Freeport launches trust

Vancouver — Seeking to improve relations with the indigenous community, Freeport-McMoRan Copper & Gold (FCX-N) aims to establish a trust for the benefit of the original tribal people around its large Grasberg operation in Irian Jaya,

Through its local mining affiliate PT Freeport Indonesia (PT-FI), the company will start the trust with US$2.5 million and then add US$500,000 to it every year. The agreement was first outlined in 1996, and fulfills the commitment by Freeport to recognize the traditional land rights in the mining area.

“This agreement and the Memorandum of Understanding are the result of several years of dialogue between PT-FI and the local community as we continue to work together in a spirit of mutual respect and understanding,” says Freeport’s CEO, James Moffet.

The fund benefits tribal groups in villages closest to the mining operations including the Amungme villages of Waa-Banti, Tsinga and Arwanop, the Kamoro villages of Nayaro, Nawaripi and Tipuka.

“We used to be on the outside, but now we stand together.” Says the Chairman of one of the local groups, Thom Beanal. “We have a stake in this mining operation and we will work hard so that we can share in its success.”

This marks the latest agreement between Freeport and the local communities. The company already spends US$20 million in yearly development through the Freeport Fund for Irian Jaya Development and existing land use recognition programs.

The Grasberg operation continues to be the cash cow that drives Freeport’s bottom line. Record gold sales and throughput in the second quarter of this year allowed Freeport to post zero-unit cash costs for each pound of copper produced at the Indonesian operation.

In the quarter ended June 30, Grasberg churned out 389.8 million lbs. copper and a record 813,600 oz. gold. Throughput reached a record 240,000 tonnes per day. During this period, Freeport posted net income of US$36.3 million (or 25 per share), compared with a net loss of US$18.6 million (12 per share) a year earlier.

For the full year, Freeport expects to produce 1.4 billion lbs. copper and 2.5 million oz. gold (an increase of about 200,000 oz. gold from 2000). Net unit cash costs for 2001 are expected to average US9 per lb. of copper, after gold and silver credits.