Dorothy Kosich – It was only a matter of time until the New York Times "investigative" series on gold mining would highlight the track record of Freeport McMoRan's Grasberg operations in Indonesia.
In an article published in Tuesday's edition of the New York Times, reporters Jane Perlez and Raymond Bonner detailed a plethora of information, much of which has been detailed in news media and NGO accounts for more than a decade.
Some grievances have been addressed along the way while others still remain, open sores on the credibility of multinational hardrock mining.
To anyone who has followed Freeport McMoRan in the news for more than a decade, many allegations raised by the Times are old news. The Indonesia military, which has even come under fire from the US State Department for its human rights abuses, helps to protect Grasberg. Freeport officials assert there is not a thing they can do about it.
The Times article also highlighted the cronyism between Freeport Chairman James R. "Jim Bob" Moffett and former Indonesian President Soharto. The newspaper claimed that Freeport paid for the vacations of the Soharto family, some of their children's college educations. and cut them in on deals that made them rich. Any journalist or miner who followed the Bre-X scandal a few years back was aware of these allegations, believed to have played a part in the awarding of the Bre-X concessions to Moffett and Freeport, after a heavily fought contest involving major players such as Barrick, Placer Dome, and Newmont.
The combination of a highly successful mining operation and outsiders, who migrated into the traditional territories of the Indonesian tribes surrounding Grasberg, exploded into a human rights nightmare. The Times quoted Australian anthropologist Chris Ballard, who worked for Freeport, and Abigail Abrash, an American human rights campaigner, who estimated that 160 people had been killed by the military between 1975 and 1997 in the Grasberg area and its surroundings. By March 1996, rioting erupted, resulting in the destruction of $3 million in equipment and ransacked offices at Grasberg.
After the riots, Freeport established a development fund for Papua, by dedicating 1% of its annual revenues. The company built clinics, hospitals, and established programs to control malaria and AIDS. Meanwhile, the local Kamoro and Amengme tribes received several million dollars in a fund intended to compensate them for the lands Freeport is using.
Although Mineweb submitted a request to Freeport's Vice President for Corporate Communications for a copy of the company's written statements provided to the Times, no one had responded by deadline Tuesday night.
In August 2002, three teachers employed by Freeport, including two Americans, were killed in an ambush on a company road. Three years later, the FBI is still investigating the deaths and the reasons for the killings. The Times suggested an initial report by the Indonesia Police 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." In filings with the SEC, Freeport said it had paid the military a total of $4.7 million in2 001 and $5.6 million in 2002. Freeport has said that the payments are required under its Contract of Work with the Government of Indonesia.
The Times article also criticized Freeport's environmental track record at Grasberg. "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," according to the report. "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 the fish have disappeared, according to environmental ministry documents." Perlez and Bonner referred to a 2000 "internal ministry memorandum" which reportedly said "the mine waste had killed all life in the rivers, and said that this violated the criminal section of the 1997 environmental law." "The Environmental Ministry has begun trying to put teeth into its rules where it can." said the Times journalists. "But in the case of Freeport, the ministry has had no traction." The toxic waste management division of the Environmental Ministry is in negotiations with Freeport regarding forcing Grasberg to obtain a permit to dispose of mine waste.
The Times article also resurrected the October 1995 revocation of Freeport's insurance policy by the Overseas Private Investment Corporation. Freeport argued the report reached "inaccurate conclusions" and went to court to block the document from being made public, according to the Times. The OPIC policy was reinstated for a few months and, ultimately, not renewed.
Freeport allegedly told the Times that its tailings are not toxic, and that the river it uses for its tailings meets Indonesian and American drinking water standards for dissolved metals. The company also declared that the coastal estuary "is a functioning ecosystem." Freeport said it spend $30 million on environmental programs in 2004.
Mineweb's findings
A search conducted by this Mineweb reporter Tuesday also discovered other findings. For instance, last September, the FTSE4Good Semi-Annual Index removed Freeport from its list, citing Freeport and 21 other companies "have failed to meet the FTSE4Good environmental criteria requirements."
Last July, a report by the human rights NGO Global Witness accused a Freeport subsidiary of allegedly paying large sums to individual military and police officers prior to April 2003. The NGO called for the company to be investigated under the US Foreign Corrupt Practices Act and other applicable US and Indonesian laws."
Freeport responded that "the Grasberg mine is designated as a vital national asset, resulting in the military playing a significant role in protecting the area." The company asserted that postings in Papua are a hardship, which requires mitigating living costs and providing other support.
"For 2004, the total costs for PT Freeport Indonesia's internal civilian security department were $13.4 million ($12.3 million net to PT Freeport Indonesia). The security department receives human rights training and each member is required to certify his compliance with our human rights policy. PT Freeport Indonesia continually evaluates its human rights training programs to seek ways to improve them," according to the Freeport website.
In August, New York City Comptroller William C. Thompson, Jr., acting on behalf of the New York City Pension Funds, expressed concern regarding the relationship between Freeport McMoRan Copper & Gold and the Indonesian military. Last May, five New York City pension funds presented a resolution at FCX's annual shareholder meeting calling for a review of the company's policy concerning payments to the Indonesian military and security forces.
Nevertheless, some good news existed among the articles, documents and studies reviewed by Mineweb. During the past two years, Freeport had voluntarily submitted itself to an audit by the International Center for Corporate Accountability (ICCA). While the audit noted the company was linked "to horrific acts allegedly committed by the Suharto dictatorship against rebels unhappy about the company's expansion of its gold and copper mine," the ICCA also found that FCX and PTFI may also be well known to human rights activists for the publication of a human rights review that could become a model for all multinationals.
The 136-page report published in October is the first of three audits involving the three operating units of PT Freeport Indonesia (PTFI). The scope of the audit included the protection of human rights, hiring and employment opportunities for the Papuan people, and social and economic development of the Papuan community.
In an October 24 BusinessWeek article, reporter Aaron Bernstein praised Freeport's "willingness to be exposed" which "puts it in a class by itself." The ICCA report found that none of the human rights violations committed in the name of protecting the Grasberg mine involved Freeport personnel. The ICCA's assessment of the PTFI Human Rights Training program for security and social program personnel found it was well suited for the operating environment.
The audit also praised the activities of the company's Social and Local Development Department and the Education Bureau. Employees' attitudes toward PTFI were determined to be quite positive, according to the auditors. ICCA revealed that Freeport has contributed $132 million to the Papua development fund since it was established after the 1996 riots. The fund concentrates on education, health and village development.
In its response to the audit, Freeport said it is establishing a team headed by Judge Gabrielle Kirk McDonald, Special Counsel for Human Rights to the Office of the Chairman, "to ensure the continued implementation of PT-FI's Social, Employment, and Human Rights Policy, including addressing the recommendations made in the ICCA audit report."
The company invited the ICCA to return to its Indonesian operations "early in 2006 to review and assess the actions that PT-FI has taken in response to issues in its audit report." Among the audit findings is to discontinue the practice of using Freeport-provided drivers to transport military personnel on PTFI roads, establishing employee development plans for all workers and attracting the best Indonesian university graduates to the mine, and improvements in scholarship and other education programs.
The audit findings were publicly disseminated, and can be found on the Internet.
"The company's willingness to open up so wide is a major development in the corporate responsibility movement. Certainly, no other global mining or oil company has come close to such transparency, long a key demand by human rights groups," declared BusinessWeek. "Most companies are closed books when it comes to independent scrutiny. A majority of US multinationals have codes of conduct that promise good behavior in these fields, but there is rarely a way of checking up. Freeport's example could set a new standard."