Freeport not worried about future despite instability

JAKARTA (JP): Copper and gold producer PT Freeport Indonesia, a subsidiary of New Orleans-based Freeport McMoRan Copper and Gold, said yesterday it was not worried about the future of its operations in the country despite recent political changes.

Company president Adrianto Machribie said the firm's success was not due to ties to former president Soeharto, and thus his May resignation would not affect Freeport's position.

"We are operating on our contract of work which is based on the existing rules and regulations. We are not bending the rules and we are not trying to exploit them," Adrianto told a packed media conference.

He said the company was confident the government would honor existing contracts of works.

Freeport, one of the country's largest taxpayers for years, has long been dogged by allegations of collusion due its alleged close connections to Soeharto's administration.

The company, which has been active in Irian Jaya since the 1960s, operates the world's largest copper and gold deposit mine in mineral-rich Irian Jaya. It has proven and probable reserves of 2.17 billion tons of copper, gold and silver ore in and around its Grasberg contract area.

Freeport is 81.28 percent owned by McMoRan, 9.36 percent by the Indonesian government and another 9.36 percent by PT Indocopper Investama Corporation.

Indocopper is 49 percent owned by McMoRan, 50.48 percent by PT Nusamba Minerals Industri and 0.52 percent by the public.

Nusamba Minerals is owned by PT Nusantara Ampera Bhakti (Nusamba), controlled by Soeharto-led foundations and Soeharto's longtime crony Mohamad "Bob" Hasan.

Nusamba bought its stake in Indocopper from the Bakrie Brothers group in 1996 with a bank loan guaranteed by Freeport.

The deal further fueled speculation about Freeport-Soeharto connections. Company spokesperson Yuli Ismartono argued yesterday: "It is a business deal that is commonly practiced around the world under which the loan is repaid out of the dividend stream."

Adrianto acknowledged that Freeport enjoyed good connections with Soeharto's administration but claimed the company never committed unsavory business practices such as collusion and bribery to ensure smooth running of its operations.

He said Freeport, through its U.S. parent company, was obliged to abide by transparency guarantees such as the Foreign Practices Act and regulations of the New York Stock Exchange.

Freeport has also been criticized for years by international and Indonesian groups over allegations of mistreatment of indigenous peoples around its work site and widespread damage to the environment.

Several tribes and their members have attempted to file lawsuits in U.S. courts on charges including "ecoterrorism" and "cultural genocide".

Adrianto also said that Freeport's operations in Irian Jaya were unaffected by recent political unrest in the province.

A small group of separatists held demonstrations in Irian Jaya demanding the province's independence, beating one police officer to death last week. Police opened fire to break up a crowd that had raised a rebel flag on the island, leaving several students injured.

"Certainly we are concerned about it, but we're still operating normally," Adrianto said.

Freeport executive vice president Stephen M. Jones said Freeport expected a throughput of a little over 200,000 metric tons of ore daily this year compared to 129,000 tons daily in 1997.

He said a fourth, newly-built concentrator was currently at the commissioning stage, and the company expected ore processing to reach between 230,000 tons and 240,000 tons daily by the fourth quarter of this year.

Despite the increase in output, Jones said he anticipated a drop in 1998 profits due to a fall in commodity prices from 1997.

"The prices for our commodities are significantly depressed right now ... At current prices we would be less profitable in 1998 than in 1997," he said. (jsk)