Habibie approves Freeport's controversial expansion plan

Habibie approves Freeport's controversial expansion plan

JAKARTA (JP): Mining company PT Freeport Indonesia has secured
President B.J. Habibie's firm support for its controversial
expansion of the giant Grasberg mine in Irian Jaya, although
Minister of Mines and Energy Kuntoro Mangkusubroto has asked for
further assessment of the plan.

Documents made available to The Jakarta Post on Wednesday said
that Habibie had instructed several ministers to assist Freeport
"realize its plan to increase its ore output to 300,000 metric
tons per day according to the schedule and plan which have been
agreed upon by the government."

The instruction was issued on Saturday, the same day James
Moffet, chief executive officer (CEO) of the giant United States
mining company Freeport McMoRan Copper & Gold, held a three-hour
meeting with Habibie at Merdeka Palace.

The ministers instructed to assist Freeport include
Coordinating Minister for Economy, Finance and Industry Ginandjar
Kartasasmita, Coordinating Minister for Development Supervision
and State Administrative Reforms Hartarto, Minister of Industry
and Trade Rahardi Ramelan, State Minister of the Empowerment of
State Enterprises Tanri Abeng, Minister of Mines and Energy
Kuntoro Mangkusubroto and Minister/State Secretary Akbar
Tandjung.

Habibie issued the instruction in response to a letter Moffet
delivered to him on Saturday.

"As you can see, we have produced three million ounces of gold
and 1.7 billion pounds of copper (last year). These excellent
financial results were made possible by the recent expansion of
our mining facilities," Moffet's letter read.

"This expansion should allow us to continue increasing our
daily ore production to approximately 300,000 tons per day (tpd).

"Freeport has all the permits necessary to reach this 300,000
tpd goal," Moffet added in his letter, a copy of which was made
available to the Post.

PT Freeport Indonesia is 81.28 percent owned by United States
mining company Freeport McMoRan Copper & Gold, The Indonesia
government hold a 9.36 percent stake in the company, as do PT
Indocopper Investama Corporation.

Indocopper is 50.48 percent owned by Nusamba Mineral
Industries, which is linked to former president Soeharto.
Freeport McMoran hold a 49 percent stake in Indocopper and the
investing public hold 0.52 percent.

The director general of mining at the Ministry of Mines and
Energy, Rozik B. Soetjipto, said earlier that Freeport had
obtained the necessary environmental impact analysis certificate
from the office of the State Minister of Environment but that his
office had yet to issue a permit for the production plan.

He said the company had instead been issued with a principle
permit under which the company must prepare a feasibility study
and can undertake trial operations until March this year.

"The minister (Kuntoro) will decide on the expansion on the
basis of the results of the feasibility study," Rozik said.

Rozik said that Freeport was licensed to produce a maximum of
160,000 tpd but currently produces around 200,000 tpd.

Kuntoro said recently that he would move swiftly to license
mining companies operating in remote areas given their pivotal
role in development of the country's hinterland.

He said he would prefer to place limits on their output to
sustain production over longer periods of time.

The longer the companies operate, the greater the modernizing
influence they will have on people living around the mines,
Kuntoro reasoned.

"Freeport has been lobbying to increase its output for a long
time, but I was very careful when considering the permit for that
reason," said Kuntoro, who served as director general of mining
from 1993 to mid-1997.

Freeport received the principle permit for the expansion in
late 1997 from then-director general of mining Adjat Sudradjat.

On Sept. 30 last year, The Asian Wall Street Journal reported
that Freeport's expansion was controversially approved directly
by former president Soeharto.

"When Freeport wanted to more than double its Grasberg output
last year (1997), Mr. Moffet took the case directly to Soeharto."

"The president scrawled his approval of the controversial
expansion in the margins of Mr. Moffet's personal letter to him
-- many months before the required environmental reviews had even
begun," the paper said.

Moffet is known to be a close friend of Soeharto. (jsk)