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Grasberg mine open pit.
Grasberg mine open pit.
The Grasberg Mine is the largest gold mine and the third largest copper mine in the world. It is located in the province of Papua in Indonesia near Puncak Jaya, the highest mountain in Papua, and it has 19,500 employees. It is majority owned through a subsidiary by Freeport-McMoRan, own 90.64% of PT Freeport Indonesia, the principal operating subsidiary in Indonesia, including 9.36% owned through its wholly owned subsidiary, PT Indocopper Investama. The Government of Indonesia owns the remaining 9.36% of PT Freeport Indonesia. FCX operates under an agreement with the Government of Indonesia, which allows Freeport to conduct exploration, mining and production activities in a 24,700-acre area (Block A). It also conducts exploration activities in an approximate 500,000-acre area (Block B). All of Freeport's proven and probable mineral reserves and current mining operations are located in Block A. The 2006 production was 610,800 tonnes of copper; 58,474,392 grams of gold; and 174,458,971 grams of silver.
In 1936, Dutch geologist Jean Jacques Dozy was a member of an expedition that scaled Mount Carstensz, the highest mountain in the Dutch East Indies. While there, he made notes of a peculiar black rock with greenish coloring, and spent several weeks estimating the extent of the gold and copper deposits. In 1939, he filed a report about the Ertsberg (Dutch for "ore mountain"). He was working for Nederlandsche Nieuw Guinea Petroleum Maatschappij (NNGPM), an exploration company formed by Shell in 1935, with 40% Standard Vacuum Oil (Mobil) interest and 20% Far Pacific investments (Chevron subsidiary).
In March 1959 the New York Times published an article revealing the Dutch were searching for the mountain source of alluvial gold which had been flowing into the Arafura Sea. Geologist Forbes Wilson, working for the Freeport mining company in August 1959 after reading Dozy's 1936 report, immediately prepared to explore the Ertsberg site. In 1960 the expedition, led by Forbes Wilson and Del Flint, confirmed the huge copper deposits at the Ertsberg. It was financed by Freeport Sulphur, whose directors included Godfrey Rockefeller, Texaco chairman Augustus Long, and Robert Lovett.
In 1963, Dutch New Guinea was transferred to Indonesia, and the mine was the first under the new Suharto administration's (see New Order) 1967 foreign investment laws intended to attract foreign investment to Indonesia's then ruined economy. Built at 4,100 metres (14,000 ft) above sea level in one of West Papua's most remote areas, it involved a capital and technology input well beyond Indonesia's resources at the time. Construction cost was $US175 million, $US55 million above the original budget. A 116 km road and pipeline, port, airstrip, power plant and a new town called "Tembagapura" (literally: copper town) were built. It officially opened in 1973 (although the first ore shipment was in December 1972), and was expanded by Ertsberg East, which opened in 1981. Steep aerial tramways are used to transport equipment and people. Ore is dropped 600 metres (2,000 ft) from the mine, concentrated and mixed with water to form a 60:40 slurry. The slurry is then pumped through a 166 km pipeline through mountains, jungle and swamp to the port at Amamapare, dried and shipped. Each tonne of dry concentrate contains 317 kilograms of copper, 30 grams of gold and 30 grams of silver.
In 1977 the rebel group Free Papua Movement attacked the mine. The group dynamited the main slurry pipe, which caused tens of millions of dollars in damage, and attacked the mine facilities. The Indonesian military reacted harshly, killing at least 800 people.
By the mid-1980s, the original mine had been largely depleted. Freeport explored for other deposits in the area. In 1988, Freeport identified reserves valued at $40 billion at Grasberg (Dutch, "Grass Mountain"), just 3 kilometres (1.9 miles) from the Ertsberg mine. The winding road to Grasberg, the H.E.A.T. (Heavy Equipment Access Trail), was estimated to require $12 million to $15 million to be built. An Indonesian road-builder who had contributed to the Ertsberg road took a bulldozer and drove it downhill sketching the path. The road cost just $2 million when completed.
The 2003–2006 boom in copper prices increased the profitability of the mine. The extra consumption of copper for Asian electrical infrastructure overwhelmed copper supply and caused prices to increase from around $1500/ton to $8100/ton ($0.70/lb to $4.00/lb).
The workings include a very large open pit mine, an underground mine and four concentrators. The open pit mine – which forms a mile-wide crater at the surface – is a high-volume, low-cost operation, producing more than 67 million tonnes of ore and providing over 75% of the mill feed in 2006.
Ore undergoes primary crushing at the mine, before being delivered by ore passes to the mill complex for further crushing, grinding and flotation. Grasberg’s milling and concentrating complex is the largest in the world, with four crushers and two giant semi-autogenous grinding (SAG) units processing a daily average of 240,000 metric tonnes of ore in 2006.
A flotation reagent is used to separate a copper-gold concentrate from the ore. Slurry containing the copper-gold concentrate is delivered by three pipelines to the seaport of Amamapare, over 70 miles away, where it is dewatered. Once filtered and dried, the concentrate – containing copper, gold and silver – is shipped to smelters around the world.
The facilities at the port also include a coal-fired power station, which supplies the Grasberg operations.
The concentrator's tailings, generated at a rate of 230,000 tonnes per day, are the subject of considerable environmental concern, as they wash into the Aikwa riverine system and Arafura Sea. Some 130 square kilometres (50 sq mi) (eventually 230 square kilometres (89 sq mi)) of lowland areas along the Aikwa River, are covered by braided sedimentary channels indicative of high sediment load (similar to glacial runoff). Native fish have nearly disappeared from now-turgid waters of the Aikwa River. The overburden (700 kt/d)  remains in the highlands, up to 480 m deep and covering 8 square kilometres (3 sq mi). Its acidic runoff, dissolved copper, and the finer material gets washed into the headwaters of the Wanagon River. It settles out along the river course and then into the ocean, and will continue to do so indefinitely. Freeport's official response is that overburden is placed in the highlands as part of its Overburden Management Plan, at "sites capped with limestone and constantly monitored. Tailings are transported to the lowlands in a designated river system. Once reaching the lowlands, they are captured in an engineered system of levees built for that purpose." Freeport states that its discharges meet regulatory requirements.
In 1995, the Overseas Private Investment Corporation (OPIC) revoked Freeport's insurance policy for environmental violations of a sort that would not be allowed in the US. It was the first action of this sort by OPIC, and Freeport responded with a lawsuit against them. Freeport states that this revocation was based on a misunderstanding, the result of a single 1994 visit to Grasberg; the company later underwent an independent environmental audit by Dames & Moore, and passed. In April 1996, Freeport canceled its policy with the OPIC, stating that their corporate activities had outgrown the policy's limits. However, the OPIC report was later publicly released  and exposed gross misrepresentations by Freeport.
The mine is located within what used to be a small equatorial mountain glacier. Steepening of slopes related to mining activities, as well as earthquakes and frequent heavy rainfall, have resulted in landslides within the open pit mine.
While landscape reclamation projects have begun at the mine, environmental groups and local citizens are concerned with the potential for copper contamination and acid mine drainage from the mine tailings into surrounding river systems, land surfaces, and groundwater. Freeport argues that its actions meet industry standards, and have been approved by the requisite authorities.
Both Freeport and its partner Rio Tinto have been excluded from the investment portfolio of The Government Pension Fund of Norway, the world's second-largest pension fund, due to criticism over the environmental damages caused by the Grasberg mine. Stocks at a value of ca. US$ 870 million were divested from the fund as a result of the decisions.
Violent ambushes near the Grasberg mine have occurred as early as 2002, when three contract school teachers were killed in August 2002. Kopassus, the Indonesian Special Forces, allegedly instigated the incident.
Starting from 11 July 2009, a string of attacks commenced and lasted more than five days. A Freeport employee, Drew Grant, was one of the fatal casualties of this incident. The 29-year-old Australian Drew Grant was shot and killed while sitting in the back of a car on the way to a game of golf. Indonesian police indicated that Grant was fatally wounded due to the five shots he sustained to the neck, chest and stomach by unknown assailants using military-issue weapons. The attack also killed Freeport security guard named Markus Ratealo and a string of police officers.
On 7 April 2011, two Freeport employees were killed when the company car they were traveling in caught fire. Bullets were found inside the car, giving weight to the suspicion that the car was fired on by unknown gunmen. This incident sparked a protest by hundreds of Freeport employees concerned about the security along the jungle road leading up to the mine.
The Grasberg mine has been a frequent source of friction in Papua. Possible causes of friction are the mine's environmental impact on Papua, the perceived low share of profits going to local Papuans (Freeport's annual report shows it made $4.1billion in operating profit on revenue of $6.4billion in 2010) and the questionable legality of the payments made to Indonesian security forces for their services to guard the site.
Papua is also the home of Free Papua Movement, a militant organisation whose purpose is to overthrow the current government of Papua and West Papua. The organisation has been blamed for some of the attacks that have happened near the mine.
In July 2011, Papuan copper miners went on strike in support of increasing their wages up from their current rate of about $1.50 an hour. As a result of the industrial action, production at the mine halted for a week.