Freeport-McMoRan

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Freeport-McMoRan Copper & Gold Inc.
Company typePublic (NYSE: FCX)
IndustryMining
Founded1988
Headquarters
United States Phoenix
,
United States
Area served
worldwide
Key people
Richard C. Adkerson, President and Chief Executive Officer; James R. Moffett, Chairman
ProductsCopper, gold, molybdenum
Revenue$16,939 million (2007)
$6,555 million (2007)
$2,769 million (2007)
Number of employees
25,400
Websitefcx.com

Freeport-McMoRan Copper & Gold Inc., (FMCG, NYSE: FCX) often called simply Freeport, is the world's lowest-cost copper producer [1] and one of the world's largest producers of gold. It was formerly based in New Orleans, Louisiana but recently moved its headquarters to Phoenix, Arizona, after acquiring copper producer Phelps Dodge in 2007. In addition to Phelps Dodge, its subsidiaries include PT Freeport Indonesia, PT Irja Eastern Minerals and Atlantic Copper, S.A. Freeport is the largest publicly traded copper and molybdenum producer in the world.

Best known for its Grasberg mine in Papua province, Indonesia, the company is the largest taxpayer to the Indonesian government. It mines and mills ores containing copper, gold, molybdenum and silver for the world market. Richard C. Adkerson is President and Chief Executive Officer of Freeport-McMoRan Copper & Gold and James R. Moffett is the company's Chairman.

McMoRan Exploration Company is a separately traded firm with some shared management with Freeport-McMoRan Copper & Gold Inc. [2]. Richard C. Adkerson and James R. Moffett are co-chairmen of McMoRan Exploration. McMoRan Exploration, an oil and gas exploration and production firm based in New Orleans, Louisiana, was created in 1998 by the merger of McMoRan Oil & Gas and Freeport-McMoRan Sulphur. McMoRan Exploration recently acquired the famed Blackbeard offshore prospect in the Gulf of Mexico, that Exxon Mobil Corp. abandoned in 2006 after drilling a 30,000-foot (9,100 m) dry hole. McMoRan Exploration's well is currently (7/21/08) below 32,550 feet (9,920 m), the deepest penetration of the earth ever recorded. [3]

History

Freeport Sulphur No.6 entering Freeport, Texas harbor, 1923

The company was founded as the Freeport Sulphur Company in 1912, and the company founded Freeport, Texas that same year, near its new sulphur mines, then the largest in the world[4] . Freeport pioneered mining sulphur by the Frasch Process at mines along the US Gulf Coast. Freeport Sulphur began to diversify in 1931, purchasing manganese deposits in Oriente Province, Cuba. The company produced nickel during WW2, and potash in the 1950s. In 1955, Freeport invested $119 million in constructing a nickel -cobalt mine at Moa Bay, Cuba and a refinery at Port Nickel, Louisiana. On March 11, 1957 the US government announced a contract buying Freeport production of nickel and cobalt from Cuba until June 30, 1965 as strategic commodities. In July 1957 the House Committee referred charges to the Justice Department against Freeport for investigation of a government trying to reduce the multi-milion dollar contract. In 1960 the Castro government nationalized the Cuban facility.[5]

In 1956, the company formed Freeport Oil Company, and sold a Louisiana oil discovery for $100 million in 1958. In 1961, the company entered the kaolin business, and in 1964 formed Freeport of Australia to pursue mining opportunities there and in the surrounding Pacific Ocean region. In 1960, a team of Freeport geologists confirmed the Dutch discovery of the rich Ertsberg copper and gold discovery, located in extremely rugged, remote country in the Jayawijaya Mountains, in then-Netherlands New Guinea. In 1966, Freeport founded Freeport Indonesia, Inc. and negotiated a contract with the Indonesian government, which had taken over the former Dutch colony in 1963, to develop the Ertsberg deposit. In their feasibilty study, Freeport geologists estimated that the orebody totaled 33 million tons averaging 2.5% copper. The Ertsberg was the largest above-ground copper deposit ever discovered. [6]

Construction of an open pit mine began in May 1970, and in mid-1973 the new Ertsberg mine was declared fully operational. Officials at Bechtel, the primary contractor on the project,called mine development at Ertsberg "the most difficult engineering project they had ever undertaken." The many challenges included building a 101 kilometer long access road (a project that required boring kilometer long tunnels through two mountains) and constructing the world's longest single span aerial tramway. Aerial tramways were needed to move people, supplies, and ore because a 2,000-foot (610 m) cliff separates the Ertsberg mine (at 12,000 feet (3,700 m) elevation) from the mill (at 10,000 feet). Getting copper concentrate from that mill to the shipping port required installation of a 109-kilometer long slurry pipeline - then the world's longest.

Mine construction and startup cost about US$200 million. The development of the Ertsberg District was an engineering marvel, but the mine's early financial performance was disappointing. Depressed copper prices and high operating costs kept the operation marginal during the 1970s. [6]

In 1971 the company changed its name to Freeport Minerals Company (FMC) to reflect its role as a diversified mineral producer. FMC formed Freeport Gold Company in 1981 to operate a rich new gold discovery at Jerrit Canyon, Nevada.

McMoRan Oil & Gas was formed in 1967 by three partners, including James R. (Jim Bob) Moffett, the present CEO of FMCG. During the 1970s, the company acquired a reputation as an aggressive petroleum explorer with cost-efficient drilling programs. It formed drilling partnerships with several companies, including Freeport. In 1981 Freeport Minerals merged with McMoRan Oil & Gas to form Freeport-McMoRan Inc.

In 1982 Freeport Gold Company was the world's largest gold producer, producing 196,000 ounces of gold in its first full year of operation.

By 1989 Freeport-McMoRan had two world-class mines to develop: the new discovery at Grasberg, Indonesia, with the world's largest gold ore reserve, and one of the world's largest copper reserves; and the Main Pass sulfur-oil-gas deposit offshore from Louisiana, with estimated reserves totalling 67 million tonnes of sulfur, 39 million barrels (6,200,000 m3) of oil, and seven billion cubic feet of natural gas. These were rich deposits, but would be very expensive to develop. Freeport sold about $1.5 billion in assets to finance the development of these two projects.[5]

By 1991, Freeport-McMoRan Inc. was basically a holding company for its two principal assets, Freeport-McMoRan Copper & Gold (FMCG) and Freeport-McMoRan Resource Partners, which ran the sulphur and fertilizer business. Freeport's focus was to raise enough cash to finance the development of the huge finds at Grasberg and Main Pass. Both of these assets got better the more they were studied: Main Pass was the second largest recoverable sulphur reserve then known, and Grasberg's ore reserves -- and profit potential -- were truly enormous.

In 1994 Freeport-McMoRan spun off its entire interest in Freeport-McMoRan Copper & Gold, which became an independent company, fully focussed on the Indonesian operation. In 1997 Freeport-McMoRan Inc., the former parent company, was itself acquired by IMC Global, a large fertilizer producer.

In 1997 the company exposed the Bre-X Gold Scandal. Brought in by the Indonesian government, Freeport was not able to correlate Bre-X's fraudulent claims to finding the largest gold mine ever discovered; Bre-X subsequently went bankrupt.

The Grasberg mine, FMCG'S crown jewel, soon became a source of violent trouble and terrible publicity [7], which continues today. It is also the world's most profitable mine. [8]

Operations[9]

North American operations:

South American operations:

  • Candelaria/Ojos del Salado, Chile, 80% owned by FMCG (copper)
  • El Abra, Chile, 51% owned (copper)
  • Cerro Verde, Peru, 53.6% owned (copper, molybdenum)

European operations:

African project:

Asian operations:

Controversy over Indonesian operations

In 2003 Freeport admitted it had been paying the local Indonesian military and police to keep the native landowners away from the lands it develops under the current Indonesian government contract; Freeport argues that this is necessary to provide security to its employees, both local and foreign. [citation needed]

In 2005, the New York Times reported that company records showed the total amount paid between 1998 and 2004 amounted to nearly US$20 million, distributed among both officers and units, with one individual receiving up to US$150,000. The company response was that there was "no alternative to our reliance on the Indonesian military and police in this regard", and that the support provided was not for individuals, but rather for infrastructure, food, housing, fuel, travel, vehicle repairs and allowances to cover incidental and administrative costs. [citation needed]

In contending that the money went to the government and not to individual officers, "the statements amount to a knowingly misleading representation by Freeport," the comptroller of the New York City Pension Funds said. While in Indonesia, Juwono Sudarsono, the civilian defense minister, said that it is illegal under Indonesian law for foreign companies to pay soldiers. [citation needed]

The New York City comptroller has charged that Freeport-McMoRan knowingly made "false or misleading" statements about payments to the Indonesian military and might have filed false proxy statements in violation of the Securities Exchange Act. He has also stated that he believed the company might have violated the Foreign Corrupt Practices Act, which forbids U.S. companies to bribe foreign officials. The Securities and Exchange Commission and the Justice Department are currently investigating these claims. [citation needed]

Freeport-McMoRan's close ties with the authoritarian Indonesian militia along with the military's heavy-handed tactics in dealing with natives has attracted the attention of many human rights advocates and organizations. However, by the late 1990s, after over twenty five years operating in Papua without recognising the land rights of the traditional peoples it finally announced recognition and established agreements with various Papuan tribes. [citation needed]

Denise Leith has written a comprehensive history of Freeport's influence, impact, and role in Indonesia [10]. The book has received generally favorable reviews as a fair and balanced treatment of the issue.

Claims of severe environmental damages caused by the company's engagements in the Grasberg mine in Indonesia has led The Government Pension Fund of Norway, the world's second largest pension fund, to exclude Freeport-McMoRan from its investment portfolia, after a recommendation from the fund's ethical council.[11]

Directors

The company was founded by Langbourne Williams Snr. as Freeport Texas in 1912 in the sulphur mining industry, in 1929 Langbourne Williams Jnr. collaborated with Payne Whitney to regain control of the company. In 1935 the Board of Directors included chairman John Hay Whitney, Kidder, Peabody & Co., Eugene L. Norton, Langbourne M. Williams Jr. (president), Monro B. Lanier, Chauncey Stillman, Godfrey Stillman Rockefeller, David M. Goodrich. The company change name to Freeport Sulphur in December 1936. Other directors have included Augustus Long, Robert A. Lovett, Charles Wight from 1947, Benno Schmidt 1954-1997, Jean Mauzé, Robert W. Bruce III, Robert C. Hills, Paul W. Douglas 1981-1983 after serving on Freeport Minerals 1975-1981, Henry Kissinger 1988-1995, George Putnam, and J. Taylor Wharton.

References

  1. ^ FCX profile
  2. ^ McMoRan Exploration Board of Directors
  3. ^ "A Famed Dry Hole Gets a Second Shot"
  4. ^ Freeport article, Handbook of Texas
  5. ^ a b Freeport-McMoRan history
  6. ^ a b OPENING THE ERTSBERG DISTRICT
  7. ^ "Below a Mountain of Wealth, a River of Waste"
  8. ^ "Papuan anger focuses on world's richest mine"
  9. ^ Freeport-McMoRan Copper & Gold Inc. - corporate web site
  10. ^ Denise Leith, 2002, The Politics of Power: Freeport in Suharto's Indonesia, University of Hawaii Press, ISBN 0824825667
  11. ^ Norwegian Ministry of Finance (2006-06-06). "Two companies - Wal-Mart and Freeport - are being excluded from the Norwegian Government Pension Fund – Global's investment universe".

Company Publications

External links

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