Grasberg mine

Grasberg mine

The Grasberg Mine complex from space.

Freeport's Contract of Work Area. deep purple in the river: tailings (2003)

The Grasberg mine is the largest gold mine and the third largest copper mine in the world. It is located in the province of Papua in Indonesia near 4°03′10″S 137°06′57″E, and employs 19 500. It is majority owned through a subsidiary by Freeport-McMoRan, based in the United States (67.3%), along with its wholly owned subsidiary, PT Indocopper Investama Corporation (9.3%), and the government of Indonesia (9.3%), and additionally, a production sharing JV with Rio Tinto Group (13%). The cost of building a mine on the mountain was $3 billion United States dollars. In 2006, it was estimated to have 2.8 Gt (2.8 E9 tonnes) reserves graded at 1.05% copper, 0.98 g/t gold and 3.87 g/t silver. The 2006 production was 610,800 t Copper, 58,474,392 g gold, and 174,458,971 g silver.

History

Dutch geologist Jean-Jacquez Dozy working for Nederlandsche Nieuw Guinea Petroleum Maatschappij (NNGPM), an exploration company formed by Shell in 1935 with 40% Standard Vacuum Oil (Mobil) interest and 20% Far Pacific investments (Chevron subsidiary), visited Indonesia in 1936 to scale Jayawijaya Mountain glacier in the Irian Jaya province in western Papua. He made notes of a peculiar black rock with greenish coloring and spent several weeks estimating the extent of the gold and copper deposits. In 1939, he filed a report about the Ertsberg (Dutch for "ore mountain"). In March 1959 the New York Times published an article revealing the Dutch were searching for the mountain source of alluvial gold which had been flowing into the Arafura Sea. Geologist Forbes Wilson, working for the Freeport mining company in August 1959 after reading the 1936 report, immediately began preparations for personally exploring of the Ertsberg site. The expedition, led by Forbes Wilson and Del Flint, confirming the huge copper deposits at the Ertsberg in 1960, was financed by Freeport Sulphur, a company then involved in a nickel stockpiling scandal which Kennedy had under Senate investigation and whose directors included Godfrey Rockefeller, Texaco chairman Augustus Long, and Robert Lovett.

With permission from the Indonesian government (though West Papua was not part of the Republic of Indonesia at the time), the Ertsberg mine was built at 4,500 metres (14,000 ft) above the sea level. It officially opened in 1973 (although the first ore shipment was in December, 1972), and was expanded by Ertsberg East, which opened in 1981. Steep aerial tramways are used to transport equipment and people. Ore is dropped 600 metres (2,000 ft) from the mine, concentrated and mixed with water to form a 60:40 slurry. The slurry is then pumped through pipelines to the port at Amamapare, dried and shipped. Each tonne of dry concentrate contains 317 kilograms of copper, 30 grams of gold and 30 grams of silver.

The mine was attacked by the rebel group OPM in 1977. The group dynamited the main slurry pipe, which caused tens of millions of dollars damage, and attacked the mine facilities. The Indonesian military reacted harshly, killing at least 800 people.

By the mid-1980s, the original mine had been largely depleted. However, Freeport did not sell the mine for $75 million, as had been offered, but instead searched for further deposits in the area. In 1988, Freeport identified reserves valued at $40 billion at Grasberg, just three kilometres (two miles) from the Ertsberg mine. The winding road to Grasberg, the HEAT (Heavy Equipment Access Trail), was estimated to require $12 million to $15 million to be built. An Indonesian road-builder who had contributed to the Ertsberg road took a bulldozer and drove it downhill sketching the path. The road cost just $2 million when completed.

The 2003-2006 boom in copper prices increased the profitability of the mine. The extra consumption of copper for Asian electrical infrastructure overwhelmed copper supply, and lead to a price increase from approximately $1500/ton to $8100/ton ($0.70/lb. to $4.00/lb.).

Environment

The concentrator's tailings, generated at a rate of 230,000 tonnes per day, are the subject of considerable environmental concern, as they are directly poured into the Aikwa riverine system and Arafura Sea. Some 130 square kilometres (50 sq mi) (eventually 230 square kilometres (89 sq mi)) of lowland areas along the Aikwa River, are saturated with copper, filled with sediment, and the fish have nearly disappeared. The overburden (700 kt/d) remains in the highlands, up to 480 m deep and covering 8 square kilometres (3 sq mi), but its acidic runoff, dissolved copper, and the finer material gets washed into the headwaters of the Wanagon River and settles out along the river course and then into the ocean, and will continue to do so indefinitely. Freeport's official response is that overburden is placed in the highlands as part of its Overburden Management Plan, at "sites capped with limestone and constantly monitored. Tailings are transported to the lowlands in a designated river system. Once reaching the lowlands, they are captured in an engineered system of levees built for that purpose." Freeport states that its discharges meet regulatory requirements. The company's environmental program consists only of monitoring their immense discharges.

In 1995, the Overseas Private Investment Corporation revoked Freeport's insurance policy for environmental violations of a sort that would not be allowed in the US - a first for the OPIC, resulting in a lawsuit by Freeport. Freeport states that this revocation was based on a misunderstanding, the result of a single 1994 visit to Grasberg; the company later underwent an independent environmental audit by Dames & Moore, and passed. In April, 1996, Freeport canceled its policy with the OPIC, stating that their corporate activities had outgrown the policy's limits. However, the OPIC report was later publicly released and exposed gross misrepresentations by Freeport. Indonesian environmental ministers Sonny Keraf and Nabiel Makarim set various demands, beginning in 2000, but nothing resulted, and the mine currently contravenes several statutes.

Environmental Damage

The mine is located in close proximity to rare equatorial mountain glaciers that serve as indicators of climate change in the region. Steepening of slopes related to mining activities, as well as earthquakes and frequent heavy rainfall, have resulted in deadly landslides in the mine workings.

While landscape reclamation projects have begun at the mine, environmental groups and local citizens are concerned with the potential for copper contamination and acid rock drainage into surrounding river systems, land surfaces, and groundwater. Freeport argues that its actions meet industry standards, and have been approved by the requisite authorities.

Both Freeport and its partner Rio Tinto have been excluded from the investment portfolio of The Government Pension Fund of Norway, the world's second largest pension fund, due to criticism over the environmental damages caused by the Grasberg mine. Stocks at a value of ca. US$ 870 million were divested from the fund as a result of the decisions.

External links

• Detailed mine information
• Mine history
• Mine diagram
• SEC 10-K Report
• Freeport's involvement with abuses by Indonesian military
• Detailed 2006 report on environmental effects of mine; includes discussion of related violations of Indonesian law
• Grasberg Riverine Disposal Case Study
• Freeport named one of 10 worst companies of 1996
• Lengthy NY Times report on the mine, December 27, 2005
• JFK, Indonesia, CIA & Freeport Sulphur
• New York Times 1959 article
• "Grasberg Mine, Indonesia". NASA Earth Observatory. Retrieved 2006-05-08.