Freeport tries to clear name in insurance row

Freeport tries to clear name in insurance row

NEW YORK (Reuter): Freeport-McMoRan Copper and Gold Inc. has moved to clear its name following a move by the company's insurer to cancel cover for the company's PT Freeport Indonesia mining operations because of environmental concerns.

The dispute over whether the Overseas Private Investment Corp. (OPIC) can cancel the policy has already been submitted to arbitration through the American Arbitration Associations.

But Freeport, angered by OPIC's claims over its environmental record in Indonesia, is keen to clear its name.

Richard Adkerson, Freeport's chief financial officer, said OPIC's move was abrupt and highly unusual, and prompted by environmentalist pressure on OPIC.

"About two months ago we received the first indication from OPIC, and they suggested we should withdraw the policy, otherwise they would cancel it on the basis of increased size of operation," Adkerson said.

Freeport Indonesia, one of the world's largest copper and gold projects, plans to produce 453,600 tons of copper in concentrates this year and 1.25 million ounces of gold.

Henry Miller of OPIC said in a letter to Freeport that since the project was opened, output has doubled to create more tailings, or mining waste, than OPIC anticipated.

"Freeport McMoRan's expansion of the PT Freeport Indonesia project has caused substantial adverse environmental impacts which compel OPIC to deny all further coverage of this project," Miller wrote.

Miller said the "massive deposition of tailings in the Ajkwa river and the sheet flow of tailings" has "degraded a large area of lowland rainforest."

"The project has created and continues to pose unreasonable or major environmental, health or safety hazards with respect to the rivers that are being impacted by the tailings, the surrounding terrestrial ecosystem, and the local inhabitants," Miller wrote.

Unfounded

Adkerson said OPIC's concerns are unfounded. "They could not provide support for them. We are in full compliance with all requirements of the Indonesia government. We have never been sanctioned for environmental issues," Adkerson said.

"We have a government agency responding to environmental groups who no longer have a sympathetic ear in Congress to achieve their agenda," Adkerson said.

Adkerson acknowledged that the mine had an impact on the environment. "But the damage is virtually non-existent over time," he said.

Freeport paid OPIC an annual premium of over US$1.0 million to cover against war, insurrection or in case the Indonesian government reneged on a contract.

Adkerson said the policy, which in recent years has been of "questionable value", is still valid, and OPIC has no right to cancel it.

OPIC spokeswoman Allison May Rosen said the agency would make no public comment about the insurance termination.

"I can confirm that OPIC has terminated the $100 million political risk insurance on Oct. 31," Rosen said.

Rosen declined to comment on Freeport's allegation that the agency had caved in to environmentalists.