Indonesia Sends Troops To Safeguard Freeport Operations

The murder of an Australian employee, a local security guard and a policeman in July 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 has reported.

China’s state-owned news agency reported that Indonesian officials said the 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 the capital Jakarta, 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 July 21 conference call announcing the company’s second-quarter results. 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. Freeport owns 90.6% of the mine through an Indonesian subsidiary and the Indonesian government owns the remaining 9%.

The Indonesian government 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 the Indonesian government is “responsible for employing police and military personnel and funding and directing their operations,” said Freeport in a 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 states.

Last year, the company 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 costs included 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 include members of the Coast Guard at the port site, the Air Force at the airport, riot control, and perimeter and onsite security at the mine and the mill.

Those funds were in addition to the US$22.7 million Freeport spent last year on its own internal civilian security measures, including the employment of a 750-person-strong, unarmed security 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. Some also argue that the Indonesian government uses the mine as an excuse to suppress campaigns for Papuan independence.

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