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)