Tag Archives: Freeport-McMoRan

Freeport Seals Pact With Indonesia on Giant Grasberg Mine

Eko Listiyorini and Viriya Singgih | Bloomberg | September 27, 2018

  •  Definitive agreement to allow Inalum to raise stake to 51%
  •  Accord is culmination of more than a year of negotiations

Freeport-McMoRan and Indonesia signed a binding landmark agreement for the U.S. miner to hand over majority control of the giant Grasberg copper and gold mine to a local state-owned firm, in the country’s biggest ever divestment by a foreign resources company.

Freeport Chief Executive Officer Richard Adkerson and PT Indonesia Asahan Aluminium President Director Budi Gunadi Sadikin signed a divestment deal and two other pacts in Jakarta on Thursday. The transfer of majority shares to Asahan Aluminium will happen once the company makes a payment of $3.85 billion to Rio Tinto Group and Freeport, Sadikin said.

The U.S. producer will continue to operate the mine under the agreement, which culminates more than a year of talks. The accord will allow Indonesia to issue a special mining license for Freeport to run the world’s second-largest copper mine through 2041. Freeport and Asahan Aluminium, known as Inalum, will complete the transaction before the year-end, Sadikin said.

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Indonesia government asked to recalculate Freeport mine damage

FILE PHOTO: Trucks operate in the open-pit mine of PT Freeport’s Grasberg copper and gold mine complex near Timika, in the eastern region of Papua, Indonesia on September 19, 2015 in this photo taken by Antara Foto. REUTERS/Muhammad Adimaja/Antara Foto/File Photo

Reuters | 26 July, 2018

Indonesia’s parliament has asked the government to recalculate damage to the environment from the giant Grasberg copper mine operated by the local unit of Freeport McMoRan Inc, the environment ministry said.

A 2017 report by Indonesia’s Supreme Audit Agency (BPK) calculated that Freeport’s decades-long operations at the mine in Indonesia’s remote easternmost province of Papua had caused environmental damage worth $13.25 billion.

That damage, it said, was largely a result of tailings from the mine that had extended beyond previously agreed limits and which had polluted coastal areas.

The audit also said Freeport Indonesia (PT FI) had missed royalty payments, cleared thousands of hectares of protected forest and began mining underground without environmental clearance.

The environmental issues have presented problems for Freeport and Indonesia, whose state-owned mining holding company, PT Inalum, hopes to finalize a $3.9 billion deal to acquire a majority stake in Grasberg this year.

In a meeting with Environment Minister Siti Nurbaya on Tuesday, parliament urged the minister to “ensure that PT FI fulfils governmental administrative penalties” in accordance with the law, the ministry said in a statement late on Tuesday.

“Commission VII asks the Environment Minister to calculate the value of environmental losses resulting from damage and pollution from PT FI operations, as per the findings of the BPK,” Commission VII chairman Gus Irawan Pasaribu said, according to the statement.

Jakarta-based spokesmen for PTFI and Inalum did not immediately respond to a written request for comment.

Freeport CEO Richard Adkerson said on a call with analysts on July 12 the company had been “working very closely” with the environment ministry and had “received assurance that we will find a resolution of the environmental issues that will be acceptable for all parties. So we’re very encouraged by that.”

Since then he said Freeport had “entered into very productive discussions with the ministry and are making progress with the ministry in addressing these issues and working toward a resolution that we do not expect and the ministry does not expect to adversely affect our operations.”

Parliament also urged the ministry to “conduct environmental risk analysis and environmental audits on a regular basis”, and plans to hold meetings with the ministries of mining and the environment on the matter.

A spokesman for the environment ministry declined to comment further on the parliament request or provide and estimate on how long this process could take.

Indonesia’s mining minister said earlier this month the environmental matters must be resolved before his office could issue a new mining permit for PT-FI up to 2031.

Inalum CEO Budi Gunadi Sadikin told parliament on Monday that “regarding the environment, we told Freeport ‘the past problems are your sins’. In future we will take responsibility together.”

Sadikin added the environmental damage from Grasberg was a shared responsibility as the government already held a 9.36 percent stake in the mine.

Sadikin said a forestry permit for the mine still needed to be issued, and “the 185 trillion rupiah ($12.80 billion) from tailings damage still needs to be cleared up” although he was confident that all the environmental problems could be resolved.

There are 13 of 48 sanctions related to the environmental audit that have not been met yet, according to the environment ministry.

In April, Freeport shares fell to a four-month low after the environment ministry announced tough new rules intended to comply with the BPK audit, just before the company announced its first quarter earnings.

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Giant Waste-Spewing Mine Turns Into a Battleground in Indonesia

Grasberg mine tailings Source: Freeport-McMoRan

Danielle Bochove and David Stringer | Bloomberg | June 5, 2018

Every year, Freeport-McMoRan Inc. dumps tens of millions of tons of mining waste into the Ajkwa River system in Indonesia. The company has been doing it for decades, and is demanding the right to keep at it for decades to come.

The discharge of what are called tailings, the leftovers of mineral extraction, is perfectly legal under Freeport’s current contract with the government. But recently, after more than a year of tense negotiations over the terms of a new deal, Indonesia suddenly changed the rules: The Grasberg mine in the highlands of Papua province would have to operate by heightened standards. It shouldn’t have been a surprise, really, considering most every other miner in the world has been forced or has elected to stop discarding tailings in rivers.

Freeport, though, has said that won’t happen at Grasberg. Chief Executive Officer Richard Adkerson has been blunt about it. “You can’t put the genie back in the bottle,” he said in April. “You simply can’t say 20 years later ‘we’re going to change the whole structure’.” Grasberg’s waste management, he added, has “always been controversial.”

The tailings tussle is the latest twist in the complicated relationship between the mining giant and the Southeast Asian republic. How it plays out will have far-reaching consequences in Indonesia. Freeport is a major taxpayer and job provider and has built homes, schools and hospitals in one of the poorest provinces. But Grasberg has also long been a target for environmentalists, indigenous and separatist groups and human-rights watchdogs.

At stake for Freeport are reserves that Bloomberg Intelligence estimates to be worth $14 billion at the world’s biggest gold deposit and second-largest copper mine. Grasberg accounted for 47 percent of Freeport’s operating income in 2017, according to data compiled by Bloomberg.

“What happens at Grasberg has global significance,” said Payal Sampat, the mining program director at the mining watchdog-group Earthworks. “It involves some of the largest global players in the mining industry and one of the leading mining economies.”

Most countries have banned tailings deposits in waterways over concerns they can be toxic, destroying habitats, suffocating vegetation and changing the topography of rivers, causing floods. Most miners have said they’re against the practice regardless of local rules. The industry’s biggest, BHP Billiton Ltd., won’t “dispose of mined waste rock or tailings into a river or marine environment,” as the company put it in a statement.

‘Environmental Burden’

Only two other industrial-scale mines — and a third, small operation — are known to get rid of tailings as Grasberg does, and they’re in Papua New Guinea, which occupies half of the island of New Guinea; Indonesia owns the rest, which is home to the Freeport-run mine. In recognition of risks that could leave “a massive environmental burden for future generations,” the practice has been phased out everywhere else, according to the United Nations’ International Maritime Organization.

Freeport sees things differently. “As we have stated before, the tailings are benign,” said Eric E. Kinneberg, a spokesman, referring to the corporate website for a detailed explanation.

Tailings deposition area in the Ajkwa River system.Source: : Action for Ecology and People’s Emancipation

The Phoenix-based company maintains that much of the sediment in the Ajkwa River system downstream from Grasberg is caused by natural erosion, and that tailings pose no significant — or at least unexpected — threats. “There have been no human health issues or impact on the environment that wasn’t anticipated,” Adkerson said on a quarterly earnings call in April.

The company’s partner in the Grasberg complex, Rio Tinto Group, recently addressed concerns about waste removal. “Riverine tailings disposal is very, very far from best practice,” Chairman Simon Thompson told a meeting in London in April, perhaps highlighting one of the reasons Rio may be willing to sell its 40 percent interest to a state-owned company for $3.5 billion. A spokesman for the company declined to comment for this story.

Rio shares were up 1.5 percent in U.S. trade at 2:54 p.m. while Freeport gained 2.8 percent. Copper and gold prices were also higher.

‘No Realistic Alternative’

“If you think about it from Rio Tinto’s perspective, one of the biggest problems with this mine is the environmental issues. I think that’s an incentive for Rio to get out,” said Christopher LaFemina, an analyst at Jefferies LLC. “This is a critically important part of Freeport’s overall value. For Rio Tinto, it’s not.”

The problem for Freeport and Indonesia is that there’s no easy solution. “There has been no realistic alternative identified,” Thompson said. Freeport’s local unit studied 14 alternatives for tailings disposal — including dams and pipelines — and concluded all were too risky in a mountainous terrain prone to earthquakes and heavy rainfall.

As it is, the heavy ooze wends its way through glacier-capped valleys, descending almost 4 kilometers (2.5 miles) to tropical lowlands and a 230 square kilometer deposition zone, where roughly half the tailings are parked. The rest flows on to a river estuary and the Arafura Sea.

“The company has sacrificed not just the river, but also the coastal area,” said Pius Ginting, coordinator of Action for Ecology and People’s Emancipation, an Indonesian environmental group.

50 Million Tons

According to Earthworks, Freeport sends more than 76 million metric tons of tailings and waste rock into Indonesian rivers every year. The company puts the 2017 figure at 50 million tons. Without spelling out precisely how the requirement should be met, Indonesia told Freeport that it would boost to 95 percent from half the amount of tailings that must be recovered from the river system, according to Adkerson.

That was a shock that sent Freeport’s stock tumbling after Adkerson revealed it on April 24. Shares have largely recovered as investors bet the government will fail to follow through.

The negotiations to secure the right to keep mining Grasberg until 2041 had already been complicated by an edict that foreign miners sell majority stakes in their assets to local interests. Rio’s apparent interest in divesting would ease that problem for Freeport, reducing how much it would need to unload.

Stunning Asset

Even if its share dropped below 50 percent, Freeport as an operator could still win big — Grasberg is a stunning asset, expected to produce more than 520,000 tons of copper in 2018 and more gold than any other mine. Of course, Indonesia’s tailings mandate may be a negotiating tactic, as some Freeport investors said they suspect. Ilyas Asaad, inspector general at Indonesia’s Environment & Forestry Ministry, didn’t respond to a request for comment.

The company is holding its position: The discharge of tailings into the river system is an inescapable consequence of keeping the mine in operation. If the government backs down, it will be “a political decision,” said David Chambers, a geophysicist who runs the U.S. nonprofit Center for Science in Public Participation. “There aren’t many governments that are willing to sacrifice those kinds of environmental resources for the financial resources.”

Few investors have publicly seized on the tailings mess as a reason to shun Freeport. One was Norway’s $1 trillion sovereign wealth fund, which in 2006 excluded Freeport from its investment universe and in 2008 sold its holding of about $850 million of Rio shares, citing Grasberg’s use of the river system to dispose of tailings.

“The spotlight has shone on these issues a lot more brightly in the last couple of years,” said Andrew Preston, head of corporate governance in Australia for Aberdeen Standard Investments, which owns shares in Rio and BHP. The “wake-up call,” Preston said, was the 2015 failure of a tailings dam at BHP’s Samarco iron-ore joint venture with Vale SA in Brazil. Billions of gallons of sludge escaped to travel hundreds of kilometers down the Doce river, killing at least 19 people and leaving hundreds homeless.

Jefferies’ LaFemina said investors are betting on the status quo in Indonesia. “In negotiations, different sides are trying to get leverage.” In the end, “I am not expecting there to be a significant change to how this asset operates”.

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Rio Tinto about to offload stake in Grasberg mine for $3.5 billion

Grasberg mine on the island of New Guinea, one of the world’s biggest sources of copper and gold. (Image: Google Earth)

Commentary from SkyTruth: “News that Rio Tinto is negotiating to sell out its stake in the massive Grasberg Mine in West Papua (Irian Jaya). We’ve written about this mine before: uncontrolled dumping of tailings into rivers flowing past the mine has caused the deposition of tailings across a broad swath of former rainforest downstream, creating a moonscape 30 miles long and up to 2-1/2 miles wide. By selling out, Rio Tinto might be able to dodge any liability for that damage — although their partner Freeport McMoRan may still be on the hook, and apparently the “tailings issue” is holding up the sale”

Cecilia Jamasmie | Mining.com | 23 May 2018

World’s No.2 miner Rio Tinto confirmed Wednesday is ready to sell its stake in the giant Grasberg mine, the world’s second largest copper operation, to Indonesia’s state mining holding company Inalum for $3.5 billion.

The move could mark the end to a long-drawn-out, three-way dispute over the mine, which has been centered on bringing local ownership of Grasberg up to 51%, a main requisite set by the Indonesian government to allow Freeport-McMoRan to keep operating in the country.

Discussions with  PT Indonesia Asahan Aluminium, known as Inalum, and Freeport — the other two companies engaged in talks — were ongoing, Rio said, “including as to price,” noting that no agreement had been reached.

Rio’s deal with Freeport was struck in 1995 and entitles it to a 40% share of production when certain output levels are hit. But as a result of strikes and other disruptions and as the open pit at Grasberg nears the end of its life, the Melbourne-based miner hasn’t seen any benefit since 2014.

Chief executive Jean-Sebastien Jacques publicly questioned Grasberg’s place in Rio’s future back in February 2017. He followed in June with a remark about the mine being a world-class copper deposit, which might not be a world-class mining investment.

“There is a fundamental difference between a world-class resource and a world-class business,” he said again last week at the Bank of America Merrill Lynch Global Mining, Metals & Steel Conference.

Indonesia and Freeport have been negotiating the terms for the company to give the government a majority ownership in Grasberg for over a year. But until today, it wasn’t clear what would happen to Rio’s interest in the mine.

Grasberg, the world’s second-largest copper mine and fourth largest gold operation, has transitioned to a fully underground operation, set to reach full capacity by 2022, when it will produce 160,000 tonnes per day of ore.

The additional Deep Mill Level Zone block cave mine, currently under construction, is projected to contribute an additional 80,000 tonnes per day of ore once at full capacity, expected in 2021.

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Three dead since Sunday in renewed fighting in Papua

Members of the Indonesian Army in Papua. Photo: AFP

Radio New Zealand | 6 April 2018

Gunfire exchanges between Indonesian military forces and West Papuan guerillas in Mimika regency have left three people dead since Sunday.

The death of a soldier with the Indonesian army, or TNI, prompted renewed fighting in the mountainous area around the Freeport mine in Papua province.

TNI and police forces had gone into a remote part of the area to reclaim villages controlled by the West Papua Liberation Army, or TPN.

TPN guerilla forces have declared war on the Indonesian state and the operations of the Freeport mine.

An NGO worker in Mimika’s capital Timika, Demi Picoalu, said the TNI killed two Papuans in an intense sweep operation sparked by the killing of one of their troops on Sunday.

“After that, massive sweeping opertaion in (local) villages, and they (joint TNI and police troops) shoot everyone, because the TPN is hiding in the community village, so TNI used rockets.”

Earier, according to the Jakarta Post, the TPN said that over 1,000 civilian lives were at risk due to the TNI’s operation.

TPN spokesperson Hendrik Wanmang said they had gathered civilians in Kampung Opitawak and TPN fighters had retreated and left the kampung to avoid civilians being mistaken for armed fighters.

However, Demi Picoalu said that according to reports he had recieved from Banti village, the TNI’s sweep operation had stopped.

Local villagers had been evacuated to the relative calm of a village named Banti 2 where they were consideed safe lest fightnig break out again.

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Demo at Freeport office in Jakarta calls for self-determination

Papuan protesters outside the offices of PT Freeport Indonesia in South Jakarta last Thursday. Image: Tirto.id

Tony Firman | Pacific Media Centre | April 2, 2018

Calls for West Papuan self-determination were prominent during a demonstration in front of the offices of PT Freeport Indonesia in the Kuningan area of South Jakarta at the start of Easter.

The action was held by about 70 protesters from the Papuan Student Alliance (AMP) and the Indonesian People’s Front for West Papua (FRI-WP) who held the demonstration last Thursday to demand the closure of the Freeport copper and gold mine in Papua.

FRI-WP spokesperson Surya Anta said that the international community must take a position on the forced incorporation of West Papua into the Unitary State of the Republic of Indonesia (NKRI).

“Since May 1, 1963, until now, West Papua was removed from the Dutch decolonisation list without the West Papuan people’s knowledge,” said Anta.

Anta also accused Freeport of being an entry point for the colonisation of West Papua on the grounds that the first work contract between Freeport and Indonesia was signed in 1967.

Meanwhile, the Act of Free Choice (Pepera) which resulted in the incorporation of West Papua into the Indonesia was held in 1969.

Anta said that the Pepera was manipulated and undemocratic.

No prosperity or peace
Dorlince Iyowau, a resident of the mining town of Timika who took part in the action, added that Freeport’s presence in Papua had not brought prosperity or peace to the West Papuan people.

“Violence against the people and damage to the environment by waste tailings discarded into the Ajkwa River is a concrete form of Freeport’s colonial presence”, said Iyowau.

In a media release received by Tirto, the FRI-WP and the AMP made nine demands, three of which were:

  • the closure of PT Freeport,
  • the withdrawal of the TNI (Indonesian military) and Polri (National
    Police) from Papua, and
  • self-determination for the people of Papua

The media release also stated that based on a report by the Papuan Institute for Human Rights Studies and Advocacy (Elsham) in 2002, numerous cases of violence had been committed by security forces in Papua.

The report noted that thousands of people had died, scores had disappeared and hundreds more had been arrested and tortured.

In addition to this, it also noted places of worship that had been burnt down, villages and other locations that had been destroyed, many of which have yet to be properly documented.

The demonstrators began leaving the Freeport offices at around 3.15 pm. Similar actions are planned to take place simultaneously next Saturday in several different cities, including Yogyakarta and Semarang (Central Java), Bandung (West Java), Surabaya and Malang (East Java), Makassar (South Sulawesi), Palu (Central Sulawesi), Ternate (North Maluku) and Papua itself.

Tony Firman is a reporter for Tirto news website in Indonesia.

Translated by James Balowski for the Indoleft News Service. The original title of the article was “Demo di Kantor Freeport Juga Serukan Penentuan Nasib West Papua“.

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Major quake cuts communications, halts oil and gas operations in Papua New Guinea

Landslide and damage to a road located near the Ok Tedi mine township of Tabubil after an earthquake that struck Papua New Guinea’s Southern Highlands, February 26, 2018. Jerome Kay/Handout via REUTERS

Charlotte GreenfieldSonali Paul | Reuters | 26 February 2018

At least one company began evacuating non-essential personnel after a powerful 7.5 magnitude earthquake hit Papua New Guinea’s energy-rich interior on Monday, causing landslides, damaging buildings and closing oil and gas operations.

The tremor hit in the rugged, heavily forested Southern Highlands about 560 km (350 miles) northwest of the capital, Port Moresby, at around 3.45 a.m. local time (1545 GMT Sunday), according to the U.S. Geological Survey (USGS).

A spokesman at Papua New Guinea’s National Disaster Centre said by telephone the affected area was very remote and the agency could not properly assess damage until communication was re-established.

He said there were no confirmed casualties, although the International Red Cross (IRC) in Papua New Guinea said some reports indicated there were “fears of human casualties”.

“It’s very serious all across the Southern Highlands and also all over the western highlands. People are definitely very frightened,” Udaya Regmi, the head of the IRC in Papua New Guinea, said by telephone from Port Moresby.

The PNG government also said it had sent disaster assessment teams. At least 13 aftershocks with a magnitude of 5.0 or more rattled the area throughout the day, according to USGS data, but no tsunami warnings were issued.

Early on Tuesday, USGS reported that another quake with a magnitude of 6.4 had hit 142 km (88 miles) from the city of Mount Hagen at a depth of about 10 km.

“The Papua New Guinea Defense Force has also been mobilized to assist with the assessment and the delivery of assistance to affected people as well as the restoration of services and infrastructure,” Isaac Lupari, the chief secretary to the government, said in a statement after Monday’s tremor.

ExxonMobil said it had shut its Hides gas conditioning plant and that it believed administration buildings, living quarters and a mess hall had been damaged. It also said it had suspended flights into the nearby Komo airfield until the runway could be surveyed.

“Due to the damage to the Hides camp quarters and continuing aftershocks, ExxonMobil PNG is putting plans in place to evacuate non-essential staff,” the company said in an emailed statement.

Gas is processed at Hides and transported along a 700 km (435 miles) line that feeds a liquefied natural gas plant near Port Moresby for shipping.

PAPUA PANIC

PNG oil and gas explorer Oil Search said in a statement it had also shut production in the quake-affected area.

The giant Grasberg copper mine operated by the Indonesian unit of Freeport McMoRan in neighboring Papua province was not affected, a Jakarta-based spokesman said.

However, the quake and several aftershocks caused panic in Jayapura, the capital of Indonesian Papua, Indonesia’s disaster mitigation agency said in a statement, but there were no reports of casualties or damage there.

The IRC’s Regmi said communications were “completely down” in Tari, one of the larger settlements near the quake’s epicenter, and that landslides had cut roads.

Several other aid and missionary agencies said poor communications in the area made damage and injury assessment difficult.

“The bush structures that they build tend to handle earthquakes extremely well,” Christian missionary Brandon Buser told Reuters after contacting several remote villages by shortwave radio.

Earthquakes are common in Papua New Guinea, which sits on the Pacific’s “Ring of Fire”, a hotspot for seismic activity due to friction between tectonic plates.

“This is the Papuan fold-and-thrust belt, so it’s a typical movement of faults in that region, but it’s big,” said Chris McKee, acting director of the Geohazards Management Division in Port Moresby.

Part of PNG’s northern coast was devastated in 1998 by a tsunami, generated by a 7.0 quake, which killed about 2,200 people.

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