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Monday, April 11, 2011

Articles about the gold mine freeport


Freeport Gold Mine: who is deprived of State Assets

Potential Mining Giant Freeport

Demand for minerals in the world market in the future will likely continue to rise. Demand for copper, for example, continue to rise along with rising economic nations in the world. This was accompanied by an increase in the industrial sector, especially industries related to telecommunications and electricity sectors. As a copper producer Freeport certainly profited greatly by the needs of this industry.

Freeport Indonesia through production was recorded as the ten largest copper producer in the world. Indonesia showed increased copper production, for example from 928.2000 tons in 1993 to 1, 06 million tons in 1994 and 1.52 million tons in 1995. Copper commodity price projections by the World Bank showed a tendency to continue to rise. Meanwhile, the other producing countries like the United States and Canada have reached the maximum point of production.

With the growing global demand means that the future of Freeport has a great chance to earn profits doubled. Until now, the three types of mining production in Indonesia is dominated by Freeport. Freeport's copper production rose very high, for example in 1991 by 50% and 42% in 1995. This can be met because of the size of the territory of exploitation by the government. Indonesia currently produces 100% copper produced by PT Freeport.

PT Freeport mining area currently covers an area of ​​2.6 million hectares or equal to 6.2% of the area of ​​Irian Jaya. In fact, the initial operation of PT Freeport only get the concession area of ​​10,908 hectares. Broadly speaking, the vast mining area can be exploited in the 2 periods, namely Ertsberg period (1967-1988) and Grasberg period (1988 - present). Potential metal ore Freeport initially managed only 32 million tons, whereas until the year 1995 rose to nearly 2 billion tons, an increase of more than 58-fold. 2005 data reveal, the potential Grasberg approximately 2.822 million metric tons of ore.

1. Potential Ertsberg

In 1936, a Dutch geologist named Jean-Jacques Dozy adventure expedition to the land of Papua and his team. Dozy and his team reached the peak of the mountains, where found a rock outcrop that allegedly contain valuable minerals. From the discovery outcrop locations were then led to the discovery of "Ertsberg" or Mountain ores, a mineral reserve is situated at the foot of snowy mountains. The report was published in the magazine Dozy geology in Leiden, Holland in 1939. The report inspired an exploration manager of Freeport Minerals Company, Forbes Wilson, along with Del Flint in 1960 on an expedition to Papua to learn more about these findings and believe that the mineral reserves Ertsberg will become the largest copper reserves. Allegation is proved, Ertsberg is the largest copper reserves ever found at that time.

Ertsberg consist of 40-50 percent in the form of iron oxide mineral magnetite, 3.5% copper in the form of the mineral chalcopyrite and bornit (both iron and copper sulfide). Thus, Ertsberg is the richest copper deposits ever found on the ground. Laboratory analysis to ensure expedition estimates that there are copper content of "13 acres", a code made by Wilson to declare 13 million tons of ore. Far more to the soil, it is estimated there are 14 million tonnes of ore for each depth of 100 meters. The total is estimated to reach 50 million tons of ore.

We do not have accurate data about how much the products mines that have been generated from Ertsberg. In planning and the initial agreement, apparently agreed that the region will only be producing copper mines, and this is the basis why it was originally called Tembagapura mining locations. Besides copper, the mine also produces gold Ertsberg turns. Gold initially "considered" just a by-product, it later became the main product of Freeport. This is perhaps due to increasingly high concentrations of gold and silver in minerals and the deposit was found.

We're not too sure about the claim is a by-product is gold because at that moment no one is Indonesia, which followed the purification process concentrates. Especially in the early period of mining, refining concentrate committed abroad, both in Japan and in America. Besides that Freeport had not yet become a public company must follow the principle of good corporate governance. Thus, it could be true since the beginning of Freeport has been produced or even gold and silver, but this has not declared, or intentionally concealed from the government.

From the data we collect is obtained that the potential mineral content Ertsberg reach 50 million tons of ore minerals. Mining Department of Papua mention Ertsberg reserves by 35 million tons, with 2.5% Cu content. Assuming an average price of copper for about 20 years of mining in Ertsberg period was U.S. $ 2000/ton, revenues can be gained from all the potential mineral Ertsbegr mine is (35 million tonnes x 2000 U.S. $ / ton) = U.S. $ 70 billion.

Please note that during the period Ertsberg, Freeport is a private company, and the smelter which used to refine the results of mine done in Japan and America. In addition, as noted above mine "Tembagapura" also produces gold, which is recognized as a "by product", which was sold by Freeport without government control. Thus, the total value of revenue that has been generated by the Freeport mine during Ertsberg believed to be greater than U.S. $ 70 billion mentioned above.

2. Potential Grasberg

After his review of production and income Ertsberg, we will also discuss the potential of the Grasberg mine production and revenue. For that we see data that indicated the Grasberg mineral reserves since December 31, 1995 in Table 1 below.

Freeport at Grasberg concession area holds the potential of copper, gold and silver in huge quantities. Metal content contained in the deposit is very high, namely 1.9 billion tons. Metal deposits contain potential copper reserves of 18 million tons (40, 3 billion pounds), reaching 1600 tonnes of gold (52.1 million ounces) of silver and 3400 tonnes (111 million ounces). With the existing capacity of 115,000 MTPD (million tons per day), estimated mine life is approximately 46 years (estimated in 1994 was 27 years old).

Potential reserves of copper, gold, and silver, from year to year may change, depending on the results of exploration carried out. Therefore, for the potential reserves of the Grasberg mine showed an increasing trend. During the period 1990-1995, potential copper reserves increased by 190%, gold reserves increased by 167% and 220% silver reserves. While at the end of December 2001, we note that in the aggregate gold reserves are 64.5 million ounces and copper reserves in the aggregate is 52.5 billion ounces.

Grasberg reserves found it eventually doubling the total reserves to 200 million metric tons. Based on the data displayed on Freeport Financial Report June 2009, we find that the reserves of the Grasberg gold and copper mine amounted to 38.5 million ounces and 35, 6 million tons. With the average price of gold and copper mines during the period are assumed, each for 900US $ / ounce, and 5,000 U.S. $ / ton, the total potential revenue is the Grasberg gold mine (38.5 million ounces of X 900US $ / ounce) = 34, U.S. $ 65 billion. While the total revenue potential of the Grasberg copper mine is (35, 6 million tons X 5000 U.S. $ / ton) = 178 U.S. $ billion.

If we assume only minerals mined gold and copper, the total revenue potential of the Grasberg mine is about U.S. $ 212.65 billion. However, because of the content of silver and various other mineral elements, the total revenue potential of the Freeport mine to reach U.S. $ 300 billion or around Rp 3,000 trillion! Indonesia must obtain a larger share of this potential.

Freeport Revenue and Change Become Giant Company

Based on the potential mineral content described above, found that the total revenue that can be accepted in Ertsberg minimum U.S. $ 70 billion and total revenue potential in the Grasberg worth about U.S. $ 300 billion. Of the total potential, we find that so far as miner Freeport, have gained a larger share of revenue than the state as owner of the resource. This can be found from the data obtained and published in the financial statements of Freeport.

Revenue based on the estimated mineral potential during the period Ertsberg above is about U.S. $ 70 billion. We do not charge that Freeport has made manipulation. However, the fact that gold is recognized as a by-product at the beginning of mining, and that silver is not declared as minerals produced, is a huge potential revenue that may be hidden in the official financial statements of Freeport. Thus, if this is true, it is not surprising that Freeport is a company at the beginning of the landless would evolve into a giant company in a short time.

Allegations of fraud or concealment of the total income of the element of gold as a "by product" This in turn has also hurt state revenues in a very large amount. They became great because of alleged cheating and colonize. But this did happen as a result of fraud and corruption by rogue elements Indonesia as well.

Based on the above table, if we compare the accumulated income of PT Freeport Indonesia (2004-2008) with the acceptance of Indonesia (2004-2008) will be able to look real, that Indonesia was severely impaired. PT Freeport Indonesia's total income from the period 2004-2008 was U.S. $ 17.893 billion. If all the operating expenses and taxes incurred Freeport assumed 50% of revenue, net revenue Freeport during 2004-2008 was U.S. $ U.S. $ 8.946 billion.

In Table 2 above we can also calculate the total revenue derived from taxes and royalties of U.S. $ 4.411 billion. Thus, Indonesia as the legal owner of mineral resources is precisely the acceptance of a smaller gain than the Freeport as a contractor KK rights holders, with a ratio of U $ 4.411 billion (Indonesia): U $ $ 8.946 billion (Freeport). Variation in reception which cost Indonesia should be changed immediately, and the way is to renegotiate KK and stock ownership by state-owned Freeport.

As mentioned above, in addition to copper, Freeport is a major producer of gold in Indonesia. Gold is currently a major product of Freeport, is no longer the copper. This is due to increasingly high concentrations of gold and silver in the mineral deposit was found. This gold production continued to increase until it reaches 67% of national gold production in 1995.

Since finding the largest gold and copper deposit largest in the world's number three, the company turned into a world-scale gold mining giant. Total assets owned by PT Freeport Indonesia until the end of 2005 reached U.S. $ 5.55 billion. In January 2006, PT Freeport Indonesia announced revenue in 2005 reached U.S. $ 4.012 billion (equivalent to Rp 40 trillion), doubled from a year earlier. Even in 2007, said PT Freeport Indonesia revenues reached U.S. $ 5.315 billion.

Based on the June 2008 financial statements, can be seen that the value of PT Freeport Indonesia's total assets amounted to U.S. $ 23.35 billion. In conclusion, we urge the Indonesian government to immediately have a stake in Freeport. However, the share price to be paid is not based on market price of FCX. The share price must be smaller, taking into account a variety of fraud and convenience that has been accepted for investing in PT Freeport Indonesia. (Continued)

photo illustration: safecom

*) About the Author:

Coal Marwan, was born in Delitua, North Sumatra, July 6, 1955. Marwan is a member of the Regional Representatives Council (DPD) RI 2004-2009 period, representing the provinces of DKI Jakarta. S1 graduated in the Department of Electrical Engineering, University of Indonesia and S2 field of Computing at Monash University (Australia). Marwan is a former employee of Indosat 1977-2003 with his last position as General Manager in Indosat. Through the vessel of State Assets Rescue Committee (KPK-N), Marwan forward hoping to play a role to advocate the policies of natural resource management, in order to be useful for the greatest prosperity of the people.



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