Freeport Divestment: A Tale of Losses and Waste

TEMPO.CO, Jakarta - Wrapped up in the spirit of nationalism, now we know that the Freeport’s share divestment was a very costly one. After having to shell out Rp55.8 trillion to acquire 51.23 percent of the shares, the government now must deal with the massive environmental damage caused by improper management of tailings or mining wastes.

According to the findings of the Supreme Audit Agency (BPK) released in 2017, the losses from the environmental damages totaled Rp185 trillion. The destruction was resulted by the substandard tailing storage management along the Ajikwa river in Mimika regency, Papua. The high costs of the losses include Rp10.7 trillion at the upstream area, Rp8.2 trillion at the estuary and at Rp166 trillion at the Arafura sea. The company committed a serious violation when the tailing storage which is restricted to just 230 square kilometers in the upstream area encroached into the estuary.

Unfortunately for the government, it did not tackle the issue when the gold mine was still controlled by Freeport-McMoRan, which should have been slapped with heavy sanctions. It also failed to use the issue as a leverage to get a better deal. The problem that was swept under the rug for years now has become a huge and costly environmental threat.

Freeport has deposited mining waste in Ajikwa river’s upstream basin since 1995. With the daily capacity of 300,000 tons, it produces around 230,000 tons of waste, according to the audit agency. This is plausible since only 3 percent of the all the earth that was excavated and processed contains minerals and most of the rest is disposed. The excessive tailing waste severely polluted the river, the forests and sago fields. The locals also found themselves isolated as a result.

The locals living around the mine may have been contented with the inducement money given by the mining company. Freeport actively gave away yearly religious donation of around Rp85 billions which was distributed via the Papua regional government, the Mimika provincial government and tribal organizations.

Now that the majority shares have been taken over through Indonesia Asahan Aluminum (Inalum), the government must be prepared to bear all the consequences. It must prove that Inalum is capable of managing the waste better. The company must prevent further environmental damage. The environmental management road map agreed upon between the environmental ministry and Freeport must be thoroughly implemented.

The most pressing issues that need to be addressed immediately include the reduction of non-tailing sediment in the mining areas and the construction of new dikes at the reservoir to put the lid on tailing spills.

From the environmental aspect, it makes sense if production is decreased to reduce tailing but economic calculations give a different result. If the production decreases, the state’s income will also plummet. It seems an unlikely solution at a time when the government needs to prove that the investment in the share divestment can be recouped soon. The government must now resolve all issues without blaming other parties and make sure that such environmental disasters will not recur in the future.

Read the complete story in this week's edition of Tempo English Magazine