament to the initiative and creativity of people and communities at the grassroots, but putting in place promised state reforms is vital to its development and long term future.

“The informal economy in the agricultural sector is a booming industry,” Maria Linibi, president of PNG Women in Agriculture Development Foundation, claims.

“Women in PNG are entrepreneurs and make do with what resources they have, such as markets, transport, even if it means walking long distances with heavy loads on their backs to the nearest available means to earn some cash,” Linibi said.

“But there is,” she added, “no proper marketing infrastructure and other facilities in place to facilitate and support the informal sector to boost and sustain its effectiveness.”

Market vendor, Nikil, took pride in saying: “We do everything ourselves.”

However Bingeding said that substantial PNG-based agricultural research and its effective application, addressing restricted and expensive transport options and developing appropriate technology to prolong the life of perishables, would bring prosperity to smallholders and food gardeners.

So Arnold Amet (aka as Double A on the streets of Madang (and it doesn’t stand for Arnold Amet!) says the Deep Sea Tailings System (DSTP) is safe at Ramu (yea right Double A) and that he would be the first to take any responsibility should anything go wrong! Yep – everyone that’s what the man said.

Since his getting in bed with Somare and his election ole Double A’s credibility has gone increasing downhill and at an increasing accelerated pace lately. As if the comedy show in Moresby hasn’t made him lose any credibility he had left – his latest statement is simply another politician showing a big ego with no respect for the local people and somehow thinking making an absurd statement will con the locals.

Wake up Double A – the people aren’t stupid and they are angry. As one angry person told us “oh good Double A – our children and their children will be very happy you took responsibility for their dead environment”. That about says it all doesn’t it? So much for ignorant landowners Double A!