FCX is in grave danger of of loosing the jewel in its crown - the giant Freeport Mine in West Papua. Freeport is the second largest producer of copper in the world. It is also a substantial gold producer.
The WPNGNC has no sympathy for FCX because of its past dealings with the corrupt Indonesian Elite, Police and Military. Since 1969, when the mine commenced production, FCX has greased the greedy palms of successive individuals, the most prominent being former corrupt, bloodthirsty, President Suharto.
Stricter US corporate disclosure laws, following the Enron collapse, have made it more difficult for companies like FCX to hide corrupt payments in their Annual Reports.
See report "Paying for Protection (pdf 1.6mb)" by Globalwitness.org.
Crunch time, for FCX, came in August, 2002 when the Indonesian Military staged an ambush on a Freeport Mine convoy of 4WD which resulted in the deaths of two American teachers and an Indonesian teacher as well as the wounding of several others. The Indonesians attempted to blame the OPM for the attack in order to demonstrate to Freeport Management that it should continue to pay protection money.
The simplistic mind set of the Indonesian Military planners for the attack was soon exposed and even Bali policeman Pastrika determined the Indonesian Military was responsible for the ambush. Pastrika was hastily withdrawn from the investigation.
The whole Timika incident is well covered in the Globalwitness report.
The local Indonesian populace often refer to their Military as "Boneheads" and it appears this term is well deserved.
Indonesian Kopassus & Military
aka Boneheads
Indonesian Police and Military rely on graft, corruption and side businesses such as illegal logging, prostitution, drug running and where ever else a quick buck can be made, to top up their modest standard government salaries.
The second warning came in early January this year when Indonesian Attorney General Abdul Rahman Saleh announced an investigation into Freeport's payments to Indonesian Security Forces (boneheads).
The third warning came for FCX when the the Indonesian Vice President issued a press release earlier this month demanding a greater Indonesian share in the Freeport profits.
Indonesia wants to renegotiate its profit-sharing agreement with U.S. mining giant Freeport because of soaring mineral prices on the global market, Indonesia's vice president said Friday.
"Prices of gold and nickel are currently high, (and) based on this, profit sharing should be increased by two to three times from the previous figures," Jusuf Kalla told reporters, without elaborating on whether the terms of the government's current deal allow for renegotiation.
A fourth warning came, at about the same time, for FCX when the Indonesian Environment Minister stated recently that he was concerned by the extent of the Freeport Mine's destruction of the local environment. Suddenly after over thirty years of environmental destruction and pollution the Indonesians are now concerned about Freeport's mess. In the past FCX has consistently stated that it has met or exceeded all Indonesian environmental standards. This all occurred under an environmental plan when there was mass acid pollution pristine lakes and rivers and land slips which resulted in the deaths of several Freeport workers.
The fifth warning is occurring right now. In the last few days there have been extensive protests at both Timika and Jakarta (Freeports Indonesian Office) which have forced closure of the mine. Freeport have advised that the closure is costing the company $12m US a day.
Under normal circumstances Freeport would request the "boneheads" to clear the protestors and this request would be complied with utmost vigor. The four hundred "illegal" miners would be massacred.
The fact that this has not happened and the fact that West Papuan students protested and ransacked the Jakarta offices of Freeport, indicate the protests are stage managed by the Indonesian authorities (boneheads?) with the ultimate authorization coming much higher up the tree, possibly from the top.
It will be very interesting to see what happens in the wash.
Some very other interesting developments have also occurred recently. Russia and Indonesia have announced the construction of a joint space base on Biak Island. Construction has already commenced. Indonesia has indicated its intention to purchase Russian military equipment including its latest fighter planes and helicopters. It has also indicated its wish to develop a much more extensive arms manufacturing industry with the assistance of Russia. China has agreed to carry out joint development with missiles.
When you examine the history of the Freeport Mine and the involvement of individuals like former US President Gerald Ford and Henry Kissinger with FCX, you would imagine that FCX would be pulling every string it can with the Bush administration to save the Freeport project. The loss of the mine would have no doubt would result in the collapse of FCX and result in significant downturn in the US stock market particularly mining.
The final question is - would the Bush Administration let this happen.
President Yudhoyono should look at Indonesia's short history and in particular President Sukarno's courting of the Russians in the early 1960's and his subsequent fate.
Whilst current circumstances are different, the US must be concerned about Russia and China's expansion into Indonesia. The US currently has it's hands full in Iraq, can it afford not to support its golden jewel in West Papua.
China is a major purchaser of Freeport ore.
If the Indonesians were to take control of the Freeport Mine, they would require the assistance of a major partner such as China or Russia to keep it running. China or Russia would be less concerned about corporate accountability than the US owned FCX and FCX has a very poor past record in that area.
Condoleezza Rice recently announced that she would be keeping a close eye on West Papua. There is no doubt there is concern in the Bush Administration and it's not about human rights.
The Indonesian Administration is just driven by greed. The company said it paid $1.2 billion (US) in taxes, royalties and dividends to the government in 2005 and is the largest corporate taxpayer in Indonesia. None of this money finds it way back to indigenous West Papuans.
If I was holding any FCX shares, I would be unloading them right now.
The WPNGNC believes whatever the outcome is for the Freeport Mine, the fact is that the Indonesians have lost the trust of US and a process has been put in train which cannot be stopped.
The WPNGNC's advice to the OPM to leave the Freeport Mine alone was very wise advice indeed, in view of the above circumstanes.
Our only hope is that it will result in Independence for West Papuans.
Whatever the outcome watch this space.
24th February, 2006
