Indonesia Case Study: Freeport Copper Mine Project

Posted: August 27th, 2021

Indonesia Case Study: Freeport Copper Mine Project  

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Indonesia Case Study: Freeport Copper Mine Project  

            Indonesia Freeport, copper mine project, provides students with insights into a case study involving environmental and social problems. Both environmental and social problems affect the operationalization of the company. Therefore, consulting engineers must investigate the root cause of the problems through consultation with the relevant authorities in Papua, Indonesia. Through multi-dimensional dialogue, the consulting engineers would help the company integrate industrial ecology principles effectively to impactsuccessful copper mining.

Situation Assessment

Factual Assessment of Indonesia Freeport Copper Mine

            Indonesia Freeport, copper mine project, is considered among the top 10 most leading producers of copper globally. The project’s significant operations and development are under the management of Freeport McMoran Copper & Gold, Inc (FCX) that seeks to mine copper and its ores in Papua, Indonesia. For example, the entire Grasberg location is rich in 1.4 billion pounds of copper reserves (ICSG, 2012). With the ongoing mining activity, the stock pricing of FCX has consecutively fluctuated over five years, with the highest value at 39.0604 and the lowest figure at 3.52, as illustrated in 2016. With the start of mining in 1972, FCX is the second-largest producer of copper worldwide with 1.4 billion pounds of copper and 2.5 million ounces of gold from Grasberg (ICSG, 2012). With the renewal of its contract, the company aims to retain more than 227,000 direct and indirect jobs (Nakagawa, 2008). Therefore, this project has contributed $1.4 billion in taxes, royalties, and dividends to its GDP.

Challenges Facing the Mine Project

            The operationalization of the mining activities at Grasberg faces many challenges, such as the social unrest among the Amungme and Komoro local people. The shift from open pit to underground mining has occasioned a significant decrease in local community programs’ funding. For example, the number of community development programs has reduced to a lower percentage due to a shift to underground mining activity, leading to many local workers’ massive lay-offs(Nakagawa, 2008). Eventually, the local community’s public health has worsened in terms of poor sanitation and clean water, where a majority of them have suffered from the effects of malaria, dengue fever, and TB.

Likewise, Papua’s consideration as a world heritage site by a Dutch scientific team in 1909 has brought about many challenges to the Grasberg mine’s operationalization. With a total area of about 2,505,600 hectares in Papua declared as a National Park in 1999, there has been a series of union strikes among the workers triggered by human rights, unions, and environmentalists (Nakagawa, 2008.). The consideration of more than 2,350,000 hectares of land for conservation purposes under Lorentz World Heritage has negatively impacted the company’s operations. As a result, work has stopped, leading to illegal small-scale mining activities across the rivers.

            Furthermore, the challenging topography surrounding the location of Grasberg mine has also affected the operation and environment. Specifically, the mine’s proximity to alpine mountains has brought about the drainage of acid rock both inside and outside the mines, leading to high impacts of regional hydrology(Nakagawa, 2008). The underground mining transition has resulted in high production shortfalls, as many locals do not experience underground mining. Moreover, underground mining requires the employment of heavy caterpillars that have interfered with Lorentz biodiversity by creating heavy equipment access trails (HEAT), thus occasioning glaciers’ melting.

The Roles of Consulting Engineers

            First, the consulting engineers need to interact with the local communities to ascertain how best the company can improve social development programs. Specifically, they need to consult with the relevant authority in Papua District, thus establishing the best way FCX can initiate its corporate social responsibility(Nakagawa, 2008). Besides, they should focus on empowering the local communities with training on underground mining to reduce the high number of unemployed populations. Second, the consulting engineers need to arrange a meeting with the management team from Lorentz World Heritage Facility together with environmentalists to agree on the best measures of continuing underground mining while assisting in rehabilitating the open pits across Papua (Freeport McMoran Copper & Gold, n.d.). Third, consulting engineers need to study how they can avoid coal using coal by focusing on hydroelectric power to run the high voltage machines at copper mill processing plants. Lastly, the consulting engineers need to organize a peace treaty meeting between the military, police, and civilians to end the personal feud that has continued to impact the mining activities (Freeport McMoran Copper & Gold, n.d.) negatively. Therefore, consulting engineers’ fundamental roles aim to reinforce the trust of the stakeholders in the management of the project in collaboration with a peaceful existence with both the Indonesian local government and people.

Discussion on ESEM Principles

            The management of such a large and complex project requires applying a multi-dimensional dialogue principle, where the Indonesian government, through its agencies (military and police), is brought in consultation with the local community. Such a multi-dimensional dialogue ensures that the company and government agree with the locals on how copper mining would benefit the local people’s welfares through the promotion of social amenities and employment(Nakagawa, 2008). Also, there is a need to apply the principle of technology as a measure of accomplishing the requirements of large and complex industrial ecology through the use of highly advanced transportation equipment and sag mills that have a high capacity to move more than 700,000 tons and process more than 250,000 tons of copper ores. Of course, the employment of such advanced means of technology would stir high production volumes, leading to high sales revenue(Nakagawa, 2008). Moreover, the complexity of my project necessitates the application of adaptive management processes through constant learning of the environment to pinpoint the possible weaknesses of the operational activity. Such principle of industrial ecology aids in planning, evaluating, adjusting, and while at the same time carrying on with strategies that seek to affect the project management positively (Freeport McMoran Copper & Gold, n.d.). Also, the application of the principle of transparent governance ensures that stakeholders feel safe to continue investing in the project without being intimidated by corruption cases from the top management of the project.

Lessons Learned

            Students need to understand the challenges that disrupt the operationalization of large and complex industrial projects like copper mining. As much as such problems result from the project management team’s inability to have a proper consultation with the local community and government, some unavoidable onesresult from both environmental and social factors. As a student, it is essential to acknowledge that large projects trigger corruption cases among many government agencies, which are mandated with the responsibility of providing oversight of the mining activities. In this regard, students need to understand that high corruption cases usually scare away potential stakeholders from investing in a project. Thus, they should focus on remedying such a vice that stems directly from the project’s governance down to the company’s employees.

References

Freeport McMoran Copper & Gold. (n.d.). PT Freeport, Indonesia. [Arizona State University – Fultons School of Engineering PowerPoint Slides]. Slideshare. Retrieved from

International Copper Study Group (ICSG). (2012). “Indonesia’s experience mining and copper 1990-2000.” OECD Foreign Investment Conference, Paris.

Nakagawa, J. (2008). “Freeport’s Grasberg/Ertzberg mine in West Papua, Indonesia.” Asia-Pacific Economic Cooperation. Retrieved from http://publications.apec.org/-/media/APEC/Publications/2008/12/Opportunities-and-Challenges-for-Foreign-Investment-in-the-APEC-Region-Case-Studies-December-2008/TOC/Indonesia-Freeports-GrasbergErtsberg-Mine-in-West-Papua-Indonesia.pdf