Contact l Sitemap

home industries issues reasearch weblog press

Home  » Industries » Natural Resources

Freeport McMoRan's Corporate Profile

Project Underground
May 19th, 1997

"We have a volcano that's been decapitated by nature, and we're mining the esophagus, if you will."

"I can assure you that we receive better treatment in some foreign countries than we do here" -- on U.S. citizens attempts to hold Freeport accountable to the law.

"We find President Suharto to be a compassionate man."

"I graduated with the highest grades of any footballer at the University of Texas" -- explaining his qualifications to order Austin city officials around.

"You've got to be able to just goddam know your instincts are right" -- explaining how CEO's function.

"This is not a job for us, it's a religion" -- describing Grasberg as the world's greatest mine.

"I guarantee you this sombitch is glad we found a copper and gold mine" -- showing a slide of a smiling Irianese youth in a bellhop uniform -- "(...before Freeport arrived) the young man was raising vegetables or doing whatever on the mountain with his parents."

"We're going to mine all the way to New Orleans."
Quotes by Jim Bob Moffett, CEO of Freeport McMoRan [1]

Freeport-McMoRan Copper & Gold Inc, headquartered in New Orleans, is one of the world's largest and lowest cost copper and gold producers, from its Grasberg mine in Irian Jaya. In 1996 it was regarded as one of the ten worst corporations by the Multinational Monitor magazine.[2] For the money-minded however, Freeport-McMoRan Copper and Gold was listed as number 628 in the 1997 "Fortune 1000" listing of the biggest US-based corporations. Revenues were up 4% on last year at $1.9 billion with profits of $226 million.[3] The Grasberg concession's worth is estimated at $50 billion -- the single greatest asset of the company and its parent Freeport McMoRan Inc.[4]

Traded as FCX on the New York Stock Exchange the money-making operations around and out of Grasberg -- exploring, mining, smelting and marketing -- are actually conducted through FCX's majority-owned subsidiaries, P.T. Freeport Indonesia Company (PT-FI), P.T. IRJA Eastern Minerals Corporation (Eastern Mining) and through Atlantic Copper Holding, S.A. (Atlantic), a wholly owned subsidiary. FCX is itself majority-owned by the parent company Freeport McMoRan Inc (FTX) which spun off its mining operation in 1988 as a public company shortly after Grasberg was discovered.[5]

Freeport-McMoRan Inc. (FTX), has other business interests than copper and gold mining. These include a joint venture partnership in IMC-Agrico Company. This is one of the largest fertilizer producers in the world with operations in Florida and Louisiana. FTX also produces phosphate-based animal feed ingredients through IMC-Agrico. Further, FTX is the largest producer of Frasch sulphur worldwide, through majority ownership of a company known as Freeport McMoRan Resource Partners. FRP operate the offshore Louisiana Main Pass sulphur mine and the Culberson mine in West Texas. FTX is also engaged in the exploration, development and production of oil and gas reserves and has substantial oil production at Main Pass from the same geologic formation that holds the deposit's sulphur.[6]

The Grasberg Mine's other Stockholders

The operations in Irian Jaya by Freeport-McMoRan Copper & Gold Inc's subsidiary Freeport Indonesia (PT-FI) involve mineral exploration and development, mining and milling of ore containing copper, gold and silver and the worlwide marketing of concentrates containing these metals. As well as Freeport's 25 percent interest in the joint venture to construct a copper smelter on Java, Eastern Mining conducts mineral exploration activities on land adjacent to the Grasberg concession for them. Both PT-FI and Eastern Mining operate through Contracts of Work with the Government of Indonesia which, at the end of 1996, covered approximately 5 million acres of Irian Jaya. The other subsidiary of Freeport-McMoRan Copper & Gold known as Atlantic (formerly Rio Tinto Minera, S.A.) is engaged in the smelting and refining of copper concentrates from Grasberg in Spain and marketing refined copper products.

In October 1996, FCX and The RTZ-CRA Group (RTZ-CRA) concluded exploration and expansion agreements worth $100 million.[7]

As a result of this joint-venture and their 12% shareholding, in Freeport-mcMoRan Copper & Gold, RTZ-CRA are now seen to be in a major strategic alliance with Freeport and fuly involved in the ongoing debacle at Grasberg . RTZ-CRA is the world's largest mining company and has been the focus of protest for decades by labor, indigenous and human rights as well as environment groups.[8]

PT-Freeport Indonesia's shareholders include the Indonesian Government (10%) as previously discussed. In March 1997 an Indonesian company known as PT Nusamba acquired about 4.5% of PT-Freeport Indonesia, in a bizarre business deal by which the $254 million commercial loans for the purchase were guaranteed by Freeport McMoRan Copper & Gold itself.[9] PT-Nusamba is controlled by prominent businessman Mohamad "Bob" Hasan, a close friend of President Suharto, and Nusamba is a subsidiary of the Nusamba Group, majority owned by foundations chaired by Suharto.[10] This creates a situation where an American business is underwriting operating in Indonesia is underwriting the purchase of some of its stock by the President of Indonesia.

As mentioned, in 1996 a joint venture between Mitsubishi (75%) and Freeport McMoRan Copper & Gold(25%) was announced to construct the Gresik smelter to process copper in Romokalisari Village, in Manyar sub-district on Java. The inititation of the project came when the Indonesian Government told Freeport that it had to build a smelter if it wished to extend its mining contract. Due to be finished in 1998, the $710 million smelter plant will produce copper cathode, anode slimes and sulfuric acid.[11]

Freeport McMoRan Copper & Gold's Board of Directors include Jim Bob Moffett, who is also Chief Executive Officer and a Director of Freeport McMoRan Inc. Another noteworthy Freeport Board member is former Secretary of State, Henry Kissinger. He is the company's main lobbyist for dealings with Indonesia. Dr Kissinger has had strong connections in Indonesia since he met with President Suharto just prior to the invasion of East Timor, reportedly to provide full American support. His firm receives a yearly retainer fee of $200,000 from Freeport.[12] Kissinger has been director of parent company Freeport McMoran Inc since the late 1980s, and is also a shareholder in both companies. Corporate documents distributed to Freeport shareholders at the company's annual meeting this year showed that Kissinger's alma mater, Harvard University, owns 53,000 shares in Freeport-McMoran, alongside larger Wall Street investors such as Putnam Invetsment Management, Oppenheimer & Co and Scudder, Stevens & Clark.

Freeport's political influence does not end with Kissinger. In fact, according to Federal Election Commission documents, Freeport-McMoran gave the Democratic National Committee $40,000 on August 26 of 1996. On September 6, the wives of Freeport's top executives, Chief Financial Officer Richard Adkerson, vice chairman Rene Latiolais, and chief investment offiver Charles Goodyear, wrote checks to the DNC totalling $35,000. Four days later, Jim-Bob Moffett's wife Louise wrote a check to the DNC for $2,500, for a total of $77,500 in donations from sources related to Freeport McMoRan.[13]


Image reprinted with permission of the cartoonist, Doug Potter]

Jim Bob Moffett was the tenth most highly paid CEO in the U.S. in 1996.[14] Last year Moffett had a compensation package that consisted of $6.956 million in salary and bonuses and another $26.776 million in long-term compensation, for a total of $33.732 million. Then Freeport McMoran Inc. paid Moffett a salary of $180,556 and gave him a bonus of $1.025 million, plus miscellaneous and long-term pay totalling $693,948 and stock options with an estimated current value of $5.375 million. Thus, Moffett's total compensation as a corporate chieftain last year was $41.007 million. "Looking at it another way," reported the Austin Chronicle, "Moffett's pay was nearly three times the total amount that (Freeport) has agreed to pay several thousand Amungme tribal members who have been displaced by the company's mining project in Indonesia."[15]

Freeport has received a huge amount of press concerning the company's involvement in the Busang controversy -- a supposedly enormous gold deposit or "motherlode" that turned out to be a hoax. Freeport's partner in the project was to be a Canadian-based mining company named Bre-X Minerals, which originally located the gold deposit in Indonesian Borneo and claimed it could contain up to 200 million ounces of gold worth almost $70 billion at current market prices. Recent testing by an independent consultant have confirmed drilling samples by Freeport-McMoran Copper and Gold at Busang that show the site may contain only a negligible fraction of the gold originally thought to be there.

When the news that Busang might not contain as much gold as previously thought was made public in March, Freeport McMoran Copper and Gold and Bre-X stock shares took a beating. Bre-X stock fell to the ground, while Freeport stock shed several points. The Busang controversy was then further compounded by the reported death of Bre-X's chief geologist, Michael de Guzman, from an unexplained fall from a helicopter while in transit to meet Freeport to explain why recent drilling samples were not showing significant amount of gold. Confirmation that he died has yet to be made, and since the whole deposit has been proven to be false, speculation that he was in on the scam has increased. Freeport and the global gold industry may never live it down. A class action has been launched by small time investors who lost their fortune on Bre-X.[16]

For more info on Freeport McMoRan -- check out the company's own material. And read -- Spinning Gold -- a recent Mother Jones magazine article by Robert Bryce summarising how Freeport has bought out the critics of its Grasberg mine.


Notes:

  1. "From the Mouths of Pigs: Famous Jim Bob Quotes", The Blank Wall, Earth First, Austin, June 1996, Bulletin: Giving Something back (The Truth)! Freeport Watch, Summer 1996.
  2. "The Ten Worst Corporations of 1996," Multinational Monitor, December 1996.
  3. "Fortune 1000 Ranked Within Industries", Fortune, April 28, 1997.
  4. Jan Roberts, UK cash props up terror mine, Independent of Sunday, November 26, 1995.
  5. About FMC&G, Freeport McMoRan Copper & Gold webpage ( http://www.fcx.com/fcx/about.htm)
  6. About FMI, Freeport McMoRan Inc. webpage ( http://www.fmi.com/frp/about.htm)
  7. Ownership and Joint Ventures with RTZ-CRA, Freeport McMoRan's webpage.
  8. Roger Moody, Plunder! PARTiZANS/CAFCA, 1991.
  9. Form 10-K Freeport McMoRan Copper & Gold Inc, Securities and Exchange Commission, Washington DC, April 1997.
  10. "Indonesia Bakrie to sell indirect stake in Freeport gold mine", Agence France Press, Jakarta, January 30, 1997.
  11. Jimbob Moffett, speech at Freeport-McMoRan's annual shareholder's meeting, April 29, 1997, New Orleans, Louisiana.
  12. "A Short Background on U.S. Arms Sales to Indonesia," East Timor Action Network, San Francisco Bay Area, 1997; Jeri Laber, "Smoldering Indonesia," The New York Review of Books, January 9, 1997.
  13. Robert Bryce, "Rough Times for OPIC," Austin Chronicle, February 21, 1997.
  14. Top Ten CEOs, Business Week, April 21, 1997.
  15. Robert Bryce, "Another Fine Pay Day for Jim Bob: Moneybags Moffett," The Austin Chronicle, April 25, 1997.
  16. William Symonds & Michael Shari, "After Bre-X, the Glow is Gone", Business Week, April 14, 1997.