Endgame Profile of Freeport McMoRan

compiled by George Draffan, Endgame.org

Description

Tax Breaks

Freeport in Indonesia

Freeport - Phelps Dodge Merger

Further Information & Campaigns

Description

Freeport-McMoRan "is a leader in the exploration, mining, development, production, processing, and marketing of... copper, gold, silver, phosphate fertilizers, phosphate rock, sulphur, oil, and other natural resources" (company press release, March 31, 1994). Freeport-McMoRan was formed in 1981 from the merger of Freeport Minerals and McMoRan Oil & Gas. As a conglomerate, Freeport- McMoRan has been spinning off companies to raise capital (and debt, which was over a billion dollars at the end of 1991) (Business Week, Apr. 27, 1992, p. 91).

Other affiliates include Freeport-McMoRan Resource Partners, L.P.(agriculture minerals) and Freeport-McMoRan Oil & Gas Company (which merged with Freeport-McMoRan in November 1990). Freeport Minerals and American Cyanamid own Brewster Phosphates (WOTE). Most of Freeport-McMoRan's American oil and gas properties and real estate were transferred to a partnership called FM Properties Inc. (Freeport-McMoRan 1992 Annual Report, p.40-41).

In the 1990s Freeport-McMoRan's two main assets and operations were its offshore Gulf of Mexico "Main Pass" sulfur mine and its Indonesian gold mine. These properties make Freeport the world's largest integrated phosphate fertilizer producer and the operator of the world's largest single gold reserve (Forbes, Jan. 18, 1993, p. 80-81).

Freeport-McMoRan Inc., New Orleans, said its Freeport-McMoRan Resource Partners Limited Partnership unit agreed to sell its producing geothermal-energy business to a joint-venture group led by Calpine Corp. for about $254 million. Freeport-McMoRan Resources will also get a 55% interest in the venture after a certain payout has been made to the Calpine group. The properties are located in the Geysers area of Northern California. Proceeds will be used to reduce debt and for other purposes. Freeport will retain its undeveloped geothermal-energy assets in the Imperial Valley of Southern California and in the Medicine Lake area of Northern California. Calpine Corp. is a San Jose, Calif., developer, owner and operator of geothermal and cogeneration projects (Wall Street Journal, Nov. 22, 1989).

In 1990, Freeport-McMoRan Gold Co. was purchased by the Minorco subsidiary of the infamous South African Anglo-American Corporation; the name was changed to Independence Mining (Hoover's Handbook of World Business 1992, p. 151).

The corporate structure continues to evolve; in 1993, Freeport-McMoRan Copper & Gold Inc. (73 percent of which is owned by Freeport-McMoRan, 10 percent by the Indonesian government) purchased 65 percent of Rio Tinto Minera (a metals and mining subsidiary of the Spanish company Ercros). Rio Tinto Minera's main asset is a copper smelter in Huelva, Spain (Freeport-McMoRan press release, Apr. 27, 1993, p.5). Freeport-McMoRan Copper & Gold, which identifies itself as an affiliate of Freeport-McMoRan Inc., stated that it "is also engaged in the exploration, mining, and milling of copper, gold, and silver in Irian Jaya, Indonesia."

Tax breaks

As a complex set of limited partnerships, many of Freeport's operations enjoy tax-free status under the 1987 Internal Revenue Code (Section 7704) exemption for partnerships that derive 90 percent or more of their gross income from natural resources. Its 1993 Annual Report (p. 1, 34 and 46) shows sales of more than $1.5 billion and yet in 1991, Freeport gained a federal tax BENEFIT (not a payment) of $28 million; in 1992, a tax benefit of $25 million; in 1993, it received more than $2 millio in federal tax benefits.

Freeport in Indonesia

Tribal peoples attacked Freeport facilities in the 1970s. "After the uprising, the Indonesians uprooted entire communities and sent them to barracks on the coast. By June 1980 epidemics had swept through these communities, killing more than 20 percent of the infant population" (National Catholic Reporter, Dec. 22, 1995, citing Roger Moody, The Gulliver File: Mines, People and Land (London: Minewatch).

PT-FI (formerly Freeport Indonesia) is 78-percent owned by Freeport-McMoRan, and 10-percent owned by the Indonesian government (Freeport-McMoRan 1992 Annual Report, p.40). The huge gold and copper mining operations at Tembagapura (Copper City) in Irian Jaya involve a 30-year contract between Indonesia and Freeport (Engineering & Mining Journal, Feb. 1992, p. 13). The Indonesian military has been used to control natives displaced by Freeport projects (Rainforest Action Network Action Alert, No. 72, May 1992).

The lengthy articles in the June 1991 and March 1992 issues of Engineering and Mining Journal contain considerable information on Freeport in Indonesia. Royal Dutch Shell first found minerals in the 1930s, and "successfully negotiated with Stone Age Ekari and Danal cannibal-tribes." In 1959, Freeport Sulphur arrived. Systematic exploration was begun in the 1970s. Bechtel built the mine in the 1970s, using Korean coal miners to dig tunnels through the mountains.

In 1977 Amungeme people and West Papua Liberation Movement or Organisasi Papua Merdeka (OPM) independence fights blew up Freeport McMoRan's pipeline to the coast; Indonesian military bombed and strafed villages and moved people away from the mine (Killings at Freeport Mine, World Rainforest Report, No. 31, June 1995, p. 9-10).

Freeport's Grasberg deposit, as it is called, is said to be the world's largest single gold reserve. It also contains vast reserves of copper. J.P. Morgan and Fuji are said to have loaned $500 million for development; mining and milling was expected to reach full capacity in 1992. The company-built town of Tembagapura houses 8000 people. Streams have been diverted to three dams. There is a diesel-fueled power plant. Lumber mills, lime plants, and foundries are planned. Hundreds of trucks go through 700 tires per week. Pipelines bring fuel and carry slurry. Barges and aerial tramways carry workers and material. Freeport is "mindful" of two national parks in the area. "Waste is now conventionally end-dumped, but, in time, may require some form of layering and compacting..." Concentrate is delivered to Japanese, European, South Korean, and Philippine smelters (Engineering & Mining Journal, June 1991 and Mar. 1992).

Freeport currently employs 1589 Irianese out of its workforce of around 10,000 employees in the province (gn:minewatch in Econet igc:reg.newguinea, July 22, 1993).

Freeport is considering doubling its Grasberg production by 1996, at a cost of some $800 million (Business Week, April 27, 1992, p. 91).

In 1990, Indonesia granted Freeport permission to explore an additional 6.1 million acres adjacent to the existing contract area. Freeport has budgeted $22 million for three years' work. In 1991, Freeport was awarded a thirty-year contract. Indonesia has also indicated interest in building its first copper smelter at Gresik, Java; Mitsui and Metallgesellschaft are contenders for a joint venture (Engineering & Mining Journal, June 1991 and Mar. 1992). The copper concentrates collected are exported without being further processed. Freeport estimates there is 800 million tons of copper ore in its concession area which it will exploit in 25 to 30 years. To gain added value, the government has asked Freeport to build a smelting plant, which it will do in co-operation with Metal Gesselschaft of Germany and a Japanese company, in Gresik, East Java. There the concentrates will be processed to produce copper, gold, silver and sulphuric acid. Operations are projected to begin three years hence (gn:minewatch in Econet igc:reg.newguinea, July 22, 1993).

The University of Texas at Austin is also involved in mineral exploration with Freeport; its president, William Cunningham, is on Freeport's board of directors (Rainforest Action Network Action Alert, No. 54, Nov. 1990 and No. 57, Feb. 1991).

Freeport's Grasberg mining, and its 20-year operation of the Mount Ertsberg gold, silver, and copper mines, was again criticized in Rainforest Action Network's Action Alert No. 72, May 1992. Freeport's "public relations campaign to bolster their international image" was contrasted with the company's environmental record, its treatment of Amungme and other indigenous people, some of whom have died of malaria after being relocated, and its lack of openness with environmental activists.

In June 1993, a group called the Sympathisers for the Mimika-Amungme Community accused Freeport Indonesia of being responsible for outbreaks of diarrhoea, skin disease, and miscarraiges. A Freeport spokesman and a government report said the outbreaks were due not to the mine, but to poor hygiene, sanitation, and nutrition, and to venereal diseases. Freeport processes 60,000 tons of ore each day. After going through the separating process, more than 95 per cent of the material is dumped into the rivers in the form of tailings. Freeport claimed the mine tailings were indistinguishable from natural sediments (gn:minewatch in Econet igc:reg.newguinea, July 22, 1993).

Freeport announced the expansion of its Irian Jaya mining from 66,000 metric tons of ore per day to 115,000 tons per day by investing another $140 million; annual production by 1996 is hoped to be 1.1 billion pounds of copper and 1.5 million ounces of gold (Freeport McMoRan news release, Dec. 8, 1993).

Freeport McMoRan Copper & Gold's P.T. Freeport Indonesia Company, Duke Energy (a subsidiary of Duke Power, PowerLink (a subsidiary of Northstar Energy), and an Indonesian investor have announced a plan for the creation of a $200 million joint electricity venture for the Irian Jaya mine (Freeport-McMoRan news release, Dec. 7, 1993).

Freeport McMoRan (West Papua (Irian Jaya), copper and gold mine is insured by the World Bank affiliate Multilateral Investment Guarantee Agency (MIGA); it was MIGA's first insurance policy, in 1990) (Chatterjee, Pratap. Digging Everyone's Grave: World Bank's Mining Mayhem. Earth First! 16(1): 17, Nov. 1, 1995). In November 1995, OPIC cancelled Freeport's $100 million political risk insurance policy, citing impacts to local rivers; Freeport's had increased ore production to nearly double that stated on its insurance policy, increasing mine wastes and degrading large areas of rainforest; Freeport has been under ncreased criticism for its environmental record and its close relationship to the Indonesian military; the Jakarta NGO WALHI recemtly sued the Indonesian Dept. of Mines and Energy over its approval of Freeport's operations (World Rivers Review, Nov. 1995, p. 11).

From the time of an uprising in Tsinga (june to December 1994) and a December 25 demonstration in Tembagapura, Freeport security officials and the Indonesian military have been accused of killing or disappearing at least 22 civilians and 15 rebels, according to a report by the Australian Council for Overseas Aid; (Chatterjee, Pratap. Digging Everyone's Grave: World Bank's Mining Mayhem. Earth First! 16(1): 17, Nov. 1, 1995; and Killings at Freeport Mine, World Rainforest Report, No. 31, June 1995, p. 9-10, citing the email conference reg.newguinea and BBC reports).

In December 1995 FM anounced that its estimate of Grasberg mineral reserves had increased by 13 billion pounds of copper (a 57 percent increase), 14 million ounces of gold (a 43 percent increase), and 41 million ounces of silver (83 percent). FM said the increases would mean an increase in the life of the Grasberg mine from 26 to 45 years. RTZ Corporation is extending up to $750 million for expansion of the Grasberg mine, and has a 40 percent interest in the new-discovered reserves (FM Copper & Gold news release, Dec. 5, 1995).

The Grasberg mine produces 120,000 tons of mine tailings per day; since 1972 the tailings have been dumped into the Aghawagon River; a 1996 environmental audit by Dames & Moore reported the tailings to be primarily non-toxic, but that the tailings have clogged rivers and flooded rainforest; 420 millionn tons of acidic waste rock has been dumped in a nearby valley, with another 2.8 billion tons projected to be dumped in the future. In April 1996, Amungme tribal leader Tom Beanal filed a $6 billion class action lawsuit against Freeport, claiming that the Amungme were forcibly removed from their land without compensation. Freeport's response was that the corporation spends $14 million per year on education, medical treatment, job development, and economic initiatives for local people. The October 1995 cancellation of Freeport's political risk insurance policy bu the U.S. Overseas Private Investment Corporation was based on OPIC's conclusion that "the project has created and continues to pose unreasonable or major environmental, health, or safety hazards with respect to the rivers that are being impacted by the tailings, the surrounding terrestrial ecosystem and the local inhabitants." Freeport hired former U.S. CIA director James Woolsey as its legal representative, in December 1995 Freeport spent $200,000 on three advertisements in the New York Times, blamed foreign interests spreading false or misleading information, and threatened to lobby against Congressional funding of OPIC. OPIC, which was spending $100,000 to $200,000 per month on attorney's fees, reinstated Freeport's insurance in April 1996, days before Freeport's annual meeting. Freeport agreed to create a $100 million trust fund to clean up the site after the mine closes. A March 1996 riot by several thousand villagers closed the mine for two days and destroyed $15 millio worth of Freeport's equipment. More than 1,000 Indonesian soldiers were flown into the area in response (Bryce, Robert and Susan A. Brackett. Culture Clash: Controversy at the Grasberg Mine I Indomesia. Clementine: The Journal of Responsible Mineral Development (Mineral Policy Center, Washington), Spring/Summer 1996, p. 10-13).

January 2000: Indonesian troops shoot protesters in Irian Jaya
"Indonesian troops shot at protesters in Irian Jaya early last month injuring 28 people who were trying to stop the separatist flag from being lowered, a local human rights group said. The shooting took place in front of a church in Timika, a district town near the giant gold and copper mine operated by Freeport McMoRan, said John Rumbiak, the head of the local chapter of the Institute for Human Rights Studies and Advocacy. The troops fired on a group of activists who had gathered to stop the separatists' Morning Star flag from being taken down. The flag had been raised in front of the church on November 10. There were some 2,000 people at the church compound when the shooting took place, Mr Rumbiak said. Reports from human rights activists said four of the wounded were being treated at the Freeport hospital while 24 others were at the Caritas hospital in Timika, he said. At least 10 people were arrested, among them were Yosepha Alomang, an Amungme tribeswoman who has sued Freeport McMoRan, Isak Onawame, chairman of the Christian Missionary Alliance of Mimika district and Hiskia Merarabuyam, who organised the West Papua flag raising." (World Wildlife Fund, South Pacific Currents, Jan 7, 2000).

March 2000: Freeport Indonesia Urged to Share Wealth
"Hugely profitable PT Freeport Indonesia is under pressure to share more of the wealth generated by its massive copper and gold mine in the eastern province of Irian Jaya, as Jakarta struggles to stem separatism there. The highly sensitive issue has split Indonesia's young government. Rear Admiral Freddy Numberi, governor of Irian Jaya province on the western half of New Guinea island, has called for Freeport's contract to be reviewed. But Foreign Minister Alwi Shihab has ruled that out. Freeport, a subsidiary of New Orleans-based Freeport McMoRan Copper & Gold Inc, made an average profit of just under $2 million a week in 1999 from the vast mine it operates in mountains near Timika, 3,375 km (2,100 miles) east of Jakarta. But although Indonesia's central government has a small stake in the project, the provincial government has none. Nor do any other Irian Jaya interests. Historically, decisions relating to the controversial mine by-passed the provincial authorities, like those relating to other multinational mining firms in Indonesia. Now governor Numberi, an indigenous Irianese, says that must change. "The local government was never involved in the contract. All we knew was that the contract had been agreed and we all had to comply to it," Numberi, who is also minister for administrative reform in the cabinet, told Reuters. AUDIT LOOMS Freeport will soon face a new audit to verify its statements that its environmental record is fine. The result is expected around June. An earlier report by a consultant appointed by Freeport said its environmental record was good. However, its operations have inflicted massive damage on forests to the south of the mine, with some literally buried under 'tailings', or crushed waste ore. Former U.S. Secretary of State Henry Kissinger, recently named as an adviser to President Abdurrahman Wahid, has pressed Jakarta to honour its contract with Freeport. Kissinger is on the board of Freeport's U.S. parent. Freeport is mining one of the world's largest deposits of copper and gold. It began operations in Irian Jaya in 1968 and in recent years has become a constant target of public criticism, particularly since former President Suharto was forced out of office two years ago. Freeport is also one of Indonesia's largest corporate income tax payers. It argues that it makes significant economic contributions to the country through taxes and a scheme to donate a small proportion of its revenues to ethnic groups in the area of its mine. One major project was to build a hospital for the local people. Freeport is, directly or indirectly, the main employer in and around Timika and Tembagapura. Neither town existed before the mine opened. The company employs a number of Irianese, but their jobs tend to be lower-paid because they generally lack the right skills for the better paid ones. Freeport says it is trying to promote employment at the higher levels in the long run through a scholarship scheme, but it is years away. The company says it has complied fully with Indonesian environmental regulations and says any move to amend or review its contract will impede the flow of foreign investment to Indonesia, which is still on the recovery track after its worst economic crisis in decades. "It will have a negative impact. Foreign investors would question the legal certainty in Indonesia," Freeport spokesman Mindo Pangaribuan told Reuters. But allegations of corruption, something much of Indonesia's mining industry is tainted with, as well as environmental damage and ignoring local needs have blighted its image. DEAL LEAVES OUT LOCAL GOVT Freeport's first contract was signed in 1967 and extended in 1991 following the discovery of the world-class copper deposit in the Grasberg mine site. The mine sits at an elevation of just over 4,000 metres (13,120 feet) above sea level. Soon after Suharto resigned in May 1998, several members of parliament alleged that corrupt practices took place when the contract was awarded. Freeport has denied any wrongdoing. But its massive profits are in stark contrast to the poverty of most Irianese, many of whom cannot read and write. They are, however, aware of Freeport. They know it makes a huge amount of money and bitterly resent it. Governor Numberi says the company should "donate" some of its equity to the local government. "Ideally, the local government should have a 20 percent stake in the company," said Numberi, adding that this would help defuse calls for independence. Irian Jaya is one of the most strongly pro-independence provinces in Indonesia and the armed Free Papua Movement has waged a low-level guerrilla campaign for decades. Environmentalists also want the contract reviewed and say the river near Timika has silted up with tailings. Environment Minister Soni Keraf told Reuters that he had received many complaints about environmental damage caused by Freeport. Freeport's operations, currently an average of 200,000 tonnes of ore daily, have to be reduced, he said. The government's own environmental audit will follow up a report by independent consultant Montgomery-Watson -- appointed by Freeport -- which applauded its environmental management. "The team consists of officials from several key departments which are involved in this mining project," said Keraf. The report would serve as a basis on which a decision on reviewing the contract would be taken, he added. "From the complaints and reports which I have received from various groups, I can say that the level of destruction which Freeport caused to the local environment is pretty bad." (Reuters, March 16, 2000).

May 2000: Mishap Increases Controversy Over Freeport Mine
"A fatal accident at Freeport-McMoRan Copper & Gold Inc.'s large Indonesian mine on May 4 escalated a controversy between environmentalists and the mining company. Indonesian environmental groups were quick to attack Freeport for the accident, in which a water basin containing potentially hazardous materials overflowed and swept away four workers. The groups accuse the company of failing to improve the safety of its waste-handling procedures after similar accidents in the past, and they blame Freeport's operations for causing irreparable damage to the ecosystems of Papua. Indonesian Minister of Environmental Affairs Sonny Keraf said the company never responded to long-standing warnings about the dangers of its waste-handling facility (). Keraf: "We have a strong suspicion that the accident happened due to procedural neglect." But Freeport says international environmental audits have been favorable. The company and the government will report on the cause of the accident and the effect it will have on a river that flows past a village of 150 families." (Greenwire, May 8, 2000, citing Jay Solomon, Wall Street Journal, May 8 and Tom McCawley, Financial Times, May 6).

July 2005: Indonesia Court Ruling on Mining Decree Upsets Greens. By Dan Eaton and Tomi Soetjipto, Reuters, July 7, 2005.
Indonesia's constitutional court on Thursday upheld a presidential decree allowing 12 mining firms to continue operating in protected forests, removing a hurdle to much needed foreign investment but angering environmentalists.
Green groups lodged an appeal last year against the presidential edict, which revised a 1999 forestry law that banned open-pit mining in protected forests.
"For me it is an education that for our leaders in Indonesia, sustainable development is not yet on the radar screen," Emil Salim, a former environment minister called as an expert witness in the case, told Reuters on hearing the verdict.
"Of course it is an age of trade-off between mining and forests...but protected forest is vital for water, the prevention of flood, prevention of erosion and so on," he said.
The court's decision cleared one of the main hurdles to fresh foreign investment in the mining sector, but a host of legal and security concerns remain, analysts said.
"The constitutional court ruling I think finally puts to bed years of uncertainty over the legality of mining in certain areas in Indonesia," said Stephen Wilford, an Indonesia business risk analyst with Control Risks Group in Singapore.
"But the mining sector in Indonesia is beset by all kinds of unique problems, such as having to deal with ad hoc taxation and legislation."
Mining investment in Indonesia, home to some of the world's largest deposits of copper, tin, nickel and gold, has declined since the 1990s due to uncertainty. But President Susilo Bambang Yudhoyono, who took office last year, has made it a priority to wipe out corruption and create a better investment climate.
The ruling on Thursday follows a decision by the environment ministry last month to seek an out-of-court settlement with US-based Newmont Mining Corp in a $133 million civil suit over pollution allegations.
However, prosecutors on Tuesday said they still planned to press criminal charges against a local unit of Newmont and its American chief executive.
"What we are seeing there is Indonesia very much committed to prosecuting individuals as well as the company itself, which obviously represents quite a high degree of risk," said Wilford.
Constitutional court chief Jimly Asshiddiqie said in his ruling the presidential decree was needed to honour contracts with mining companies made before the forestry law.
But he told companies they were being watched. "If there is a violation on the licencing agreements, then the government has the right to annul the operational licence," he said.
Firms among the 12 include US-based Freeport McMoRan Copper & Gold Inc, which owns the world's third-largest copper mine, Grasberg, in the rugged eastern province of Papua.
The 12 companies operate 13 individual concessions.
Other firms include the Soroako nickel mine on Sulawesi island run by PT International Nickel Indonesia (Inco), majority owned by Canada's Inco Ltd.
These mines and others continued operating throughout the period when the previous forestry law was in place. But company officials said the revised legislation provided greater certainty and would allow them to push forward with expansion projects.

The Cost of Gold - The Hidden Payroll: Below a Mountain of Wealth, a River of Waste. By Jane Perlez and Raymond Bonner. New York Times, Dec 27, 2005.

The closest most people will ever get to remote Papua, or the operations of Freeport-McMoRan, is a computer tour using Google Earth to swoop down over the rain forests and glacier-capped mountains where the American company mines the world's largest gold reserve.

With a few taps on a keyboard, satellite images quickly reveal the deepening spiral that Freeport has bored out of its Grasberg mine as it pursues a virtually bottomless store of gold hidden inside. They also show a spreading soot-colored bruise of almost a billion tons of mine waste that the New Orleans-based company has dumped directly into a jungle river of what had been one of the world's last untouched landscapes.

What is far harder to discern is the intricate web of political and military ties that have helped shield Freeport from the rising pressures that other gold miners have faced to clean up their practices. Only lightly touched by a scant regulatory regime, and cloaked in the protection of the military, Freeport has managed to maintain a nearly impenetrable redoubt on the easternmost Indonesian province as it taps one of the country's richest assets.

Months of investigation by The New York Times revealed a level of contacts and financial support to the military not fully disclosed by Freeport, despite years of requests by shareholders concerned about potential violations of American laws and the company's relations with a military whose human rights record is so blighted that the United States severed ties for a dozen years until November.

Company records obtained by The Times show that from 1998 through 2004, Freeport gave military and police generals, colonels, majors and captains, and military units, nearly $20 million. Individual commanders received tens of thousands of dollars, in one case up to $150,000, according to the documents. They were provided by an individual close to Freeport and confirmed as authentic by current and former employees.

Freeport said in a written response to The Times that it had "taken appropriate steps" in accordance with American and Indonesian laws to provide a secure working environment for its more than 18,000 employees and contract workers.

"There is no alternative to our reliance on the Indonesian military and police in this regard," the company said. "The need for this security, the support provided for such security, and the procedures governing such support, as well as decisions regarding our relationships with the Indonesian government and its security institutions, are ordinary business activities."

While mining and natural resource companies sometimes contribute to the costs to foreign governments in securing their operations, payments to individual officers raise questions of bribes, said several people interviewed by The Times, including a former Indonesian attorney general, who said it was illegal under Indonesian law for officers to accept direct payments.

The Times's investigation also found that, according to one current and two former company officials who helped set up a covert program, Freeport intercepted e-mail messages to spy on its environmental opponents. Freeport declined to comment.

More than 30 current and former Freeport employees and consultants were interviewed over the past several months for this article. Very few would speak for attribution, saying they feared the company's retribution.

Freeport's support of the military is one measure of its extraordinary working environment. In the 1960's, when Freeport entered Papua, its explorers were among the very first outsiders ever encountered by local tribesmen swathed only in penis gourds and armed with bows and arrows.

Since then, Freeport has built what amounts to an entirely new society and economy, all of its own making. Where nary a road existed, Freeport, with the help of the San Francisco-based construction company Bechtel, built virtually every stitch of infrastructure over impossible terrain in engineering feats that it boasts are unparalleled on the planet.

That history, Papua's extreme remoteness and the company's long ties to the Indonesian government have given Freeport exceptional sway over a 21st-century version of the old company town, built on a scale unique even by the standards of modern mega-mining.

"If any operation like this was put forward now, it wouldn't be allowed," said Witoro Soelarno, a senior investigator at the Department of Energy and Mineral Resources, who has visited the mine many times. "But now the operation exists, and many people depend on it."

For years, to secure Freeport's domain, James R. Moffett, a Louisiana-born geologist who is the company chairman, assiduously courted Indonesia's longtime dictator, President Suharto, and his cronies, having Freeport pay for their vacations and some of their children's college education, and cutting them in on deals that made them rich, current and former employees said.

It was a marriage of mutual convenience. As Freeport prospered into a company with $2.3 billion in revenues, it also became among the biggest - in some years the biggest - source of revenue for the government. It remains so.

Freeport says that it provided Indonesia with $33 billion in direct and indirect benefits from 1992 to 2004, almost 2 percent of the country's gross domestic product. With gold prices hitting a 25-year high of $540 an ounce this month, the company estimates it will pay the government $1 billion this year.

With Suharto's ouster in 1998, after 30 years of unchallenged power, Freeport's special place was left vulnerable. But its importance to Indonesia's treasury and its carefully cultivated cocoon of support have helped secure it against challenges from local people, environmental groups, and even the country's own Environment Ministry.

Letters and other documents provided to The Times by government officials showed that the Environment Ministry repeatedly warned the company since 1997 that Freeport was breaching environmental laws. They also reveal the ministry's deep frustration.

At one point last year, a ministry scientist wrote that the mine's production was so huge, and regulatory tools so weak, that it was like "painting on clouds" to persuade Freeport to comply with the ministry's requests to reduce environmental damage.

That frustration stems from an operation that, by Freeport's own estimates, will generate an estimated six billion tons of waste before it is through - more than twice as much earth as was excavated for the Panama Canal.

Much of that waste has already been dumped in the mountains surrounding the mine or down a system of rivers that descends steeply onto the island's low-lying wetlands, close to Lorentz National Park, a pristine rain forest that has been granted special status by the United Nations.

A multimillion-dollar 2002 study by an American consulting company, Parametrix, paid for by Freeport and its joint venture partner, Rio Tinto, and not previously made public, noted that the rivers upstream and the wetlands inundated with waste were now "unsuitable for aquatic life." The report was made available to The Times by the Environment Ministry.

Freeport says it strives to mitigate the environmental effect of its mine, while also maximizing the benefits to its shareholders. The Times made repeated requests to Freeport and to the Indonesian government to visit the mine and its surrounding area, which requires special permission for journalists. All were turned down.

Freeport refused to make any official available for an interview and would respond to questions only in writing. A cover letter signed by its legal counsel, Stanley S. Arkin, said that Grasberg is a copper mine, with the gold retrieved as a byproduct, and that many journalists had visited the mine before the government tightened its rules in the 1990's. "Freeport has nothing to hide," Mr. Arkin wrote.

Indeed, at Grasberg, Freeport-McMoRan Copper & Gold mines the world's third-largest copper deposit. The mine also has proven reserves of 46 million ounces of gold, according to the company's 2004 annual report. This year, Mining International, a trade journal, called Freeport's gold mine the biggest in the world.

Social Tensions Erupt

Since Suharto's ouster, Freeport employees say, Mr. Moffett's motto has been "no tall trees," a call to keep as low a profile as possible, for a company that operates on an almost unimaginable scale.

But even before then, the new world that Freeport created was growing smaller. By the mid-1990's, with production in full swing, and the expanding impact of Grasberg's operations ever more apparent, Freeport was beset on all sides.

Environmental groups, able to coordinate more effectively with the Internet, made Freeport a target. Local tribes were more and more restless at seeing little benefit for themselves as vast riches were extracted from their lands. And some military commanders in Papua saw Grasberg's increasing value as ripe for the plucking.

To fortify itself, Freeport, working hand in hand with Indonesian military intelligence officers, began monitoring the e-mail messages and telephone conversations of its environmental opponents, said an employee who worked on the program and read the e-mail messages.

The company also set up its own system to intercept e-mail messages, according to former and current employees, by establishing a bogus environmental group of its own, which asked people to register online with a password. As is often the case, many who registered used the same password for their own messages, which then allowed the company to tap in.

Freeport's lawyers were nervous, a person who was at the company at the time said, but decided that nothing prohibited the company legally from reading e-mail messages abroad.

Social tensions around the mine, meanwhile, were fast growing, as was Papua's population. Papua, mostly animist and Christian after long years of missionary work, is distinct in many ways from the rest of Indonesia, the world's largest Muslim country.

Almost from Indonesia's independence, the province had rumblings of a separatist movement. Throughout Indonesia the military, a deeply nationalist institution, finances itself by setting up legal enterprises like shopping centers and hotels, or illicit ones, like logging. In Papua, the Grasberg mine became a chance for the military not only to profit but also to deepen its presence in a province where it had barely a toehold before Freeport arrived.

For many years Freeport maintained its own security force, while the Indonesian military battled a weak, low-level insurgency. But slowly their security needs became entwined.

"Where Freeport really took it on the chin is the military who came in had no vehicles, and they would commandeer a Freeport bus or a Freeport driver," said the Rev. David B. Lowry, an Episcopalminister hired by Mr. Moffett to oversee social programs. "We had no policies at that time."

No investigation directly linked Freeport to human rights violations, but increasingly Papuans associated it with the abuses of Indonesian military units, in some cases using company facilities.

An Australian anthropologist, Chris Ballard, who worked for Freeport, and Abigail Abrash, an American human rights campaigner, estimated that 160 people had been killed by the military between 1975 and 1997 in the mine area and its surroundings.

Finally, in March 1996, long-simmering anger at the company erupted in rioting when anti-mine sentiment among different groups coalesced into what was perhaps the biggest threat to the company to this day.

The mine and its mill were shut down for three days. Rioters destroyed $3 million of equipment and ransacked offices.

The company intercepted e-mail messages that, according to two persons who read them at the time, suggested that certain military units, the community and environmental groups were working together.

One e-mail exchange, between a community leader and the head of an environmental group, was filled with tactical military intelligence, according to a person who read the messages. In another exchange, an environmental leader urged the group's members to pull out because the demonstrations had turned violent.

Freeport told The Times that local leaders later met with company officials and said "they had provoked the disturbances as a means of expressing their aspiration to receive greater benefits from our operations."

In recent interviews, current and former Freeport officials recalled how they were stunned when, among those rioting, they saw men with military haircuts, combat boots and walkie-talkies. They seemed to be directing the rioters, at one point, to a Freeport laboratory, which they ransacked.

It was not long before a worried Mr. Moffett flew out to Indonesia in the company jet.

Freeport refused to comment on the meeting that followed. But a company official who was there recounted that Mr. Moffett met with a group of senior Indonesian military officers at the Sheraton Hotel in the lowland town of Timika, near the mine. The all-powerful Gen. Prabowo Subianto, son-in-law of President Suharto and commander of the Indonesian Special Forces, presided.

"Mr. Moffett, to protect you, to protect your company, you have to help the military here," General Prabowo began, according to the company employee who was present.

Mr. Moffett is said to have replied: "Just tell me what I need to do."

The Cost of Security

Each military service drew up its wish list, current and former company employees said.

In short order, Freeport spent $35 million on military infrastructure - barracks, headquarters, mess halls, roads - and it also gave the commanders 70 Land Rovers and Land Cruisers, which were replaced every few years. Everybody got something, even the Navy and Air Force.

The company had already hired a former C.I.A. operative, and on his recommendation, it now approached a military attaché at the American Embassy in Jakarta, and persuaded him to join the company, according to former and current employees. Two more former American military officers were hired, and a special department, called the Emergency Planning Operation, was set up to handle the company's new relationship with the Indonesian military.

The new department began making direct monthly payments to Indonesian military commanders, while the Security Risk Management office handled the payments to the police, according to company documents and current and former employees.

"They signed a pact with the devil," said an American who was part of Freeport's security operations at the time, and who agreed with the company's decision.

Freeport gave the military and the police in Papua at least $20 million from 1998 to May 2004, according to company documents. In interviews, current and former employees said that at least an additional $10 million was also paid during those years.

Seven years of accounting records were provided to The Times by an individual close to the company. Additional records for three years were provided by Global Witness, a nongovernment organization, which released a report last July, "Paying for Protection," about Freeport's relations with the Indonesian military.

Diarmid O'Sullivan, who works for Global Witness in London, criticized the payments. It may be necessary for a company to help governments with security, he said, but "they should give the money through the proper channels, in a transparent way."

Freeport told The Times, "Our books and records are transparent and accurately reflect the support that we provide."

That support, the company said in its responses, included "mitigating living costs," as well as "infrastructure, catered food and dining hall costs, housing, fuel, travel, vehicle repairs, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military and police."

The company said all of its expenditures were subject to a budget review process.

The records received by The Times showed payments to individual military officers listed under things like "food cost," "administrative services" and "monthly supplement."

Current and former employees said the accounting categories did not reflect what the money was actually used for, and that it was likely that much of the money went into the officers' pockets. The commanders who received the money did not have to sign receipts, current and former employees said.

Asked if there was a reason Freeport would give money directly to military officers, Father Lowry, who retired in March 2004, but remained a consultant to Freeport until June, said, "I can't think of a good one."

The records show that the largest recipient was the commander of the troops in the Freeport area, Lt. Col. Togap F. Gultom.

During six months in 2001, he was given just under $100,000 for "food costs," according to the company records, and more than $150,000 the following year. Freeport gave at least 10 other commanders a total of more than $350,000 for "food costs" in 2002, according to the records.

Colonel Gultom declined to be interviewed.

Those payments were made to individual officers, current and former employees said, even though since the riots Freeport had allowed soldiers to eat in the company's mess and had trucked food to more distant military kitchens. "Three meals a day, seven days a week," a former official said.

Freeport also gave commanders commercial airplane tickets for themselves and their wives and children. Generals flew first or business class and lower ranking officers flew economy, said Brig. Gen. Ramizan Tarigan, who received $14,000 worth of tickets in 2002 for himself and his family.

General Tarigan, who held a senior police post, said that police officers were allowed to accept airplane tickets because their pay was so low - as a general, his base salary was roughly $400 a month - but that it was in violation of police regulations to receive cash payments.

In April 2002, the company gave the senior commander of forces in Papua, Maj. Gen. Mahidin Simbolon, more than $64,000, for what was described in Freeport's books as "fund for military project plan 2002." Eight months later, in December, he was given more than $67,000 for a "humanitarian civic action project." The payments were first reported by Global Witness.

General Simbolon, who is now inspector general of the Indonesian Army, declined requests to be interviewed.

A former Freeport employee who was involved in making those payments said the company could not be certain how much of the money General Simbolon actually spent on those projects.

Unsolved Killings

By 2003, following the Enron scandal and passage of the Sarbanes-Oxley Act, which imposed more rigid accounting practices on companies, Freeport began making payments to military and police units instead of individual officers, according to records and current and former employees.

The company paid police units in Papua slightly under $1 million in 2003, according to the records, listed under items like "monthly supplement payment," "administrative costs" and "administrative support."

Freeport told The Times that "company policies take into account the potential for human rights abuses in determining what types of assistance to provide."

According to the records received by The Times, the police Mobile Brigade, a paramilitary force often cited by the State Department for its brutality, received more than $200,000 in 2003.

In its 2003 annual human rights report, the State Department said soldiers from the Mobile Brigade "continued to commit numerous serious human rights violations, including extrajudicial killings, torture, rape, and arbitrary detention." It cited no specific incidents from Papua.

There was another reason for extra care by the company.

In August 2002, three teachers employed by Freeport, including two Americans, were killed in an ambush on a company road patrolled by the military that Freeport had paid to protect its employees. Three years later, the F.B.I. is still investigating and the reasons for the killings have not been determined. Freeport said that it could not comment on the investigation.

The United States indicted a Papuan, Anthonius Wamang, in 2004. But it has yet to receive the full cooperation of the military, several American officials said.

Freeport employees and American officials said the killings could have been part of a turf war between the military and the police, each of which wanted access to Freeport payments.

An initial report by the Indonesian police pointed to the Indonesia military, and some Freeport and Bush administration officials have said they suspect some level of military involvement.

The police report suggested that the motivation was that Freeport was threatening to cut its support to soldiers. Soldiers assigned to Papua have "high expectations," the report said, but recently, "their perks, such as vehicles, telephones, etc., were reduced."

Questions of Accountability

Freeport has resisted nearly any detailed disclosure of its payments to the military, saying they are legal and even required under Indonesian law.

Marsillam Simanjuntak, who was minister of justice and later attorney general in one of the first governments after the fall of President Suharto, said it was a violation of Indonesian law for soldiers or police officers to accept payments from a company. "Of course, it's illegal," he said.

But many companies do it, he said. The better question to ask, he said, was, "Is it allowed by the laws of the United States?"

This year, the New York City pension funds submitted a shareholder resolution asking Freeport to review its policy on paying the police and military. They argued that it could violate the Foreign Corrupt Practices Act, which forbids American companies from paying bribes to foreign officials. Freeport opposed the resolution.

In 2002, the funds submitted a similar resolution demanding that Freeport disclose how much it was paying to the military. Freeport kept it off the ballot.

In later filings with the Securities and Exchange Commission, Freeport reported that it had paid the military a total of $4.7 million in 2001, and $5.6 million in 2002. The company did not indicate whether the money was paid into commanders' personal accounts, or what the money was used for.

Freeport, in its responses, said it was complying with the Voluntary Principles on Security and Human Rights, a set of guidelines drawn up by the State Department. They recognize that natural resource companies "may be required or expected to contribute to, or otherwise reimburse, the costs of protecting company facilities."

The principles do not address the question of direct payments to individual officers. Nor do they require companies to account for the payments.

Freeport has also said that the payments were required under its Contract of Work, its basic agreement with the government of Indonesia, first signed in 1967 and updated in 1991.

The company declined to provide a copy of the contracts to The Times. A copy of each was provided by Denise Leith, author of "The Politics of Power: Freeport in Suharto's Indonesia." They contained no language requiring payments to the military.

S. Prakash Sethi, head of the International Center for Corporate Accountability, which recently concluded a report on Freeport's development policies in Papua, said that the company had told him that it made "in-kind" contributions to the military, for housing and food, but that he had not been given access to accounting records.

Any direct payments to military officers would be illegal, said Mr. Sethi, an expert on business ethics and corporate social responsibility and a professor at Baruch College. "It's corruption," he said. "It's bribery."

Mine Waste in the Rivers

All the while Freeport sealed its relations with the military, the country's fledgling environment ministry could do little but watch as waste from the mine piled up.

This year Freeport told the Indonesian government that the waste rock in the highlands, 900 feet deep in places, now covers about three square miles.

Down below, nearly 90 square miles of wetlands, once one of the richest freshwater habitats in the world, are virtually buried in mine waste, called tailings, with levels of copper and sediment so high that almost all fish have disappeared, according to environment ministry documents.

The waste, the consistency and color of wet cement, belts down the rivers, and inundates and smothers all in its path, said Russell Dodt, an Australian civil engineer who managed the waste on the wetlands for 10 years until 2004 for Freeport.

About a third of the waste has moved into the coastal estuary, an essential breeding ground for fish, and much of that "was ripped out to sea by the falling tide that acted like a big vacuum cleaner," he said.

But no government, even in Indonesia's new democratic era, has dared encroach on Freeport's prerogatives. The strongest challenge came in 2000, when a feisty politician, Sonny Keraf, who was sympathetic to the Papuans, was appointed environment minister.

Again, Mr. Moffett flew out to Jakarta.

Mr. Keraf initially refused to see the Freeport boss, but eventually agreed, and on the day kept him waiting for an hour and a half. "He came in so arrogant," Mr. Keraf recalled of the meeting in a recent interview, "sitting with his legs crossed."

Freeport refused to comment on the meeting. The American ambassador to Indonesia at the time, Robert Gelbard, said in an interview: "It was a terrible meeting."

Mr. Keraf said that Mr. Moffett had said that his company had never polluted. "I told him that he should spend the money he spent on paying off people not to talk about the mine to properly dispose of the waste," Mr. Keraf said.

Behind the scenes, Mr. Keraf kept up the pressure, angered that the company was using the rivers, forest and wetlands for its mine waste, a process allowed during the Suharto years.

An internal ministry memorandum from 2000 said the mine waste had killed all life in the rivers, and said that this violated the criminal section of the 1997 environmental law.

In January 2001, Mr. Keraf wrote to the coordinating minister for economic affairs, arguing that Freeport should be forced to pay compensation for the rivers, forests and fish that its operations had destroyed.

Six months later, one of his deputies, Masnellyarti Hilman, wrote to Freeport, saying a special environmental commission had recommended that the company stop using the river as a waste chute, and instead build a system of pipes.

She also told Freeport to build sturdier dam-like walls to replace the less solid levees that it used to contain the waste on the wetlands. That practice has continued.

Freeport says that local and regional governments have approved its waste management plans, and that the central government has approved its environmental impact statement and other monitoring plans.

But in a blistering July 2001 letter, Mr. Keraf took the governor of Papua to task for granting Freeport a permit in 1996 to use the rivers for its waste. The governor, Mr. Keraf said, had no authority to grant permits more lenient than the provisions of national laws.

Despite all these efforts, nothing happened. Mr. Keraf was unable to secure the support of other government agencies or his superiors in the cabinet.
In August 2001, a new government came to power, and a less aggressive minister, Nabiel Makarim, replaced Mr. Keraf. At first, he, too, talked publicly of setting stricter limits on Freeport. Soon his efforts petered out.

The Environment Ministry has begun trying to put teeth into its rules where it can. It brought a criminal suit against the world's largest gold company, Newmont Mining Corporation, for alleged pollution, including a charge of not having a permit for disposing of mine waste into the sea. Newmont has fought the charges vigorously.

But in the case of Freeport, the ministry has had no traction. Freeport still does not hold a permit from the national government to dispose of mine waste, as required by the 1999 hazardous waste regulations, according to Rasio Ridho Sani, assistant deputy for toxic waste management at the ministry. Mr. Arkin, Freeport's counsel, said that the company cooperated well with the environment ministry and that Freeport would not otherwise comment.

"Freeport says their waste is not hazardous waste," Mr. Rasio said. "We cannot say it is not hazardous waste." He said his division and Freeport were now in negotiations on how to resolve the permit question.

'A Massive Die-Off'

The environment ministry was not the first to challenge Freeport over how it has disposed of its waste in Papua.

The Overseas Private Investment Corporation, a United States government agency that insures American corporations for political risk in uncertain corners of the world, revoked Freeport's insurance policy in October 1995.

It was a landmark decision, the first time that the agency had cut off insurance to any American company for environmental or human rights concerns.

In doing so, two environmental experts, Harvey Himberg, an official at the agency, and David Nelson, a consultant, after visiting the mine for several days, issued a report critical of Freeport's operations, especially the huge amounts of waste it had sent into rivers, something that would not be allowed in the United States.

The company went to court to block the report from being made public, and only a redacted version was later released. A person who thought it should be made public provided an uncensored copy to The Times.

Freeport says the report reached "inaccurate conclusions." The company says it has considered a full range of alternatives for managing and disposing of its waste, instead of using the river, and settled on the best one.

A storage area would not be large enough and would require a tall dam in a region of heavy rainfalls and earthquakes, it said. A waste pipeline, rather than the river, would be too costly, prone to landslides and floods.

To the American auditors, such arguments were not convincing.

Freeport "characterizes engineered alternatives as having the highest potential for catastrophic failure when the project otherwise takes credit for legendary feats," the audit noted, like the pipelines more than 60 miles long down the mountains to carry fuel and copper and gold slurry.

At the time, the waste was jumping the riverbanks, "resulting in a massive die-off of vegetation," the report said.

The company threatened to take the agency to court over the cancellation of its insurance. After protracted negotiations, the policy was reinstated for a few months, as a face-saving gesture to Mr. Moffett, according to the head of the agency then, Ruth Harkin. It was not renewed.

Today, many of the same problems persist, but on a much larger scale. A perpetual worry is where to put all the mine's waste - accumulating at a rate of some 700,000 tons a day.

The danger is that the waste rock atop the mountain will trickle out acids into the honeycomb of caverns and caves beneath the mine in a wet climate that gets up to 12 feet of rain a year, say environmental experts who have worked at the mine.

Stuart Miller, an Australian geochemist who manages Freeport's waste rock, said at a mining conference in 2003 that the first acid runoffs began in 1993.

The company can curb much of it today, he said, by blending in the mountain's abundant limestone with the potentially acid producing rock, which is also plentiful. Freeport also says that the company collects the acid runoff and neutralizes it.

But before 2004, the report obtained by The Times by Parametrix, the consulting company who did the study for Freeport, said that the mine had "an excess of acid-generating material."

A geologist who worked at the mine, who declined to be identified because of fear of jeopardizing future employment, said acids were already flowing into the groundwater. Bright green-colored springs could be seen spouting several miles away, he said, a tell-tale sign that the acids had leached out copper. "That meant the acid water traveled a long way," he said.

Freeport says that the springs are "located several miles from our operations in the Lorentz World Heritage site and are not associated with our operations."
The geologist agreed that the springs probably were in the Lorentz park, and said this showed that acids and copper from the mine were affecting the park, considered a world treasure for its ecological diversity.

In the lowlands, the levees needed to contain the waste will eventually reach more than 70 feet high in some places, the company says.

Freeport says that the tailings are not toxic and that the river it uses for its waste meets Indonesian and American drinking water standards for dissolved metals. The coastal estuary, it says, is a "functioning ecosystem."

The Parametrix report shows copper levels in surface waters high enough to kill sensitive aquatic life in a short time, said Ann Maest, a geochemist who consults on mining issues. The report showed that nearly half of the sediment samples in parts of the coastal estuary were toxic to the sensitive aquatic organisms at the bottom of the food chain, she said.

The amount of sediment presents another problem. Too many suspended solids in water can smother aquatic life. Indonesian law says they should not exceed 400 milligrams per liter.

Freeport's waste contained 37,500 milligrams as the river entered the lowlands, according to an environment ministry's field report in 2004, and 7,500 milligrams as the river entered the Arafura Sea.

Freeport would not comment on the measurements. The company says it spent $30 million on environmental programs in 2004, and planted 50,000 mangrove seedlings last year as part of its reclamation efforts. It says cash crops can be grown on the waste with the addition of nutrients, and has begun demonstration projects.

An Uneasy Coexistence

If the accumulating waste is the despair of critics, for Freeport it signals expanding production. To keep its mine running, the company has increasingly had to play caretaker for the world that it has created.

After the 1996 riots, Freeport began dedicating 1 percent of revenues annually to a development fund for Papua to pay for schools, medical services, roads - whatever the people wanted.

The company built clinics and two hospitals. Other services include programs to control malaria and AIDS and a "recognition" fund for the Kamoro and Amungme tribes of several million dollars which, among other things, gives them shares in the company as part of a compensation package for the lands Freeport is using.

By the end of 2004, Freeport had spent $152 million on the community development fund, the company said.

Mr. Sethi, of the Center for Corporate Accountability, commended Freeport for commissioning the report on the company's development programs, saying that it was the first mining company to do so.

The report, which was released in October, concluded that the company had successfully introduced a human rights training program for its employees and had doubled the number of Papuan employees by 2001. The company was poised to double the number of Papuans in the work force again by 2006, the audit said.

Still, Thom Beanal, the Amungme tribal leader, says the combined weight of the Indonesian government and Freeport has left his people in bad shape. Yes, he said, the company had provided electricity, schools and hospitals, but the infrastructure was built mainly for the benefit of Freeport.

Mr. Beanal, 57, a vocal supporter of independence for Papua, has fought the company from outside and inside. In 2000, he decided that harmony was the better path, and joined the company's advisory board.

In November, he and other Amungme and Komoro tribesmen met with Mr. Moffett at the Sheraton Hotel in Timika. In an interview in Jakarta not long afterward, Mr. Beanal said he told Mr. Moffett that the flood of money from the community fund was ruining people's lives.

When the company arrived, he noted, there were several hundred people in the lowland village of Timika. Now it is home to more than 100,000 in a Wild West atmosphere of too much alcohol, shootouts between soldiers and the police, AIDS and prostitution, protected by the military.

Still more soldiers are on the way. Having negotiated an end to a separatist insurrection this year in another province, Aceh, the government is redeploying soldiers to Papua in a move to defeat the growing enthusiasm for independence, once and for all, and to watch over the province with the world's biggest gold mine. Freeport says its gold ore has 35 years to go.

Mr. Beanal said he was increasingly impatient with the presence of the soldiers and the mine. "We never feel secure there," he said. "What are they guarding? We don't know. Ask Moffett, it's his company."

Mining Company Notes U.S. Review of Payments to Indonesian Military. By Katharine Q. Seelye, New Yrok Times, January 19, 2006.

Executives of Freeport-McMoRan Copper and Gold have acknowledged that the mining company is under scrutiny by the federal government regarding payments it made to the Indonesian military.

The information was made public on Tuesday during a conference call with investors. In a subsequent filing with the Securities and Exchange Commission, the company said that it had "received informal inquiries from governmental agencies" in the United States related to its support of Indonesian security institutions. The company also said it was "fully cooperating" with those inquiries.

Freeport shares fell more than 2 percent, to $60.26, yesterday after news of the inquiry, despite an announcement by the company, which is based in New Orleans, that its fourth-quarter profits had more than doubled as gold prices surged to $540 an ounce.

The disclosure by Freeport followed a report by The New York Times last month that from 1998 through 2004, Freeport paid individual military and police officers and military units nearly $20 million to secure its operations in the Indonesian province of Papua, where it runs the world's largest gold mine.

In the past, Freeport has refused requests by the New York City Pension Fund, a shareholder, to review its policy on paying the police and military. The fund argues that the payments may violate the Foreign Corrupt Practices Act, which forbids American companies to bribe foreign officials. Freeport says its payments are within American and Indonesian laws.

In response to the article, Freeport posted on its Web site a letter sent to editors at The Times saying the Dec. 27 article and a subsequent editorial contained "disturbing and provocative misstatements" about its Papua operations and that the article had "ignored the practicalities of conducting business in a remote area."

Stanley S. Arkin, a lawyer for the company, declined to elaborate. In the Indonesian capital, Jakarta, the vice chairman of Indonesia's anticorruption commission said yesterday that if Freeport had made payments to individual officers, "that's corruption."

Company documents obtained by The Times show that Freeport made monthly payments to more than a score of individual officers from 1998 through 2004. The company publicly reported paying military units in 2001 and 2002, but has not acknowledged that the money went to individual officers over seven years.

The Indonesian anticorruption official, Erry Riyana Hardjapamekas, said that his agency would support any American agency that started an investigation into the payments.

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Indonesia: Protesters Vandalize Mining Co. Offices. By Zakki Hakim. Associated Press/CBSNews.com, Feb 22, 2006.

Students attacked the building housing offices of a U.S. gold mining giant in Indonesia's capital on Thursday, as the company's mine in western Papua province remained shut for a second day due to protests, police said.

Up to 20 Papuan students broke windows and damaged facilities in the lobby of the building in the pre-dawn attack, said police chief Gen. Sutanto. Thirteen people were arrested.

Freeport-McMoRan Copper & Gold Inc. was forced to shut its massive gold and copper mine in Papua on Wednesday after locals some of them carrying bow and arrows set up barricades and demanded permission to sift through waste ore pumped out by the mine.

The New Orleans-based company, already under fire over pollution allegations and its practice of paying security forces to guard its open pit mine, said it hoped to resume operations soon, but the mine remained close Thursday.

The blockades followed clashes Tuesday after police and company security guards tried to prevent locals from sifting through the waste rock. Six people were injured.

Freeport did not say Thursday how much the shutdown was costing the company.

"It's premature to try to quantify any effect on our production," said company spokesman Bill Collier. "Our priority is resolving this peacefully and quickly."

The mine, which has long had an uneasy relationship with local people, many of whom are desperately poor, last temporarily closed in 2003 after a landslide killed several workers. Although illegal, many people earn their living retrieving and selling tiny amounts of gold and copper from waste rock, or tailings, dumped by the mine.

Security practices at the site have came under renewed scrutiny since a 2002 attack on a convoy of teachers working at the mine killed two U.S. citizens. Local and foreign rights groups claim soldiers took part in the attack, allegedly to extort more security payments from Freeport.

Papua is also home to a separatist rebellion, further complicating Freeport's security.

The Grasberg mine, the largest gold mine in the world and third largest copper mine, opened in 1973. Freeport estimates the mine, some 2,300 miles east of Jakarta, has decades of future production.

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Indonesia: Mine Protesters Clash With Indonesia Police. AP/ABCnews.com, Mar 14, 2006.

Protesters demanding the closure of a U.S.-owned gold mine in Papua clashed with police Wednesday in the second day of violent protests in the province. Two officers were injured after being hit with protesters' arrows, police said.

Around 200 protesters fought with police as they tried to march on the Grasberg mine, run by Freeport-McMoRan Copper & Gold Inc., Lt. Col. Dedi Junaidi told el-Shinta radio station.

Junaidi said the two injured officers were hospitalized but did not say how badly they had been hurt. Seven protesters were arrested.

There have been several protests in recent weeks against the gold mine said to be the world's largest by mostly poor locals who complain they have received no benefits from it.

Freeport, which pays millions of dollars in taxes and funds scores of community projects, was forced to temporarily shut the facility last month after demonstrators blockaded it.

Papua is home to a popular separatist movement that has been brutally repressed by Indonesian security forces. The mine is often held up by independence supporters as a symbol of the unfair division of resources between the capital and Papua.

The eastern part of the island forms Papua New Guinea.

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Indonesia: Political elite told not to fan protests. By Anissa S. Febrina, The Jakarta Post, March 23, 2006

The Indonesian Chamber of Commerce and Industry (Kadin) has warned the political elite against stirring up protests directed at foreign companies' mining operations, with jittery investors watching from the sidelines.

"There should be no provocative approach anymore against mining operations," M.S. Hidayat said Wednesday in reference to a rash of attacks and protests against foreign companies. "We should all try to create a conducive investment climate in order to further improve the economic condition."

Speaking at a Kadin press conference, Hidayat said the local communities' resentment of mining operations, which are mostly controlled by foreign investors, could be fueled by an inadequate contribution provided by the companies for local development, which is the argument of human rights groups.

If that were the case, he added, the discontent could be resolved through negotiation, such as by reviewing the existing mining contracts to ensure that local people receive more financial benefits from their operation.

Protests against American companies' interests have spiraled into violence in recent weeks, including against ExxonMobil Corp., Newmont Mining Corp. and Freeport-McMoRan Copper & Gold Inc., with damage to property and the loss of at least five lives.

National Intelligence Agency head Syamsir Siregar indicated there were political moves behind the allegedly orchestrated protests, but he did not elaborate.

Kadin's deputy chairman for international cooperation John Prasetyo said many foreign executives also believed the unrest stemmed from conflicts among the country's political elite.

"We have to deal with the root of the problem -- is it lack of community development or a mistake during the history of the contract negotiations?" he added.

Hidayat said demanding closure of the company's operations here sent the negative message to foreign investors that Indonesia lacked legal certainty.

National Economic Recovery Committee head Sofjan Wanandi said the protests would deter the crucial investment needed to boost growth and create more jobs.

"We still lack competitiveness in the manufacturing sector. As we still rely on the mining and agricultural sector to attract foreign investment, such destructive protests should be avoided," he said.

According to data from business consultant PriceWaterhouse Coopers, the mining sector contributed US$1.6 billion in taxes, and employed more than 37,000 workers, in 2004.

During the same period, the companies allocated Rp 466 billion for community development and $66 million for reclamation projects.

The chairman of House Commission VII on mining, energy and the environment, Agusman Effendi, said public discontent should be resolved by accommodating the people's demands in the proposed mining law, now being deliberated by the House.

"All input, be it on required community development programs, local ownership of shares as well as divestment issues, could be regulated through the law."

Agusman said all recommendations would be considered before the bill was passed into law.

"I am sure all the politicians have their own representatives on the commission, so they should speak out in the discussions."

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Freeport - Phelps Dodge Merger

What are they thinking? Feb 2007 news release from Groundwater Awareness League, Green Valley Arizona

Phelps Dodge Corporation, a maverick that would have the worst environmental record in Arizona if it weren't for the sale of ASARCO to a foreign company. . . .

Freeport-McMoRan Corporation, highlighted on every environmental and human rights black list for their Indonesian gold mine. . . .

Both companies have extensive and serious environmental obligations that should be addressed and completed before they even think about expanding-a merger would be a devastating combination.

Concerned over the environment and human rights issues, today Nancy Freeman of Groundwater Awareness League sent a stack of data and reports, relevant to the proposed Freeport-McMoRan/Phelps Dodge merger, to the Securities and Exchange Commission (SEC). Freeman, Executive Director of an Arizona non-profit knows a lot about Phelps Dodge (PD), for she has worked for four long years pushing them to take responsibility for the industrial waste in her drinking water in a small retirement town in southern Arizona.

[The full report is at the following link: http://www.g-a-l.info/SECReport.htm]

There's plenty of cause for concern. As documented in the report to SEC, the Phelps Dodge-Cyprus Minerals merger caused delays of up to six years on some permits and still counting on others. In the report, Freeman has detailed PD's current liabilities, outlined FM's lack of response to environmental matters, and has gathered information on human rights issues.

In short, Freeport-McMoRan Corporation has not demonstrated the experience, will, or the skill to give any confidence they will be able to manage the numerous environmental responsibilities that Phelps Dodge has been mandated by state and federal agencies in Arizona, New Mexico, Colorado and other states. FM has no experience with extensive water pollution regulations in the Southwest, where water is precious.

In addition to concern for the local environmental liabilities here in U.S., the greatest concern is that FM would get into the Republic of Congo and repeat the same irresponsible operations they have perpetuated on the environment and culture at their Grasberg operations in Indonesia. In a conference call in November, 2006 between the major parties, Steve Whistler, PD's CEO, specifically stated, ". and the opportunity to create a Grasberg type asset with the Tenke project in the Democratic Republic of the Congo."

PD is in the beginning stages of the Congo operation and has already agreed to give the Government an increasing incremental share of the wealth. The Congo is a stressed nation that needs some guidance, integrity and cooperation from foreign investors. In an EPA Hardrock Mining Conference in Tucson last November, the need to be sensitive and responsive to the cultural and social concerns of Third World countries was emphasized. Freeman has arranged that the report to SEC be delivered to the authorities in the Republic of Congo, so that they are forewarned that the devil is at their back door.

But we can't consider the FM crew all bad-in a last ditch attempt to show how magnanimous they are to the natives, they have offered to sell them a small percentage of the operations (less than 10%) for $1 billion dollars. That's right-bargain price. They could do so only because they have toted billions out of the country for years. Even though there are regulations in place that foreign companies have to partner with locals, it's interesting that they waited until last month to do so-when they were being scrutinized carefully because of their proposal to acquire Phelps Dodge.

Who really wins?

Two old buddies meet on a plane and with a handshake make a decision that will affect the lives of hundreds of people. Well, it appears to be good deal: one will retire as a multi-millionaire and the other will get his chance to do so in a few years. They both are touting that it is a real win for shareholders. Does anything else count? Even the Phelps Dodge employees are comprehensive, realizing that they may have to return to unions-which Phelps Dodge killed with the aid of the Wharton School of Business, the Arizona Governor, Arizona Highway Patrol and National Guard in 1983. Shouldn't the employees be allowed to express themselves with a vote?

Phelps Dodge Corporation has been a wheeler-dealer in Arizona. They have had extensive influence in Arizona for some 100 years. With intensive lobbying and deep pockets, they have managed to get exempt from every law regarding water usage. Now just when it looked as if they were entering the 21st century by taking some responsibility for their past indiscretions to Mother Earth, they want to bail out!

PD management thinks they will continue running mining operations and everything will remain the same with the existing copper mining operations. If that is so, why are the CEO and other "management" from FM moving to Phoenix? Further, there is no guarantee that FM will keep the current PD managers in place-PD did replace all, but one, of the Cyprus Minerals managers after their acquisition. Then there is the big question. Will the current managers even want to stay after the southern boys from Louisiana take over? They are surely an unknown reality.

We have to beware of corporate gyrations. Currently, we have the example of ASARCO, which was acquired by a smaller company. There is litigation alleging that Grupo Mexico sold ASARCO assets to pay their acquisition bill and transferred the most lucrative operations to a separate corporation, leaving the original corporation with a long list of debtors-including the environment.

The various corporate scandals in the last couple of years underscore the need to have some oversight over corporations and their dealings. In the conference call in November, the PD and FM directors mentioned the word "shareholder" thirty-eight times. So that gives a clue of one thing they are thinking about-$$$$. We know who the major shareholders are! "Shareholder value"-at any cost to the rest of us and to the earth we live on.

BE WELL

Nancy Freeman
www.savethesantacruzaquifer.info
www.g-a-l.info
520/207-6506
520/235-0256 (cell)

###

Further information on Freeport-McMoRan

Amungme Ne Sorei people. (Lemasa is their traditional council).

Australian Council for Overseas Aid (ACFOA). 124 Napier St, Fitzroy 3065. Tel (03) 417 7505. Fax (03) 416 2746. Trouble at Freeport: Eyewitness Accounts of West Pauan Resistance to the Freeport-McMoRan Mine in Irian Jaya, Indonesia and Indonesian Military Repression, June 1994-February 1995. April 1995 report alleging intimidation and torture by the Indoneisan army and Freeport security forces, and the death or disappearance of 37 local people between June 1994 and February 1995.

Australian Council for Overseas Aid. More Human Rights Abuse on Freeport Mine Area of Irian Jaya. Aug. 29, 1995 press release. Village pastor and two children killed; Freeport vehicles and containers used to transport detainees; torture conducted at Freeport shop at Koperakopa in Tembagapura.

Catholic Church of Jayapura. Violations of Human Rights in the Timika Area of Irian Jaya, Indonesia. Mgr. H.F.M. Munninghoff, OFM, Bishop of Jayapura. August 1995. Report alleging torture and murder carried out by Indonesian troops on Freepot's behalf.

Biodiversity Convention Conference of Parties II, Jakarta, Indonesia, Nov. 6-17, 1995. Stop Freeport Mine's Destruction: NGO Statement. Signed by David Downs (Center for International Environmental Law (CIEL), Washington D.C. E-mail cielus@igc.apc.org) and by representatives from Cultural Survival Canada, ELAW-Indonesia, Environment Liason Centre International, Friends of the Earth U.S., Greenpeace Australia, Japanese NGO Network on Biodiversity, Humane Society International, German Working Group on Biodiversity, Solidaritas Perempuan Indonesia, IUCN Netherlands Committee, Third World Network, ELSAM Indonesia, Indian Institute of Public Administration, Environmental Defense Fund, Sierra Club U.S., TIILO U.S., Indonesia Legal Aid Foundation, and INDISCA Indonesia.

Boyer, Robert. University of Texas, Austin. E-mail boyer@cs.utexas.edu.

Bryce, Robert and Susan A. Brackett. Culture Clash: Controversy at the Grasberg Mine in Indomesia. Clementine: The Journal of Responsible Mineral Development (Mineral Policy Center, Washington), Spring/Summer 1996, p. 10-13.

Budiardjo, Carmel. Surviving Indonesia's Gulag: A Western Woman Tells Her Story. 1995.

Chatterjee, Pratap. The Mining Menace of Freeport-McMoRan. Multinational Monitor, Apr. 1996, p. 11-14.

csheiner@igc.apc.org. E-mail list on West Papua.

Clay, Jason. West Papuans Flee Violence. Cultural Survival Quarterly, Fall 1984, 8(3).

Death of a Nation: The Timor Conspiracy. Video.

Delta Greens, New Orleans.

Downs, David. Center for International Environmental Law (CIEL), Washington D.C. E-mail cielus@igc.apc.org.

Hyndman, David. How the West (Papua) Was Won. Cultural Survival Quarterly, 1987, 11(4).

Hyndman, David. Melanesian Resistance to Ecocide and Ethnocide: Transnational Mining Projects and the Fourth World on the Island of New Guinea. Chapter 27 in: Tribal people and Development Issues: A Global Overview (Mountain Vew, CA: Mayfiled Publishing, 1988).

Indonesia Environmental Form (Walhi). E-mail walhi@igc.apc.org.

(Indonesian) National Human Rights Commission (Komisi Nasional Hak Asasi Manusia). Results of Monitoring and Investigation of Five Incidents in Timika Sub-district and an Incident in the Village of Hoea, Irian Jaya, from October 1994 Till June 1995. Sept. 1995 report alleging torture and murder carried out by Indomesian troops on Freepot's behalf. E-mail tapol@gn.apc.org. http://www.cs.utexs.edu/users/boyer/fp/sec4.html includes articles, correspondence, human rights reports, and other documents on Freeport-McMoRan.

Komisi Nasional Hak Asasi Manusia (Indonesian Human Rights Commission). Report alleging torture and murder carried out by Indomesian troops on Freepot's behalf. E-mail tapol@gn.apc.org.

Lemasa (Amungme peoples' traditional council).

Loyola University (New Orleans) students. Protesting university ties to Freeport.

Maritime Union of Australia. 1997. Freeport mine: the Cairns dispute.

Monbiot, George. 1989. Poisoned Arrows.

NGO Taskforce on Business and Industry. Minding Our Business Report 1997. Scraping Bottom: Freeport McMoRan in Irian Jaya.

Olaya, Phil. Loyola Students Protest Freeport McMoRan. Tulane Hullabaloo, Dec. 1, 1995.

OneWorld/UnMundo. Bilingual publication on the Internet.

Project Underground. 1998. Risky Business: The Grasberg Gold Mine: An Independent Annual Report on P.T. Freeport Indonesia.

Sands, Susan. West Paua: Forgotten War, Unwanted People. Cultural Survival Quarterly, 1991, 15(2).

Shari, Michael. Freeport McMoRan-A Pit of Trouble. Business Week, July 31, 2000.

Stanford University - Students for Environmental Action at Stanford (SEAS) campaign against Freeport

Tapol. 1983 report West Papua: The Obliteration of a People. E-mail tapol@gn.apc.org.

U.S. environmental groups, including Environmental Defense Fund, Sierra Club, Friends of the Earth, and International Rivers Network. November 1995 letter to Freeport.

University of Texas (Austin TX) students. Protesting university ties to Freeport. Daily Texan newspaper.

Walhi (Indonesia Environmental Form). E-mail walhi@igc.apc.org.

West Papua News - campaign against Freeport

 

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