A long and profitable history of mining excellence

PT FREEPORT INDONESIA'S Grasberg open-pit mine in Papua (former Irian Jaya).

Indonesia is a country of vast natural resources, in particular minerals. Although traditional mineral production centered on bauxite, silver and tin, in recent years the country has expanded its copper, nickel, gold and coal output for export markets. President Megawati’s government is actively involved in the protection of the country’s mining investments, as witnessed by the recent ruling on tin exports, intended to safeguard against the sales of minerals obtained through illegal mining. The government is also seeking to resolve a rather tangled issue concerning open pit mining in recently designated protected forest sites. A possible revision to the decree which has stalled progress for nearly 150 companies previously granted licenses to operate in these areas is now under consideration.

President Director of PT Freeport Indonesia

As the government works on providing legal certainties for new investors, the gains of companies long established in Indonesia’s mining sector are proof that the rewards are worth the wait. PT Freeport Indonesia, an affiliate of U.S.-based Freeport- McMoRan Copper & Gold Inc., a NYSE listed company, operates the world’s largest gold and third largest copper deposit at its Grasberg site in Papua (formerly Irian Jaya) in eastern Indonesia. President Director Adrianto Machribie states, “geologically, Indonesia is one of the most exciting places on the globe, located, as it is, in the so-called ‘ring of fire’. In the past three or four decades, Indonesia has proven that it is a giant in the mining industry. We are not a gold company, yet we have the single largest mine in the world! We are also convinced that there are more deposits in the country.” Freeport produced 1.4 billion pounds of copper and 2.6 million ounces of gold in 2001, and added 150 million tons to its reserves. Cost effectiveness is another of the company’s strong points–Freeport is the world’s lowest-cost copper producer. Mr. Machribie says, “we are a copper company, with gold and silver as by-products, which reduces production costs. Also, our copper is one of the cleanest produced in the world so the costs of processing concentrate into copper are lower. The cleaner the process is, the better it is for the environment.” The environment is a concern the company takes seriously–it performs an internal audit of its environmental management and monitoring systems every year; external audits are done periodically.

Freeport’s story began back in 1960 when an exploration manager of Freeport Minerals Company, Forbes Wilson, read a report on the 1936 discovery of ‘Ore Mountain’ by a Dutch geologist in Papua, and decided to undertake an expedition. Freeport signed its first contract with the Indonesian government in 1967, began exploration that same year and produced its first copper exports in 1972. A second Contract of Work was signed with the Indonesian government in 1991, which grants the company rights to continue operations for another thirty years with possible extensions.

Freeport’s long history in Indonesia explains the interest the company has taken in the welfare and empowerment of surrounding communities and peoples. The involvement of the Papuan people in the economic development now taking place in their region is an important priority for Freeport. “When we started in the late 1960s, there were about 1,000 people living in the area, including the main city Timika. Today the population is close to 150,000,” comments Mr. Machribie. “We try to give something back to the area because we believe in sustainable development. We do not want to reach the day when the mine is mined out, 40 years from now, based on current reserves when suddenly there is no more economic activity. We have been trying to train the local indigenous people to become entrepreneurs and to bring in other investors so that the economy that is driven by Freeport right now will move on when we are gone.” Freeport employs over 9,000 people, is one of the nation’s largest taxpayers and, since 1991, has spent more than $180 million on community development projects, including health and education initiatives, as well as programs designed to support local cultural activities.

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