Indonesia sends troops to safeguard Freeport operations

The murders in July of an Australian employee, a local security guard and a policeman and a spate of shootings since then at Freeport-McMoRan Copper & Gold‘s (FCX-N) Grasberg mine in Indonesia’s Papua province have prompted the country’s military to deploy about 600 troops to help safeguard the company’s workers, Xinhua reported today.

China’s state-owned news agency reported that Indonesian officials said the additional troops would be deployed on Sept. 2 and would protect the mine from shooters the government believes come from the Papua Independence Movement, a militant separatist group.

Unidentified gunmen have also fired at Freeport buses on the road leading to the mine site on two separate occasions, Aug. 12 and 16.

Two of the seven suspects that are being held in connection with the attacks worked at the mine, about 3,400 km east of Jakarta, the country’s capital city, according to news reports.

One of the men arrested “‘has admitted to being the sniper,'” Richard Adkerson, Freeport’s president and chief executive, said in a conference call July 21 announcing the company’s second quarter financial results. But Freeport has been “‘assured by the highest levels of the Indonesian government that they are committed to providing security'” he noted.

“The attacks have taken place outside the mining operations area and production has not been impacted,” Bill Collier, a Freeport spokesman, told The Northern Miner. “But there is no question the situation is stressful to our employees and we will be greatly relieved when it is resolved.”

The Grasberg mining complex is the world’s largest copper and gold mine in terms of recoverable reserves. Freeport owns 90.6% of the mine through an Indonesian subsidiary and the Indonesian government owns the remaining 9%.

Indonesia designated Grasberg as one of the country’s national vital assets and the mine has been protected by both the Indonesian police and military. This designation means that the Government of Indonesia “is responsible for employing police and military personnel and funding and directing their operations,” according to Freeport’s 2008 report on sustainable development.

Due to the government’s lack of resources and the mine’s remote location, however, Indonesia “has looked to the company to provide logistical and infrastructure support as well as supplemental funding for these necessary services,” the report notes.

Last year Freeport spent about US$8.2 million on expenses involving the support of government-provided security. That support included infrastructure costs, food, housing, fuel, travel, vehicle repairs and allowances to cover incidental and administrative costs. The funds also went to pay for in-kind assistance and monetary allowances “to mitigate living costs and the hardship elements of posting in Papua.”

About 1,860 government security personnel in the area received support from Freeport last year. Those numbers included members of the Coast Guard at the port site, the Air Force at the airport, riot control personnel, and perimeter and on-site security at the mine and the mill.

Those funds came on top of the US$22.7 million Freeport spent last year on its own internal civilian security measures, including the employment of a 750-strong, unarmed, security personnel force.

Grasberg has fallen under public scrutiny on environmental grounds and is accused by local tribal leaders and members of the Papuan separatist movement for not sharing its wealth with indigenous people.

At presstime Freeport was trading at US$62.85 per share. Over the last 52 weeks it has traded in a range of $15.70-$90.61 per share.