Tag: Grasberg mine

Papuan provincial assembly’s recommendations regarding the Freeport dispute

Bintang Papua, 6 October 2011
[Abridged in translation by TAPOL]

Jayapura: The efforts being made by the DPRP (the Papuan provincial legislative assembly) to persuade the CEO of Freeport Indonesia to attend a meeting between the trade union, the SPSI, and related organisations, have apparently failed. The CEO Armanda Mahler was not present at the meeting.

According to the chairman of Commission A of the DPRP, the meeting discussed the wages  of the Freeport workforce and made several recommendations.The first was that the DPRP, the provincial legislative assembly, should set up a special team to visit the location of the mine in Tembagapura. The second was a decision to write to the management asking the company to stop recruiting new workers as well as other steps that are harmful to the workforce. The third was to call on the Indonesian government, via the intermediary of the US embassy in Jakarta to approach the major shareholder, James Robert Moffet to be held to account for the conflict between the company and the workforce.

Asked about the failure of Moffet to attend the meeting, the DPRP member said that this revealed the arrogance of the American side towards the Indonesian government for not respecting the views of other parties. ‘Our spirits have not been dimmed,’ he said, ‘as we are voicing the aspirations of the Papuan people.’

Meanwhile, the spokesman for the SPSI Julius Pororongan, together with the chairman of PUK-SPSI, told the press after  the meting that efforts to recruit new workers was a blatant violation of Law 13/2003 on labour relations, because the company is not allowed to recruit workers while workers are on strike.

It also appears that  since the start of the strike by the Freeport workforce, an accident occurred at the mine but the identities of the two casualties  are not known. The union said that if they were able to obtain the names of the two casualties, they would announce them to the press.

The union rejects any mediation because the proposal for mediation does not take into account the call for a 25 percent (sic) increase in wages. Our demands, he said, are based on a number of factors. Firstly, the capacity of the company and secondly it income, and thirdly it should take account of the need for compensation for the risks involve in the work, and fourthly, it should take account of inflation.Fifthly it should take account of  the educational level  and work experiences. He said that the union had held meetings with the MPR and the DPRPand hopes that the provincial government  will pay attention to the special autonomy law because the company falls under the authority of this law. While both the company and the workforce are major assets , it is hoped that the government will work together witl all the relevant components  and will seriously  recognise that  the company has been responsible for many violations by sacking workers for no legitimate reason and has intimidated the workers.

‘They hve intimidated our wives and children by sending them sms messages. This is very inhumane because our wives stay at home and dont know anything about what is happening in these industrial relations. The union has suggested that the company should stop violating the stipulations of the Industrial Relations Court .If the labour contracts remain in force a whole year, this means there will be no increase in wages, which will greatly benefit Freeport.’

He said that their efforts in their communications with the MRP and the DPRP as well as with the government were intended to get the government to deal with the problem more speedily.’It is not our intention to destroy the company,’ he said. ‘On the contrary, we want to persuade the company to acknowledge the workers living conditions within the  framework of better industrial relations so as to avoid  the emergence of new problems that occur when peopl are arbitrarily sacked .

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AFP: Freeport Workers in Papua Vow to Paralyze Production

Agence France-Presse
October 7, 2011

Freeport Workers in Indonesia Vow to Halt Production

Workers at one of the world’s largest gold and copper mine in the
remote Indonesian province of Papua vowed on Friday to paralyze
production, as their strike over pay enters its second month.

Workers at the Grasberg mining complex run by US giant
Freeport-McMoran began a month long strike on September 15, demanding
at least an eight-fold increase in the current minimum wage of $1.50
an hour.

“If we don’t get the pay increase we want, our goal is to stop
production by November 15,” said Virgo Solossa, spokesman for the
workers’ union, which extended the strike by a month on Thursday.

“Freeport has tried to intimidate us to go back to work, but we won’t
until they are open to a fair negotiation,” he said, adding that at
least 8,000 of the company’s 23,000 workers would remain on strike.

The Arizona-based company said it was “disappointed” by the union’s
decision, “which has no basis under Indonesian law.”

It added that some workers were gradually returning to work, “allowing
the company to scale up mine production, milling production and
concentrate sales.”

Production at Grasberg, one of the world’s largest sources of gold and
copper, has suffered considerably since the strike.

Production in the first week of the strike last month was slashed by
230,000 tons a day, representing daily losses of $6.7 million in
government revenue.

Slowing production at Grasberg, coupled with a spate of strikes at
Freeport’s South American mines, has raised concerns of a global
copper shortage, analysts said.

Freeport’s Papuan workers, who are mostly indigenous Melanesians,
receive the lowest wages of any Freeport mining facility in the world,
according to union workers.

The current lowest wage is $1.50 an hour, which workers want raised to
$12.50, the union said. The workers want the maximum hourly rate of
$3.50 to rise to $37.

The union had originally demanded a minimum of $17.50 and a maximum of $43.

“We have followed all the right procedures to strike, which is our
right. So we hope the company will make a fairer offer soon,” Solossa,
the union spokesman, said.

The company has offered a 25 percent increase on wages, which the
union rejected.

Freeport Indonesia is the largest single taxpayer to the Indonesian
government, contributing billions of dollars a year to state coffers.

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Freeport Strikes Could Just Work

with New Matilda.com

7 Oct 2011

Freeport Strikes Could Just Work

By Alex Rayfield and Claudia King

Renewed strikes at West Papua‘s Grasberg mine have caught the Indonesian government off guard – and signal a shifting power balance in the province, report Alex Rayfield and Claudia King

Workers at the Freeport McMoRan mine in West Papua resumed strikes on 15 September after more than six weeks of unresolved negotiation talks with company management.

Increasing numbers of international media are covering the workers’ return to strikes, the first of which ended in July after eight days of work stoppage that halted production at the Grasberg mine.

However, national and international media have focused solely on worker demands for an increase in their hourly pay rate — ignoring the history of Freeport’s unfair and even illegal treatment of the mine’s so-called “non-staff” workers.

West Papuan workers receive the lowest wages ($1.50-$3.00) of any Freeport mining facility in the world, despite the fact that their work accounts for 95 per cent of the company’s consolidated gold production, and a substantial percentage of Freeport’s copper production. According to NASDAQ, Freeport has reaped astonishingly high profits from the low labour costs at the West Papuan site, enabling the company “margins in excess of 60 per cent in past years”.

Indonesian energy minister Darwin Zahedy Saleh estimates the Indonesian government alone could lose as much as $6.7 million in tax revenues, royalties and other payments from Freeport every day the strike carried on. Leaders of the All Indonesian Workers Union (freeport division) have said they will agree to a 25 per cent wage increase (down from demands for increases of up to $200 per hour) but Freeport management is so far refusing to lift their offer higher than 22 per cent.

However, media coverage of the strikes is missing Freeport’s long history of suppressing workers’ rights and union organising in Papua, not to mention the historical context and legacy of poor industrial relations out of which these strikes have emerged.

For one, Freeport McMoRan’s contract of work with the Indonesian government was signed prior to a scheduled referendum on West Papua’s political status. The UN had granted Indonesian temporary control over the region in 1963 but by the time the “Act of Free Choice” of 1969 was ready to proceed, only 1,022 West Papuans — less than 0.01 per cent of the population at the time — participated. In reality there was no referendum and no vote. Papuans were told by Indonesian military generals to vote for Indonesian rule or have “their tongues cut out”. Unsurprisingly, in this atmosphere of intimidation, 100 per cent choose to support West Papua’s incorporation.

But Freeport McMoRan, subsidiary PT Freeport Indonesia, did not even wait for this farce. The US Company made a deal with the Indonesian dictator Suharto, who was waging military operations in West Papua at the time. Freeport signed their first contract of work in 1967, two years before the 1969 Act of Free Choice. Under Suharto an authoritarian management style became entrenched. Dissent by workers and the local Papuan landowners were repressed harshly by the military.

Secondly, Indigenous West Papuans’ cultural, and economic livelihoods, which are dependent on a healthy natural environment, have been disrupted by Freeport’s arrival. It is no wonder that local communities resisted both violently and nonviolently to the company’s takeover of large swaths of their territory. In fact, Papuan resistance to Freeport has always been connected to Papuan resistance to Indonesia’s repressive “neocolonial” rule, which has now lasted over 50 years and according to Amnesty International resulted in the deaths of over 100,000 people.

Alongside West Papua’s pro-independence movement are workers, both native Papuans and Indonesian migrants, organising for fair pay, basic rights to organise without threats and intimidation from Freeport management, and the provision of equal facilities for local workers as their foreign worker counterparts, including: housing, health care, education, and pension funds.

They are demanding the freedom to organise as workers, to strike and demonstrate without threats, intimidation, or interference from Freeport management or local police, and without penalty of receiving no pay or the risk of losing their jobs. Freeport has now engaged global security contractors Securicor (now G4S), to break the strike.

Union leaders are maintaining vigilant documentation of violations by the various security apparatus. Since resuming the strike, workers have received messages from officials viaSMS, and visits to their family homes by Freeport staff and security who threaten to withhold pay and fire striking workers. Barracks near the mine’s entrance in Tembagapura were raided by officials, some whom were allegedly foreign nationals, who according to workers ordered miners to sign an agreement to end the strike.

The most disturbing incident was the attempted shooting of Union Chairman Sudiro while in his home on September 11, 2011 by “persons unknown”, a phrase in Indonesia that is often shorthand for the Indonesian military.

In a significant escalation of resistance, leaders of the Amungme and Kamoro tribes — the two customary landowner groups who own the land Freeport is mining — are supporting the striking workers. Senior tribal leaders Anis Natkime, Canisius Amareyau, Viktor Beanal and youth leaders Jecky Amisim and Donny Emayauta have written to Freeport CEO James Moffett and Freeport President Richard Adkerson to ask the company to agree to worker’s demands.

Failing this the tribal leaders threaten to close Freeport’s entire operations from the Amungme highlands of the 4,200 metre high Grasberg mine down to the Kamoro lowland port of Amapare. In doing so, these leaders are throwing off decades of fear and trauma brought about by repressive Indonesian military operations in support of Freeport. Abuses include the forced removal of villages and massacres by Indonesian military and police personnel who have never been held to account.

Although Indigenous communities living in and around the site of the Grasberg mine are supposed to receive a percentage of the profits from mining extraction as a part of an agreement known as the “1 per cent fund” community leaders claim the funds, which are routed through Jakarta, never reach the local community. The fund has also created conflict and competition between tribes.

While there is no guarantee that workers and community leaders will achieve their goals or address long-standing grievances, the worker strikes have caught Freeport and the government off guard, and awoken them to the reality that they are no longer uncontested power-holders in the region. Instead they will be forced to shift their practices one way or another, or else face serious economic and reputational losses.

The strike also threatens to have much wider repercussions than mere pay rises. West Papuan independence leaders in other parts of the country are preparing to organise the third national gathering of Papuan resistance groups. These leaders are watching the events at Freeport closely. When the three-day Third Papua Congress opens in Jayapura/Port Numbay on 16 October you can be sure that grievances around Freeport will be high on the agenda.

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Freeport-Indonesia wages the lowest in the world, according to SPSI

Bintang Papua, 3 October 2011Thousands of workers from Freeport Indonesia  have been on strike since 15 September demanding higher wages and better personal welfare, bearing in mind  the great risks that their work involves. The wages they currently receive are far from adequate and are way below the wages paid in mines elsewhere the world.

‘Of all the mining companies anywhere in the world, the wages paid to workers at Freeport are the lowest. even though the risks they take are extremely high, working at a depth of 4,200 meters. It’s very dusty, high rainfall and extremely cold, as we mine copper, gold, silver and other minerals,’ said Frans Wonmaly, member of the executive committee of the trade union SBSI.

In 2006 the workers’ pay in North America was $10.70 an hour, in South America, it was $10.10 an hour but in Indonesia it was only $0.98 an hour. In 2010, the pay had reached on average $66.43 an hour, whereas in Indonesia it was only  $4.42 – $7.356 an hour

‘As compared with mining companies elsewhere in the world, the difference is like heaven and earth, and this is why we are making demands from the management,’ he said. All they were asking for was a rise to $30-$50 an hour.

Wonmaly strongly denied a recent statement by Armando Mahler, president-director of Freeport Indonesia to the effect that the workers would be losing Rp 570,000 a day.’ I personally have reached Grade 3 and I only get Rp7 million a month. If I were getting Rp570,000 a day I would be receiving Rp17.2 million a month,’ he said, while holding up the joint contract book.  As yet, negotiations between the workers on strike and the management have not made any progress. Despite the mediation of the labour affairs ministry in Jakarta, there is a deadlock.’The management has not shown any intention to recognise the aspirations of their workforce.’

Furthermore, the management is spreading propoaganda, sending sms messages to the families of the workers and spreading reports in the local media that the workers should go back to work. Wonmaly said that the strike will continue until their demands have been fully met by the company. ‘It will continue till 16 October and if by then, negotiations have still led nowhere, the workers have agreed call in lawyers and take the dispute to court.’

According to a spokesman of the company, 1,217 contract workers have returned to work.in the higher reaches of the mine which they travel to daily by 23 buses.

The production and dispatch of concentrates is now very limited, while the management have expressed their appreciation to those workers who have remained at work.

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A history of violence at Indonesia mine/AJE

Rio Tinto has cosy ties with the Indonesian military, who have a long history of human rights abuses.
Freeport’s James Moffett has said ‘there is no alternative’ to the company’s reliance on the Indonesian military [EPA]


Investing in conflict-affected and high-risk areas is a growing concern for responsible businesses and investors. Companies based in developed countries often operate in lesser-developed foreign markets, where governance standards are lax, corruption is high and business practices are poor.

These pieces focus on one specific Anglo-Australian company and their American partner that jointly operate a mine in West Papua, one of the poorest provinces of Indonesia. The risks for the company include the potential to contribute to environmental and social damage in a foreign market. The risks for investors include financing a company that does not get its risk management right.

This is the third chapter of a four-part essay that examines how the Norwegian Pension Fund came to blacklist the mining giant Rio Tinto. The first part can be found here, and the second part can be found here.

In February 1995, Anglo-Australian mining giant Rio Tinto announced three deals that secured access into Grasberg, a massive gold and copper mine in the Indonesian province of West Papua.

First, Rio Tinto agreed to invest $500m of new capital in Arizona-based mining corporation Freeport for a 12 per cent stake in the US business. Second, Rio Tinto agreed to finance a $184m expansion of the Grasberg mine. In return, it received 40 per cent of post-1995 production revenue that exceeded certain output targets and, from 2021, a 40 per cent stake in all production. Finally, Rio Tinto would receive 40 per cent of all production from new excavations elsewhere within West Papua.

Rio Tinto was effectively doing business with Indonesian dictator Suharto, too.

In response, Freeport told shareholders that Rio Tinto would “contribute substantial operating and management expertise” through proportional representation on the board – as well as on various Grasberg operating and technical committees, from which the “policies established by the [board] will be implemented and operation will be conducted”.

Speaking of the “exceptional potential” of the deal, Rio Tinto’s then chief executive, Robert Wilson, agreed that“given [Rio Tinto’s] experience in other major open-pit copper ore bodies such as Bingham Canyon, Palabora and Escondida, we anticipate considerable mutual benefit”.

Rio Tinto obviously liked how Freeport-Indonesia did business, especially at Grasberg.

US government: Grasberg contravenes the Foreign Assistance Act

By October 1995, an independent US government agency had cancelled Freeport’s international political risk insurance. The insurer, the Overseas Private Investment Corporation (OPIC), specifically cited the Grasberg mine operation as contravening the Foreign Assistance Act of 1961, which required that “overseas investment projects do not pose unreasonable or major environmental hazards or cause the degradation of tropical forests”. Freeport was the first policyholder to be terminated by the OPIC for ethical violations, despite President Suharto and Freeport director Henry Kissinger heavily lobbying the US government to reinstate the policy. Following OPIC’s decision, the company did not disclose the environmental performance of the mine again until 2003 – it no longer had to.

For a brief time in 2000 and 2001, a particularly sympathetic Indonesian environment minister, Sonny Keraf, pursued numerous avenues to impose penalties and fines on Grasberg, including an unsuccessful attempt to invoke the criminal section of the 1997 Environmental Law to cease Freeport-Indonesia’s riverine method of tailings disposal, by which the corporation fed the mine’s waste product into nearby rivers. Under pressure for his pursuit of the part-Indonesian-owned Freeport, Keraf was replaced following the 2001 election.

As Suharto’s reign came to an end, an increasing number of West Papuans also began to campaign against the environmental and social impact of Grasberg. Papuan leaders brought the matter before the US Federal District Court in April 1996 and before the Subcommittee on International Operations and Human Rights of the US House of Representatives in May 1999. Many more attempts, including one to address shareholders at Rio Tinto’s 1998 annual general meeting in London, were foiled by Indonesian authorities.

Building on restrictions introduced in 1991, the US government banned arms transfers to Indonesia for widespread human rights violations in East Timor in 1999. Consequently, Freeport’s payments to the Indonesian military and security forces were more closely scrutinised. The Wall Street Journal found that, between 1991 and 1997, Freeport guaranteed more than $500m in loans so that Suharto’s family and allies could purchase a stake in the mine – a great portion of which was written off by Freeport in 2003.

An outspoken Australian academic, Lesley McCulloch, also found that the 1996 Timika riots adjacent to the Grasberg mine led to a spike in monetary demands by the Indonesian military, resulting in the funding of a $35m army base. Freeport and Rio Tinto refused to disclose details of the payments.

A history of violence

Then in August 2002, two US teachers and an Indonesian employee of Freeport-Indonesia were murdered at the Grasberg mine complex. Following one rebel’s admission that he was a business partner of the Indonesian military, several New York City pension (superannuation) funds formally requested that Freeport disclose the nature of its Indonesian “security” payments. The shareholders were concerned that such payments violated the Foreign Corrupt Practices Act.

Although Freeport was not required to put the proposal to shareholders, the company did begin to disclose its security-related payments. Filings with the US Securities and Exchange Commission since 2001 have confirmed annual payments reaching an average $5m each year for government-provided security of the Grasberg complex and its staff – and fluctuating annual costs reaching $12m for unarmed, in-house security costs. A spokesman for the company later told the Jakarta Post that these payments had been taking place since the 1970s.

Sporadic accounts began to surface – in the Sydney Morning Herald, Jakarta Post, and New York Times – quoting internal sources that confirmed that the Indonesian had masterminded the killings to extort monies from the Grasberg operators. “Not surprisingly, the Indonesian military has exonerated itself,” US Congressmen Joel Hefley and Tom Tancredo said in June 2003. “American investigative teams, including the FBI, have not been able to complete their investigations mainly due to the Indonesian military’s refusal to co-operate and tampering of evidence.”

Freeport remained steadfastly opposed to later demands by New York City pension fund investors to cease all payments to the Indonesians until they complied with official US investigations into the August 2002 murders. At the 2004 annual general meeting, president and chief executive Richard Adkerson advised shareholders: “The management and Board believe that the stockholder proposal mischaracterises the company’s relationships with Indonesian security institutions and suggests actions that would undermine the company’s relationship with the Indonesian government and the security of the company’s operations.”

Despite the ongoing human rights and corruption concerns in West Papua – including a report by the World Bank and a letter by US senators to then UN Secretary General Kofi Annan calling for the appointment of a special representative to Indonesia – after a vote by shareholders, the resolution was not passed.

On March 23, 2004, Rio Tinto announced it had sold its 11.9 per cent shareholding in Freeport. Rio Tinto made a $518m profit. Citing no environmental or social reasons, Rio Tinto’s then-chief executive Leigh Clifford reassured shareholders that “the sale of [Freeport] does not affect the terms of the joint venture nor the management of the Grasberg mine” and that through “our significant direct interest in Grasberg, we will continue to benefit from our relationship with Freeport”.

Rio Tinto remained committed to the mining of Grasberg and would continue overseeing its management through various operating and technical committees.

Sensational claims that illegal payments to individual soldiers, units, and policemen had been routinely made to secure the Grasberg complex and its staff came to light in 2005. A report by Global Witness revealed that an additional $10m had been paid directly to individual military and police commanders between 1998 and 2004. This included $247,000 between May 2001 and March 2003 to General Mahidin Simbolon, former head of the 1999 East Timor massacre, and monthly payments throughout 2003 to the police Mobile Brigade – a group cited by the US State Department as having “continued to commit numerous serious human rights violations, including extrajudicial killings, torture, rape, and arbitrary detention”.

With the US arms trade embargo still in place, Rio Tinto had reassured the market that payments to the Indonesian military were “legally required and legitimate” only months before the news broke. Now Rio Tinto and Freeport-Indonesia came under even greater public pressure. At Rio Tinto’s next shareholder meeting, after several West Papuans refugees made statements to the board on Grasberg, shareholder activist Stephen Mayne suggested that “the most appropriate thing for Rio Tinto to do would be to exit”. After confirming that Rio Tinto’s contractual obligations would permit such a move, then-chairman Sir Rod Eddington informed shareholders that they “make a considerable effort to ensure that the best that Rio Tinto can offer to Freeport in the management of that venture is available to them”.

An Indonesian ministerial decree in 2007 demanded that the security of “vital national objects” – such as Grasberg – be handed over to the police within six months. Evidence obtained by world news service AFP suggests this is not happening. In a filing to the US Securities and Exchange Commission, Freeport disclosed additional direct payments of “less than” $1.6m in 2008 to 1,850 soldiers, despite the fact that 447 policemen make up the official number of personnel responsible for security at the Grasberg complex.

Unrepentant

The company’s 2008 Sustainable Development report confirms that Freeport-Indonesia makes contributions to “security institutions (including both police and military)”. Alarmingly, according to Amnesty International, as recently as 2008 there have been fundamental human rights violations such as the “torture, excessive use of force and unlawful killings by police and security forces” – reports that have subsequently been confirmed by the UN Special Representative of the Secretary General on Human Rights Defenders and the United Nations Committee against Torture.

“There is no alternative to our reliance on the Indonesian military and police,” Freeport chairman James Moffett said to the New York Times in 2005. “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.”

Part 4 to follow next week.

This is an extract of a chapter from the book, Evolutions in Sustainable Investing: Strategies, Funds and Thought Leadership, to be published by Wiley in December 2011.

NAJ Taylor is a PhD candidate in the School of Political Science and International Studies at the University of Queensland, and casual lecturer in the Faculty of Law and Management at La Trobe University.

Follow NAJ Taylor on Twitter: @najtaylordotcom

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