maart 8

Telegram From the Embassy in Indonesia to the Department of State (143)

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After the inauguration of US President John. F. Kennedy on January 25th, 1961. The US Ambassador Mr. Jones in Jakarta, Indonesia propose to hand over Administration of West Papua or West New Guinea or Netherlands New Guinea into Communist Country of Indonesia. It’s after they found Gold and Cooper Mountain in Grasberg and Earsberg where explored by Forbes Wilson from Freeport McMoran Gold & Cooper Company in 1960.

The ambition of US to pushed Dutch to transfer Administration of West New Guinea to Indonesia rejected by Dutch because West New Guinea were the Non Self Governing Territory where established by UN General Assembly Resolution 448 (V) since December 12th, 1950. So, in April 5, 1961 New Guinea Council established and October 19th, 1961 New Guinea Council setup the State of West Papua, Coat of Arm, National Anthem, etc. In December 1st, 1961 Kingdom of Dutch accept the State of West Papua but US didn’t support. Before the General Assembly Session in September 1961, UN Secretary General Daag Hamarsjold killed in Congo then changed by U Than who support Indonesia occupied West Papua. Daag Hamarsjold were the best UN Secretary General who help the Rights of Self Determination for the Peoples of West Papua pursuant to the Article 73 and UN General Assembly Resolution 1514 but he was killed finally Dutch under pressured by John. F. Kennedy to accept the proposal of US Diplomat Elsworth Bunker who acting as U Thant Ambassador. So, Dutch accept the Proposal of Elsworth Bunker and they signed New York Agreement in UN Headquarter New York on August 15th, 1962 then Dutch transferred the administration of West Papua to United Nations Temporary Executives Authority, UNTEA in October 1st, 1962. And UNTEA transfer the administration of West Papua to Indonesia in May 1st, 1963 then preparing Referendum in 1969 but before Referendum in 1967 Freeport McMoran Gold %& Cooper Company from Arizona (USA) has signed Contract Agreement with Indonesia. So, International Practice of Referendum was changed to the System of Representatives who were chose by Indonesia Military to be the members of Assembly. Where, the Assembly consist of 600s Settler Indonesian and 400s Inhabitants peoples of West Papua who under pressured by Brigadier General Ali Murtopo. Total Representatives in Assembly were 1025 peoples and 800,000s peoples forbidden to join in that Fake Referendum. This Referendum was not done by UN but by Indonesia Military, the UN members only 16th peoples under command of Mr. Ortizan Fernando who chose by UN Secretary General U Thant. Finally the referendum in 1969 rejected independent of West Papua and accept join with Indonesia.

 

 

143. Telegram From the Embassy in Indonesia to the Department of State0

2154. For Secretary from Ambassador. CINCPAC also for POLAD. Time has come in my opinion when US interests demand reassessment of situation in Indonesia and review of our policy and courses of action.

US has been seriously challenged in Indonesia by Communist bloc for first time since nation freed from colonial domination of Dutch.

Result is that economic, military, psychological programs which formerly good enough, no longer can assure achievement of US minimum objective of preventing Indonesia from falling under Communist control.

US is faced with decision as I see it whether this minimum objective of sufficient importance to make necessary effort to repel Communist counter-attack now in full swing. If answer affirmative US will, as in achievement any major objective, have to pay price. Price will be higher, longer we wait.

Situation still sufficiently fluid that if positive program to meet new situation is pressed immediately, vigorously, Communists can be beaten here. Inaction unlikely to preserve status quo; on contrary it virtually certain produce deterioration our position, further Communist gains, ultimate necessity for drastic measures to avert disaster—measures we might by then be unable or unwilling to take.

I wish to propose now in broad outline seven-point program of immediate action. In subsequent communications I intend to spell out in greater detail certain parts of it.

Before suggesting program I would discuss briefly reasons why we must take action—why it is that, despite the anti-Communist position of the army, Indonesians now moving slowly but perceptibly from neutralist position to one of greater dependence on bloc.

Slightly less than year ago USSR apparently reached conclusion it could not afford have largest Asian Communist Party outside China mainland go down drain. At about that time President Eisenhower declined visit Indonesia. Khrushchev did come, and he dangled practically [Page 303]unlimited offers of economic, military aid before eyes of relatively unsophisticated Indonesians. Even more importantly he came forward with sky’s-the-limit offer of political support for satisfaction of Indonesian national claim to WNG. Perhaps most effective of all, he paid attention to Sukarno.

At almost this precise moment Dutch elected assert their colonial claim in this part of world by dispatching aircraft carrier Karel Doorman on flag-showing cruise. However innocent Dutch intent may have been, however well-grounded in legality their claims to this conglomeration of mountain and swamp land half world away, from Holland, consequences of this action have been mischievous and long-lasting. At worst, this defiant gesture may have been prelude to free world disaster in Southeast Asia, opening the way, as it has, for an unwelcome choosing up of sides over intrinsically insignificant issue.

It hardly necessary to spell this out in detail. Should war break out between Netherlands and Indonesia over WNG, consequences are such that our entire position in Asia would be threatened. The Sino-Soviet bloc would at once come to support of Indonesia, Australia would at once come to support of Holland. The US would be forced to choose between unsatisfactory position of neutrality and support of Netherlands on an issue which all of Asia and Africa would regard as struggle of new nation against colonialism.

In my view this bleak outlook can be prevented from ever coming to pass but not without US seizing initiative, difficult as this is for us in situation in which long-time, tried and true ally arrayed against uncertain newcomer. Formula for solution of WNG question must be found, US as acknowledged leader of free world has responsibility of finding it. We must further face up to hard fact that if peaceful solution to be developed it must be solution acceptable to Indonesians. Time has passed that Dutch could dictate terms and every attempt on their part to do so only throws Indonesians closer and closer into waiting Soviet arms.

Solution of West Irian problem, difficult as that may be, is, however, alone no longer sufficient to bring about readjustment of Indonesian posture. Second essential key is Sukarno the man. Once Sukarno would have turned with whole heart to US if we would have changed our position on WNG; he told at least three successive Ambassadors this. Today more is required.

We must convince Sukarno we are interested in working with him to achieve peaceful solution to problems of Asia in general and WNG in particular. As first step toward new rapprochement with Indo President, we must satisfy him that US is not hostile to him personally. Reserving elaboration of separate points for subsequent communications, following is summary of actions which I think we must take to achieve our objectives.

[Page 304]

1.
Resolution of New Guinea question. We must actively seek formula for solution West Irian question, exploring all possibilities, recognizing that there no possibility of permanent, peaceful settlement which does not include unmistakable promise that this territory will one day be united with Indonesia.
2.
Establishment of personal relationship between President Kennedy and President Sukarno. This involves also recognition of fact there no group in Indonesia except rebels willing directly to oppose Sukarno, and therefore no immediate means of displacing him.
3.
Greater flexibility in (a) technical assistance programs including commodity support; and (b) educational exchange. Only slightly more funds would be required but Ambassador should be free to move expeditiously when opportunity arises.
4.
Much greater speed in supporting development projects and programs, more stress on political effect; willingness to let Indo use development funds as they think best, including promotion of their concept of socialist state if necessary; and broader use of resources for development of impact projects on basis of calculated risk even though such use funds may involve some departure from traditional economic criteria for justification.
5.
Removal of political restrictions, “token aid” character military assistance to Indo. For example, provision heavier weapons rather than permitting bloc to supply them (although we may be too late here).
6.
Preparation for possible major psychological war campaign coordinating covert and overt resources when proper climate can be developed.
7.
Review of US position colonial questions throughout world, to assure that we are as we talk and as we like to think of ourselves. Although listed last in this list, it might well be first in importance.

It my considered judgment that such program would not meet our short range objective here. I believe, however, that its success depends upon complete coordinated pursuit of all seven points. Partial implementation would not likely bring partial success but only delayed failure.

If it is to be argued as heretofore that such program involves too high price, then we must readjust our thinking to concept of advanced Communist base in this three thousand [garble], strategically located treasure house of resources, or at least an Indonesia closely approximating Communist satellite. We may even have to face involvement in new proxy war or war itself should Anzus become involved over WNG.

It not my purpose to evaluate these possibilities in total scheme of things. I consider it my inescapable duty, however, to point the ways I see of avoiding them.

  1. Source: Department of State, Central Files, 611.98/1–2561. Secret. Also sent to CINCPAC
Category: History, Secret | Comments
juli 16

Response Indonesia to WPLO’s Statement in UNPFII 2016

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Indomie Response John Anari Statement in UNPFII 2016
Representative of Indonesia who response John Anari Statement in Fifteen Sessions of UNPFII

The Government of Indonesia doesn’t received the Political Status of West Papua After the chairman of West Papua Liberation Organizatio (WPLO), John Anari spoke in the United Nations Permanent Forum on Indigenous Issues (UNPFII) at 10.00 am to 1.00 pm 17 May 2016 at UN Headquarter in New York about the involvement of USA, UN and Indonesia by removing West Papua or Netherlands New Guinea from the List of Non Self Governing Territories without processing UN General Assembly Resolution 448 (V) and UN Charter Article 73 e also UN General Assembly Resolution 1514.

Statement by Indonesia Government and John Anari in this link below:

https://papersmart.unmeetings.org/en/ecosoc/unpfii/fifteenth-session/agenda/5/?alttemplate=AgendaAjaxStatements&nocache=1

See the Video below :

mei 30

WPLO Intervention in United Nations

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 Coat of Arm. Picture by Christian Siemer (Wappenlexikon)

West Papua Liberation Organization

Office: Jembatan Pasir Putih, Manokwari – West Papua. www.oppb.org; www.wplo.org; info@oppb.org


Dear Excellency;

Chairperson of the Permanent Forum on Indigenous Issues

Ladies and Gentlemen

 

 

My name is John Anari. I am the Leader of West Papua Liberation Organization (WPLO). On behalf of the WPLO, I offer my heartfelt thanks to the Permanent Forum for giving me this opportunity to address this Forum.

For benefit of the people of West Papuan, I and the West Papuan Liberation Organization am asking this Forum to understand both the cause of the conflict which we are suffering, and the solution which the Economic and Social Council can provide for West Papua.

Most States that come into conflict with an indigenous community, do so because the community has land or resources that the State wants.  Unfortunately, West Papua had the misfortune of having gold and other minerals that certain American businessmen wanted.

Twenty years ago a Mr Stanton introduced the concept of eight stages of genocide[1], eight steps which can condition a society to commit genocide. But I submit, that for indigenous communities there are normally only two stages; greed and deception.

Greed is the motive, and deception includes all the lies that allege that an indigenous people are less entitled to their homes and to their lives.  Nobody can prevent greed, but the deceptions can be fought with education and public awareness of the humanity of the indigenous communities.

If each of the oppressed indigenous communities had use of equipment and access to an independent media channel, the ascendancy of oppressive States might be peacefully reduced.

Even a small deception can cost the lives of hundreds of thousands of people.

For fifty four years West Papua has been the victim of such a deception, a deception at the United Nations alleging that the reporting of the progress of the colony could be exercised by the General Secretary U Thant instead of the Trusteeship Council as is required by the Charter of the United Nations.

This is a deception which the Economic and Social Council can end this year by putting the issue of West Papua on the agenda of the Trusteeship Council as should have been done in 1962.

The indigenous people of West Papua are no less deserving than other people of the protection promised by the Charter of the United Nations, so I again ask that this Forum recommend to the Economic and Social Council that it put the international issue of General Assembly resolution 1752 on the agenda of the Trusteeship Council as should have been done in 1962.

I wish to explain briefly how West Papua become the subject of General Assembly resolution 1752.  I will continue using the name West Papua for my homeland although the United Nations during the 1960s used titled including Netherlands New Guinea, West New Guinea, and West Irian.

During the nineteenth and twentieth centuries, West Papua permitted a Dutch presence, and in December 1950 the United Nations in General Assembly Resolution 448 (V)[2] agreed that the Netherlands owed an obligation to respect West Papua’s cultural, political, economic, and other rights.

But in 1959 a Mr John Henderson proposed that the United States could use an United Nations trusteeship to transfer the administration of West Papua to the United Nations and then to the Republic of Indonesia.[3] And by March 1961 the United States believed that Indonesia on condition that the trusteeship would not be called a trusteeship, would support the American plan for United Nations trusteeship of West Papua.[4]

The Dutch tried to evade the American ambition in 1961 by asking the General Assembly to approve a normal United Nations trusteeship of West Papua, unfortunately the UN Secretary General Dag Hammarskjold was killed on 18th September 1961; eight days before the Assembly’s vote. And without the assistance of Hammarskjold’s advice, the bid for a trusteeship that would have been reported to the Trusteeship Council failed.

In December 1961 the Republic of Indonesia began a small or token invasion of West Papua, after which the United States began negotiations asking the Netherlands to sign the United Nations trusteeship agreement which the United States and then Indonesia had been preparing since 1959.

Indonesia released an American pilot Mr Allen Pope in July 1962[5], and the agreement asking the General Assembly to approve an United Nations occupation and administration of West Papua was signed by the Netherlands and Indonesia on the 15th August 1962.[6]  On the next day, 16th August 1962, the New York Times published a public endorsement by the new Secretary General proclaiming the benefits of the agreement which had just been signed by the Netherlands and Indonesia.[7]

A month later a draft text for a General Assembly resolution was presented to the United Nations membership on the day before they were asked without a debate to vote on the agreement asking the United Nations to occupy and administrate West Papua.[8] The government of Benin (Dahomey) then expressed outrage that the people of West Papua had not been consulted and that the agreement did not require that the indigenous people of West Papua be permitted to have a referendum.[9] The government of Togo deplored the “haste” of the vote and the lack of time the UN members had to read the text of the agreement.[10] And three days later the government of Senegal asked to change the record of its vote from affirmative to negative.[11]

Despite the haste of the vote, the General Assembly approved the agreement and ten days later on the 1st October 1962 the United Nations took over the administration of West Papua.

Please understand, although US records assert that Indonesia did not want to call the trusteeship a trusteeship; that the first line of the 1962 agreement refers to the trusteeship relationship by saying that the purpose of the agreement is the “interests and welfare of the people of the territory of West New Guinea (West Irian)”[12]

In addition to the agreement, the physical act of occupying West Papua also placed the United Nations into the position of a trustee administrating the territory for benefit of the people of West Papua. And that event should also have been reported to the Trusteeship Council by means of the agenda of the Trusteeship Council in accordance with article 85 part 2 of the Charter of the United Nations.

I also remind this Forum and remind the Economic and Social Council that article 103 of the Charter of the United Nations does not permit any obligation of the Charter to be mitigated or voided by any agreement.  Therefore the request in the 1962 agreement asking the Secretary General receive and distribute information about West Papua, does not extinguish the obligation of the United Nations described in article 85 part 2 of the Charter of the United Nations.

It is article 85 part 2 of the Charter of the United Nations that entitles West Papua to make this request for this Forum to recommend to the Economic and Social Council that it put the international issue of General Assembly resolution 1752 on the agenda of the Trusteeship Council.

Any debate about the Charter of the United Nations obligations is in the jurisdiction of the International Court of Justice (ICJ) from whom the Trusteeship Council will be asking for an advisory opinion once the issue of General Assembly resolution 171 and General Assembly resolution 1752 are put on the Council’s agenda as should have been done in September 1962.

In the name of the Lord, I would like to thank you.

 

 

UN Headquarter, New York. May 17th, 2016

Sincererly;

Ttd

John Anari


Footnote:

 

[1]                Genocide Watch briefing paper to the US Department of State in 1996 http://www.genocidewatch.org/genocide/8stagesofgenocide.html

[2]                 General Assembly. 1950. Development of self-government in Non-Self-Governing Territories. New York. Agenda Item 320 on 12th December 1950. http://www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/448(V)

[3]                 US Department of State. Foreign Relations of the United States, 1958-1960, Indonesia, Volume XVII. 203 Despatch from the Embassy in Indonesia to the Department of State. A Proposal for settlement of the West New Guinea Dispute. https://history.state.gov/historicaldocuments/frus1958-60v17/d203

[4]                US Department of State. Foreign Relations of the United States, 1961-1963, Volume XXIII. 150. Telegram from the Embassy in Indonesia to the Department of State. https://history.state.gov/historicaldocuments/frus1961-63v23/d150

[5]                Kahin & Khan (1997) [1995]. Subversion as Foreign Policy The Secret Eisenhower and Dulles Debacle in Indonesia. Seattle and London: University of Washington Press. ISBN 0-295-97618-7.

[6]                1962 United Nations Yearbook Part 1 Sec 1 Chapter 9, page 125

[7]                Online copy available http://wpik.org/Src/NYT/19620816_statements.pdf

[8]                General Assembly 1127th Plenary meeting paragraphs 170-197.

[9]                General Assembly 1127th Plenary meeting paragraphs 242-246.

[10]              General Assembly 1127th Plenary meeting paragraphs 263-266.

[11]              1962 United Nations Yearbook Part 1 Sec 1 Chapter 9, page 127

[12]                1962 United Nations documentary reference A/5169


Original Statement:

WPLO Statement in UNPFII - Part 1 WPLO Statement in UNPFII - Part 2 WPLO Statement in UNPFII - Part 3


 

 

 

 

 

 

 

 

Download from United Nations Website:

Video:

maart 26

Letter from UN Secretary General to the PM Netherlands on 22 May 1962

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UNITED NATIONS SECURITY COUNCIL
UN Wmblem GoldDistr.
S/5124
23 May 1962
ORIGINAL: ENGLISH


 

 

LETTER DATED 22 MAY 1962 FHOM THE ACTING SECHETARY-GENERAL
ADDRESSED TO TEE PRIME MINISTER OF NETHERLANDS

 

This is to acknowledge your letter of 16 May 1962 relating to the situation in and around West New Guines. As you know, I have been myself concerned. about developments in the area and have, on a number of occasions, appealed to all parties involved to exercise the utmost restraint. This would seem to be even more desirable now that, with my encouragement, Ambassador Bunker is engaged in attempts to bring the parties together with a view, to finding a solution for the difficulties that have arisen.

Your suggestion that I now approach the Government of Indonesia with an appeal would, if accepted by me, imply that I was taking sides in the controversy, which I believe would not be in the best interest of all concerned.

I feel, however, that a situation has arisen where it appears appropriate to appeal, both to your Government and that of the Republic of Indonesia, to refrain from all aggressive action, both in view of the obligations of the two Governments under the Charter and in order not to jeopardize the efforts that are now being made by Ambassador Bunker.

With regard to your second suggestion, namely to send some observe to the region to take note of the factual situation and to act as a stabilizing factor, I would like to inform you that I could consider such a move only if a request were made by both the Netherlands and Indonesian Governments. In any other circumstances I believe that such action on my part would not be appropriate.
Accept, Sir, etc.

(Signed)

U Thant
Acting Secretary-General

februari 16

JFK, Indonesia, CIA & Freeport Sulphur

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by Lisa Pease

What is Past is Prologue.
Inscribed on the National Archives, Washington, D.C.

This article first appeared in Probe magazine.  An updated version of this article can be found in the new book, The Assassinations.

In Part One of this article (Probe, March-April, 1996) we talked about the early years of Freeport up through the Cuban takeover of their potentially lucrative mine at Moa Bay, as well as their run-in with President Kennedy over the issue of stockpiling. But the biggest conflict that Freeport Sulphur would face was over the country housing the world’s single largest gold reserve and third largest copper reserve: Indonesia. To understand the recent (March, 1996) riots at the Freeport plant, we need to go to the roots of this venture to show how things might have been very different had Kennedy lived to implement his plans for Indonesia.

Indonesia Backstory

Indonesia had been discovered by the Dutch at the end of the 1500s. During the early 1600s they were dominated by the Dutch East Indies Company, a private concern, for nearly 200 years. In 1798, authority over Indonesia was transferred to the Netherlands, which retained dominion over this fifth largest country in the world until 1941, at which time the Japanese moved in during the course of World War II. By 1945 Japan was defeated in Indonesia and Achmed Sukarno and Mohammad Hatta rose to become President and Vice President of the newly independent Indonesia. But within a month of the Sukarno/Hatta proclamation of independence, British army units began landing in Jakarta to help the Dutch restore colonial rule. Four years of fighting ensued. In 1949, the Dutch officially ceded sovereignty back to Indonesia, with the exception of one key area – that of a hotspot which is now known as Irian Jaya or, depending on who you talk to, West Papua.

Authors Gerard Colby and Charlotte Dennett, in their book Thy Will Be Done, explain the situation in what was then called Dutch New Guinea:

To Westerners, New Guinea was like a gifted child pulled in opposite directions by covetous guardians. The Dutch clung to the western half as the sole remnant of their once-vast East Indies empire. Their longtime British allies, acting through Australia, controlled the eastern half. Neighboring Indonesians, on the other hand, thought that all New Guinea was part of their national territory, even if it was still colonized by Europeans.

Dutch New Guinea, or West Irian as the Indonesians called it, was populated by native tribes not far removed from a stone age culture, such as the Danis and the Amungme. When Indonesia fought to claim independence from the Dutch, West Irian became a symbol for both sides that neither wanted to relinquish. It would take the efforts of President Kennedy to eventually pass control of this area to the newly independent Indonesians, removing the last vestiges of Dutch colonialism.

Indonesia experienced various types of government. When Sukarno first rose to power in 1945, foreigners pointed out that Sukarno’s rule appeared “fascistic,” since he held sole control over so much of the government. Bowing to foreign pressure to appear more democratic, Indonesia instituted a parliamentary system of rule and opened the government to a multiparty system. Sukarno related what followed to his biographer (now cable gossip show host) Cindy Adams:

In a nation previously denied political activities, the results were immediate. Over 40 dissimilar parties sprang up. So terrified were we of being labeled “a Japanese-sponsored Fascistic dictatorship” that single individuals forming splinter organizations were tolerated as “mouthpieces of democracy.” Political parties grew like weeds with shallow roots and interests top-heavy with petty selfishness and vote-catching. Internal strife grew. We faced disaster, endless conflicts, hair-raising confusion. Indonesians previously pulling together now pulled apart. They were sectioned into religious and geographical boxes, just what I’d sweated all my life to get them out of.

Sukarno related that nearly every six months, a cabinet fell, and a new government would start up, only to repeat the cycle. On October 17, 1952 things came to a head. Thousands of soldiers from the Indonesian army stormed the gates with signs saying “Dissolve Parliament.” Sukarno faced the troops directly, firmly refusing to dissolve parliament due to military pressure, and the soldiers backed down. The result of this was a factionalized army. There were the “pro-17 October 1952 military” and the “anti-17 October 1952 military.” In 1955, elections were held and parliamentary rule was ended by vote. The Communists, who had done the most for the people suffering the aftereffects of converting from colonial rule to independence, won many victories in 1955 and 1956. In 1955, Sukarno organized the Bandung Conference at which the famous Chinese Communist Chou En Lai was a featured guest. During the 1955 elections, the CIA had given a million dollars to the Masjumi party-an opposition party to both Sukarno’s Nationalist party and the Communist party in Indonesia (called the PKI)-in an attempt to gain political control of the country. But the Masjumi party failed to win the hearts and minds of the people.

In 1957, an assassination attempt was made against Sukarno. Although the actual perpetrators were unknown at the time, both Sukarno and the CIA jumped to use this for propaganda purposes. The CIA was quick to blame the PKI. Sukarno, however, blamed the Dutch, and used this as the excuse to seize all former Dutch holdings, including shipping and flying lines. Sukarno vowed to drive the Dutch out of West Irian. He had already tried settling the long-standing dispute over that territory through the United Nations, but the vote fell shy of the needed two-thirds majority to set up a commission to force the Dutch to sit down with the Indonesians. The assassination attempt provided a much needed excuse for action.

The victories of the Communists, infighting in the army, and the 1957 nationalization of former Dutch holdings, led to a situation of grave concern to American business interests, notably the oil and rubber industries. The CIA eagerly pitched in, helping to foment rebellion between the outer, resource rich, islands, and the central government based in Jakarta, Java.

Rockefeller Interests in Indonesia

Two prominent American-based oil companies doing business in Indonesia at this time were of the Rockefeller-controlled Standard Oil family: Stanvac (jointly held by Standard Oil of New Jersey and Socony Mobil-Socony being Standard Oil of New York), and Caltex, (jointly held by Standard Oil of California and Texaco.) In Part I of this article we showed how heavily loaded the Freeport Sulphur board was with Rockefeller family and allies. Recall that Augustus C. Long was a board member of Freeport while serving as Chairman of Texaco for many years. Long becomes more and more interesting as the story develops.

1958: CIA vs. Sukarno

“I think its time we held Sukarno’s feet to the fire,” said Frank Wisner, then Deputy Director of Plans for the CIA, in 1956. By 1958, having failed to buy the government through the election process, the CIA was fomenting a full-fledged operation in Indonesia. Operation Hike, as it was called, involved the arming and training of tens of thousands of Indonesians as well as “mercenaries” to launch attacks in the hope of bringing down Sukarno.

Joseph Burkholder Smith was a former CIA officer involved with the Indonesian operations during this period. In his book, Portrait of a Cold Warrior, he described how the CIA took it upon themselves to make, not just to enact, policy in this area:

before any direct action against Sukarno’s position could be taken, we would have to have the approval of the Special Group-the small group of top National Security Council officials who approved covert action plans. Premature mention of such an idea might get it shot down …

So we began to feed the State Department and Defense departments intelligence … When they had read enough alarming reports, we planned to spring the suggestion we should support the colonels’ plan to reduce Sukarno’s power. This was a method of operation which became the basis of many of the political action adventures of the 1960s and 1970s. In other words, the statement is false that CIA undertook to intervene in the affairs of countries like Chile only after being ordered to do so … In many instances, we made the action programs up ourselves after we had collected enough intelligence to make them appear required by the circumstance. Our activity in Indonesia in 1957-1958 was one such instance.

When the Ambassador to Indonesia wrote Washington of his explicit disagreements with the CIA’s handling of the situation, Allen Dulles had his brother John Foster appoint a different Ambassador to Indonesia, one more accepting of the CIA’s activities.

In addition to the paramilitary activities, the CIA tried psychological warfare tricks to discredit Sukarno, such as passing rumors that he had been seduced by a Soviet stewardess. To that end, Sheffield Edwards, head of the CIA’s Office of Security, enlisted the Chief of the Los Angeles Police Department to help with a porno movie project the CIA was making to use against Sukarno, ostensibly showing Sukarno in the act. Others involved in these efforts were Robert Maheu, and Bing Crosby and his brother.

The Agency tried to keep its coup participation covert, but one “mercenary” met misfortune early. Shot down and captured during a bombing run, Allen Lawrence Pope was carrying all kinds of ID on his person to indicate that he was an employee of the CIA. The U.S. Government, right up to President Eisenhower, tried to deny that the CIA was involved at all, but the Pope revelations made a mockery of this. Not cowed by the foment, as Arbenz had been in Guatemala, Sukarno marshalled those forces loyal to him and crushed the CIA-aided rebellion. Prior to the Bay of Pigs, this was the Agency’s single largest failed operation.

1959: Copper Mountain

At this point, Freeport Sulphur entered the Indonesian picture. In July, 1959, Charles Wight, then President of Freeport-and reported to be fomenting anti-Castro plots and flying to Canada and/or Cuba with Clay Shaw (see Part I of this article)-was busy defending his company against House Committee accusations of overcharging the Government for the nickel ore processed at the Government-owned plant in Nicaro, Cuba. The Committee recommended that the Justice Department pursue an investigation. Freeport’s Moa Bay Mining Company had only just opened, and already the future in Cuba looked bleak. In August, 1959, Freeport Director and top engineer Forbes Wilson met with Jan van Gruisen, managing director of the East Borneo Company, a mining concern. Gruisen had just stumbled upon a dusty report first made in 1936 regarding a mountain called the “Ertsberg” (“Copper Mountain”) in Dutch New Guinea, by Jean Jacques Dozy. Hidden away for years in a Netherlands library during Nazi attacks, the report had only recently resurfaced. Dozy reported a mountain heavy with copper ore. If true, this could justify a new Freeport diversification effort into copper. Wilson cabled Freeport’s New York headquarters asking for permission and money to make a joint exploration effort with the East Borneo Company. The contract was signed February 1, 1960.

With the aid of a native guide, Wilson spent the next several months amidst the near-stone age natives as he forged through near impassable places on his way to the Ertsberg. Wilson wrote a book about this journey, called The Conquest of Copper Mountain. When he finally arrived, he was excited at what he found:

an unusually high degree of mineralization … The Ertsberg turned out to be 40% to 50% iron … and 3% copper … Three percent is quite rich for a deposit of copper … The Ertsberg also contains certain amounts of even more rare silver and gold.

He cabled back a message in prearranged code to the soon-to-be President of Freeport, Bob Hills in New York:

… thirteen acres rock above ground additional 14 acres each 100 meter depth sampling progressive color appears dark access egress formidable all hands well advise Sextant regards.

“Thirteen acres” meant 13 million tons of ore above ground. “Color appears dark” meant that the grade of ore was good. “Sextant” was code for the East Borneo Company. The expedition was over in July of 1960. Freeport’s board was not eager to go ahead with a new and predictably costly venture on the heels of the expropriation of their mining facilities in Cuba. But the board decided to at least press ahead with the next phase of exploration: a more detailed investigation of the ore samples and commercial potential. Wilson described the results of this effort:

[M]ining consultants confirmed our estimates of 13 million tons of ore above ground and another 14 million below ground for each 100 meters of depth. Other consultants estimated that the cost of a plant to process 5,000 tons of ore a day would be around $60 million and that the cost of producing copper would be 16� a pound after credit for small amounts of gold and silver associated with the copper. At the time, copper was selling in world markets for around 35� a pound. From these data, Freeport’s financial department calculated that the company could recover its investment in three years and then begin earning an attractive profit.

The operation proved technically difficult, involving newly invented helicopters and diamond drills. Complicating the situation was the outbreak of a near-war between the Dutch-who were still occupying West Irian-and Sukarno’s forces which landed there to reclaim the land as their own. Fighting even broke out near the access road to Freeport’s venture. By mid-1961, Freeport’s engineers strongly felt that the project should be pursued. But by that time, John F. Kennedy had taken over the office of President. And he was pursuing a far different course than the previous administration.

Kennedy and Sukarno

“No wonder Sukarno doesn’t like us very much. He has to sit down with people who tried to overthrow him.” – President Kennedy, 1961

Up until Kennedy’s time, the aid predominantly offered to Indonesia from this country came mostly in the form of military support. Kennedy had other ideas. After a positive 1961 meeting with Sukarno in the United States, Kennedy appointed a team of economists to study ways that economic aid could help Indonesia develop in constructive ways. Kennedy understood that Sukarno took aid and arms from the Soviets and the Chinese because he needed the help, not because he was eager to fall under communist rule. American aid would prevent Sukarno from becoming dependent on Communist supplies. And Sukarno had already put down a communist rebellion in 1948. Even the State Department in the United States conceded that Sukarno was more nationalist than Communist.

But the pressing problem during Kennedy’s short term was the issue of West Irian. The Dutch had taken an ever more aggressive stance, and Sukarno was assuming a military posture. America, as allies to both, was caught in the middle. Kennedy asked Ellsworth Bunker to attempt to mediate an agreement between the Dutch and Indonesian governments. “The role of the mediator,” said Kennedy, “is not a happy one; we are prepared to have everybody mad if it makes some progress.”

It did make everybody mad. But it did make progress. Ultimately, the U.S. pressured the Dutch behind the scenes to yield to Indonesia. Bobby Kennedy was enlisted in this effort, visiting both Sukarno in Indonesia and the Dutch at the Hague. Said Roger Hilsman in To Move a Nation:

Sukarno came to recognize in Robert Kennedy the same tough integrity and loyalty that he had seen in his brother, the President, combined with a true understanding of what the new nationalisms were really all about.

So with preliminary overtures having been made to Sukarno and the Hague, Bunker took over the nitty gritty of getting each side to talk to each other. The Dutch, unwilling to concede the last vestige of their once-great empire to their foe, pressed instead for West Irian to become an independent country. But Sukarno knew it was a symbol to his people of final independence from the Dutch. And all knew that the Papuan natives there had no hope of forming any kind of functioning government, having only just recently been pushed from a primitive existence into the modern world. The United Nations voted to cede West Irian fully to Indonesia, with the provision that, by 1969, the people of West Irian would be granted an opportunity to vote whether to remain with or secede from Indonesia. Kennedy seized the moment, issuing National Security Action Memorandum (NSAM) 179, dated August 16, 1962:

With the peaceful settlement of the West Irian dispute now in prospect, I would like to see us capitalize on the U.S. role in promoting this settlement to move toward a new and better relationship with Indonesia. I gather that with this issue resolved the Indonesians too would like to move in this direction and will be presenting us with numerous requests.

To seize this opportunity, will all agencies concerned please review their programs for Indonesia and assess what further measures might be useful. I have in mind the possibility of expanded civic action, military aid, and economic stabilization and development programs as well as diplomatic initiatives.

Roger Hilsman elaborated on what Kennedy meant by civic action: “rehabilitating canals, draining swampland to create new rice paddies, building bridges and roads, and so on.”

Freeport and West Irian

Kennedy’s aid in brokering Indonesian sovereignty over West Irian could only have come as a blow to Freeport Sulphur’s board. Freeport already had a positive relationship with the Dutch, who had authorized the initial exploratory missions there. During the negotiation period, Freeport approached the U.N., but the U.N. said Freeport would have to discuss their plans with the Indonesian officials. When Freeport went to the Indonesian embassy in Washington, they received no response.

Lamented Forbes Wilson:

Not long after Indonesia obtained control over Western New Guinea in 1963, then-President Sukarno, who had consolidated his executive power, made a series of moves which would have discouraged even the most eager prospective Western investor. He expropriated nearly all foreign investments in Indonesia. He ordered American agencies, including the Agency for International Development, to leave the country. He cultivated close ties with Communist China and with Indonesia’s Communist Party, known as the PKI.

1962 had been a difficult year for Freeport. They were under attack on the stockpiling issue. Freeport was still reeling from having their lucrative facilities expropriated in Cuba. And now they sat, staring at a potential fortune in Indonesia. But with Kennedy giving tacit support to Sukarno, their hopes looked bleak indeed.

Reversal of Fortunes

Kennedy stepped up the aid package to Indonesia, offering $11 million. In addition, he planned a personal visit there in early 1964. While Kennedy was trying to support Sukarno, other forces were countering their efforts. Public dissent in the Senate brewed over continuing to aid Indonesia while the Communist party there remained strong. Kennedy persisted. He approved this particular aid package on November 19, 1963. Three days later, Sukarno lost his best ally in the west. Shortly, he would lose the aid package too.

Sukarno was much shaken by the news of Kennedy’s death. Bobby made the trip the President had originally planned to take, in January, 1964. Cindy Adams asked Sukarno what he thought of Bobby, and got more than she asked for:

Sukarno’s face lit up. “Bob is very warm. He is like his brother. I loved his brother. He understood me. I designed and built a special guest house on the palace grounds for John F. Kennedy, who promised me he’d come here and be the first American President ever to pay a state visit to this country.” He fell silent. “Now he’ll never come.”

Sukarno was perspiring freely. He repeatedly mopped his brow and chest. “Tell me, why did they kill Kennedy?”

Sukarno noted with irony that the very day Kennedy was assassinated, his Chief of Bodyguards was in Washington to study how to protect a president. Looking to the future, he was not optimistic:

I know Johnson … I met him when I was with President Kennedy in Washington. But I wonder if he is as warm as John. I wonder if he will like Sukarno as John Kennedy, my friend, did.

LBJ and Indonesia

As others have noted, foreign policy changed rapidly after Kennedy’s death. Donald Gibson says in his book Battling Wall Street, “In foreign policy the changes came quickly, and they were dramatic.” Gibson outlines five short term changes and several long term changes that went into effect after Kennedy’s death. One of the short term changes was the instant reversal of the Indonesian aid package Kennedy had already approved. Hilsman makes this point as well:

One of the first pieces of paper to come across President Johnson’s desk was the presidential determination … by which the President had to certify that continuing even economic aid [to Indonesia] was essential to the national interest. Since everyone down the line had known that President Kennedy would have signed the determination routinely, we were all surprised when President Johnson refused.

Someone at Freeport was so pleased with Johnson’s behavior that he supported his presidential run in 1964: Augustus C. “Gus” Long.

Long had been Chairman at Texas Company (Texaco) for many years. In 1964, he and a bunch of other conservative, largely Republican business moguls, joined together to support Johnson over Goldwater. The group, calling themselves the National Independent Committee for Johnson, included such people as Thomas Lamont, Edgar Kaiser of Kaiser Aluminum, Robert Lehman of Lehman Brothers, Thomas Cabot of Cabot Corporation of Boston, and many other luminaries of the business world.

Long had two toes in the Indonesian fray-one for Freeport, one for Texaco. In 1961, Caltex-jointly owned by Standard Oil of California (Socal) and Texas Company (Texaco)-was one of the three major oil companies in Indonesia forced to operate under a new contract with Sukarno’s government. Under the new terms, 60% of all profits had to be given to the Indonesian government. So he had two reasons to be concerned by Kennedy’s support of Sukarno’s brand of nationalism, which threatened the interests of both companies in which he had a substantial stake.

In Part I, we mentioned that Long had done “prodigious volunteer work” for Presbyterian Hospital in New York, said by a former employee of their PR firm, the Mullen Company, to be a “hotbed of CIA activity.” Now we add that Long was elected President of Presbyterian Hospital two years running-1961 and 1962. In 1964, Long retired his role as Chairman of Texaco. He would be reinstated as Chairman in 1970. What did he do in the interim?

In March of 1965, Long was elected a director of Chemical Bank-another Rockefeller-controlled company.

In August of 1965, Long was appointed to the President’s Foreign Intelligence Advisory Board, where he would approve and suggest covert activities.

In October of 1965, covert activities sealed Sukarno’s fate.

1965: The Year of Living Dangerously

After Kennedy’s death, Sukarno had grown ever more belligerent towards the West. The British were busy forming a new country out of Indonesia’s former trading partners Malaya and Singapore, called “Malaysia.” Since the area included territory from which the CIA had launched some of its 1958 activities, Sukarno was justifiably concerned by what he felt was an ever tightening noose. On January 1, 1965, Sukarno threatened to pull Indonesia out of the United Nations if Malaysia was admitted. It was and he did, making Indonesia the first nation ever to pull out of the U.N. In response to U.S. pressure on Sukarno to support Malaysia, he cried, “to hell with your aid.” He built up his troops along the borders of Malaysia. Malaysia, fearing invasion, appealed to the U.N. for support.

By February, Sukarno could see the writing on the wall:

JAKARTA, Indonesia, Feb. 23 (UPI)-President Sukarno declared today that Indonesia could no longer afford freedom of the press. He ordered the banning of anti-Communist newspapers. …

“I have secret information that reveals that the C.I.A. was using the Body for the Promotion of Sukarnoism to kill Sukarnoism and Sukarno,” he said. “That’s why I banned it.” (New York Times, 2/24/65)

The country was in disarray. Anti-American demonstrations were frequent. Indonesia quit the International Monetary Fund and the World Bank. The press reported that Sukarno was moving closer to the Chinese and Soviets. Sukarno threatened to nationalize remaining U.S. properties, having already taken over, for example, one of the biggest American operations in Indonesia, the Goodyear Tire and Rubber Company. And then, in an unexpected move, Singapore seceded from Malaysia, weakening the newly formed state bordering Indonesia.

With American money interests threatened, all the usual carrots of foreign aid shunted, no leverage via the IMF or World Bank, and Freeport’s Gus Long on the President’s Foreign Intelligence Advisory Board, it was only a matter of time, and not much, at that.

October 1, 1965: Coup or Counter-Coup?

INDONESIA SAYS PLOT TO DEPOSE SUKARNO IS FOILED BY ARMY CHIEF; POWER FIGHT BELIEVED CONTINUING

KUALA LUMPUR, Malaysia. Oct. 1-An attempt to overthrow President Sukarno was foiled tonight by army units loyal to Gen. Abdul Haris Nasution, the Indonesian radio announced. …

In Washington, a State Department spokesman said Friday the situation in Indonesia was “extremely confused.” Robert J. McCloskey told a news conference the State Department was getting reports from the American Embassy at Jakarta, but “it is not presently possible to attempt any evaluation, explanation, or comment.”

Late yesterday, a mysterious group calling itself the 30th of September Movement seized control of Jakarta.

Colonel Untung, who had announced over the Indonesian radio that he was the leader of the movement, said the group had seized control of the Government to prevent a “counterrevolutionary” coup by the Generals’ Council. (New York Times, 10/2-3/65, International Edition)

In a strange, convoluted move, a group of young military leaders killed a bunch of older, centrist leaders who, they claimed, were going to-with the help of the CIA-stage a coup against Sukarno. But what happened in the aftermath of this turned Indonesia into one of the bloodiest nightmares the world has ever seen. This original counter-coup was branded a coup attempt instead, and painted as brightly Red as possible. Then, in the disguise of outrage that Sukarno’s authority had been imperiled, Nasution joined with General Suharto to overthrow the “rebels.” What started ostensibly to protect Sukarno’s authority ended up stripping him of it wholly. The aftermath is too horrible to describe in a few words. The numbers vary, but the consensus lies in the range of 200,000 to over 500,000 people killed in the wake of this “counter-coup.” Anyone who had ever had an association with the Communist PKI was targeted for elimination. Even Time magazine gave one token accurate description of what was happening:

According to accounts brought out of Indonesia by Western diplomats and independent travelers, Communists, Red sympathizers and their families are being massacred by the thousands. Backlands army units are reported to have executed thousands of Communists after interrogation in remote rural jails. … Armed with wide-bladed knives called parangs, Moslem bands crept at night into the homes of Communists, killing entire families and burying the bodies in shallow graves. … The murder campaign became so brazen in parts of rural East Java that Moslem bands placed the heads of victims on poles and paraded them through villages.

The killings have been on such a scale that the disposal of the corpses has created a serious sanitation problem in East Java and northern Sumatra, where the humid air bears the reek of decaying flesh. Travelers from those areas tell of small rivers and streams that have been literally clogged with bodies; river transportation has at places been impeded.

Latter day thumbnail histories frequently depict the actions like this: “An abortive Communist coup in 1965 led to an anti-Communist takeover by the military, under Gen. Suharto.” (Source: The Concise Columbia Encyclopedia.) But the truth is far more complex. A persuasive indicator for this lies in the following item, cited in a remarkable article by Peter Dale Scott published in the British journal Lobster (Fall, 1990). Scott quotes an author citing a researcher who, having been given access to files of the foreign ministry in Pakistan, ran across a letter from a former ambassador who reported a conversation with a Dutch intelligence officer with NATO, which said, according to the researcher’s notes,

“Indonesia was going to fall into the Western lap like a rotten apple.” Western intelligence agencies, he said, would organize a “premature communist coup … [which would be] foredoomed to fail, providing a legitimate and welcome opportunity to the army to crush the communists and make Soekarno a prisoner of the army’s goodwill.” The ambassador’s report was dated December 1964.

Later in this article, Scott quotes from the book The CIA File:

“All I know,” said one former intelligence officer of the Indonesia events, “is that the Agency rolled in some of its top people and that things broke big and very favorable, as far as we were concerned.”

Ralph McGehee, a 25-year veteran of the CIA, also implicated the agency in an article, still partially censored by the CIA, published in The Nation (April 11, 1981):

To conceal its role in the massacre of those innocent people the C.I.A., in 1968, concocted a false account of what happened (later published by the Agency as a book, Indonesia-1965: The Coup That Backfired). That book is the only study of Indonesia politics ever released to the public on the Agency’s own initiative. At the same time that the Agency wrote the book, it also composed a secret study of what really happened. [one sentence deleted.] The Agency was extremely proud of its successful [one word deleted] and recommended it as a model for future operations [one-half sentence deleted].

Freeport After Sukarno

According to Forbes Wilson, Freeport had all but given up hope of developing its fabulous find in West Irian. But while the rest of the world’s press was still trying to unravel the convoluted information as to who was really in power, Freeport apparently had an inside track. In the essay mentioned earlier, Scott cites a cable (U.S. delegation to the U.N.) which stated that Freeport Sulphur had reached a preliminary “arrangement” with Indonesian officials over the Ertsberg in April of 1965, before there could legitimately have been any hope in sight.

Officially, Freeport had no such plans until after the October 1965 events. But even the official story seemed odd to Wilson. As early as November, a mere month after the October events, longtime Chairman of Freeport, Langbourne Williams, called Director Wilson at home, asking if the time had now come to pursue their project in West Irian. Wilson’s reaction to this call is interesting:

I was so startled I didn’t know what to say.

How did Williams know, so soon, that a new regime was coming to power? Sukarno was still President, and would remain so formally until 1967. Only deep insiders knew from the beginning that Sukarno’s days were numbered, and his power feeble. Wilson explains that Williams got some “encouraging private information” from “two executives of Texaco.” Long’s company had managed to maintain close ties to a high official of the Sukarno regime, Julius Tahija. It was Tahija who brokered a meeting between Freeport and Ibnu Sutowo, Minister of Mines and Petroleum. Fortune magazine had this to say about Sutowo (July 1973):

As president-director of Pertamina [the Government’s state-owned oil company], Lieutenant General Ibnu Sutowo receives a salary of just $250 a month, but lives on a princely scale. He moves around Jakarta in his personal Rolls-Royce Silver Cloud. He has built a family compound of several mansions, which are so large that guests at his daughter’s wedding party could follow the whole show only on closed-circuit television.

… The line between Sutowo’s public and private activities will seem hazy to Western eyes. The Ramayan Restaurant in New York [in Rockefeller Center-author’s note], for example, was bankrolled by various U.S. oil-company executives, who put up $500,000 to get into a notoriously risky sort of business. Presumably its backers were motivated at least in part by a desire to be on amiable terms with the general.

But beyond these dubious accolades, a hint of something else, as well was revealed:

Sutowo’s still small oil company played a key part in bankrolling those crucial operations [during the October 1965 events.]

Given the wealth of evidence that the CIA was deeply involved in this operation, it seems equally likely that Sutowo was acting as a conduit for their funds.

After Sukarno’s fall from power, Sutowo constructed a new agreement that allowed oil companies to keep a substantially larger percent of their profits. In an article entitled “Oil and Nationalism Mix Beautifully in Indonesia” (July, 1973), Fortune labeled the post-Sukarno deal “exceptionally favorable to the oil companies.”

In 1967, when Indonesia’s Foreign Investment Law was passed, Freeport’s contract was the first to be signed. With Kennedy, Sukarno, and any viable support for Indonesian nationalism out of the way, Freeport began operations.

In 1969, the vote mandated by the Kennedy brokered U.N. agreement on the question of West Irian independence was due. Under heavy intimidation and the visceral presence of the military, Irian “voted” to remain part of Indonesia. Freeport was in the clear.

The Bechtel Connection

Gus Long was a frequent dinner partner of Steve Bechtel, Sr., owner with CIA Director John McCone, of Bechtel-McCone in Los Angeles in the thirties. McCone and Bechtel, Sr. made a bundle off of World War II, split, and went their not so separate ways. Writes author Laton McCartney in Friends in High Places: The Bechtel Story,

[I]n 1964 and 1965, CIA director John McCone and U.S. ambassador to Indonesia Howard Jones briefed Steve Bechtel Sr. on the rapidly deteriorating situation in Indonesia. Bechtel, Socal, Texaco … had extensive dealings in that part of the world and were concerned because Indonesia’s President Sukarno was nationalizing U.S. business interests there. … In October 1965, in what a number of CIA alumni have since charged was an Agency-backed coup, Sukarno was ousted and replaced by President Suharto, who proved far more receptive to U.S. business interests than his predecessor.

Bechtel was no stranger to the CIA. Bechtel Sr. had been a charter member of the CIA conduit Asia Foundation from its inception as Allen Dulles’ brainchild. Former CIA Director Richard Helms himself joined Bechtel, as an “international consultant” in 1978. Said a former executive, Bechtel was:

loaded with the CIA … The agency didn’t have to ask them to place its agents … Bechtel was delighted to take them on and give them whatever assistance they needed.

Bechtel Sr.’s “oldest and closest friend in the oil industry,” Gus Long, had a problem. Freeport’s project was far more difficult than they had foreseen, and they needed outside help. The mountainous path to the “copper mountain” made extraction nearly impossible. Freeport hired Bechtel to help them construct the appropriate infrastructure to turn their dreams into reality.

Bechtel came with extras. Freeport needed additional financing for their costly Indonesian project. Bechtel Sr. had gotten himself appointed to the advisory committee of the Export-Import (Exim) bank after a long period of cozying up to Exim bank president Henry Kearns. Freeport was not happy with the lack of progress and costs of Bechtel’s operation. Forbes Wilson threatened to drop them from the project. Bechtel Sr. jumped in, saying he would make the project Bechtel’s top priority. He also guaranteed them $20 million in loans from the Exim bank. When the Exim bank’s engineer didn’t think that Freeport’s project seemed commercially viable and wouldn’t approve their loan, Bechtel Sr. called Kearns, and the loan went through over the objections of the bank’s engineer. Three years later, Kearns would resign from the bank when it revealed the bank had made generous loans to several projects in which Kearns was personally invested. Although Senator Proxmire called it “the worst conflict of interest” he had ever seen in seventeen years in the Senate, the Justice Department declined to prosecute. Said Proxmire:

It will appear to millions of American citizens that there is a double standard in the law, one for the ordinary citizen and quite another for those who hold high positions in government and make thousands of dollars in personal profit as a result of official actions.

Bechtel denies allegations from former employees that it spread over $3 million in cash around Indonesia in the early ’70s.

Unhappily Ever After

The tragedy of the Kennedy assassination lies in the legacy left in the wake of his absence. Without his support, Indonesia’s baby steps toward a real, economic independence were shattered. Sukarno, hardly a saint and with plenty of problems, nonetheless was trying to assure that business deals with foreigners left some benefit for the Indonesians. Suharto, in dire contrast, allowed foreigners to rape and pillage Indonesia for private gain, at the price of lives and the precious, irreplaceable resources of the Indonesians. Cindy Adams wrote a book about her experiences with Sukarno, called My Friend the Dictator. If Sukarno was a dictator, what term exists for Suharto?

Freeport’s Grasberg mine in Indonesia is one of the largest copper and gold reserves in the world. But the American based company owns 82% of the venture, while the Indonesian government and a privately held concern in Indonesia split the remaining percent.

How much influence does Freeport carry in Indonesia? Can they really say they have Indonesia’s best interests at heart?

Kissinger and East Timor

In 1975, Freeport’s mine was well into production and highly profitable. Future Freeport Director and lobbyist Henry Kissinger and President and ex-Warren Commission member Gerald Ford flew out of Jakarta having given the Indonesian Government under Suharto what State Department officials later described as “the big wink.” Suharto used the Indonesian military to take over the Portuguese territory of East Timor, followed by a mass slaughter that rivaled the 1965 bloodbath.

Says a former CIA operations officer who was stationed there at the time, C. Philip Liechty:

Suharto was given the green light [by the U.S.] to do what he did. There was discussion in the embassy and in traffic with the State Department about the problems that would be created for us if the public and Congress became aware of the level and type of military assistance that was going to Indonesia at that time. … Without continued heavy U.S. logistical military support the Indonesians might not have been able to pull if off.

In 1980, Freeport merged with McMoRan-an oil exploration and development company headed by James “Jim Bob” Moffett. The two become one, and Moffett (the “Mo” in McMoRan) eventually became President of Freeport McMoRan.

Friends in High Places

In 1995, Freeport McMoRan managed to spin off it’s Freeport McMoRan Copper & Gold Inc. subsidiary into a separate entity. The Overseas Private Investment Corporation (OPIC) wrote Freeport McMoRan Copper and Gold that they planned to cancel their investment insurance based on their poor environmental record at their Irian project, stating Freeport has “posed an unreasonable or major environmental, health, or safety hazard in Irian Jaya.”

Freeport didn’t sit still over this cancellation. Kissinger executed a major lobbying effort (for which he is paid $400,000 a year), meeting with officials at the State Department and working the halls of Capitol Hill. Sources close to the matter, according to Robert Bryce in a recent issue of the Texas Observer, say Freeport hired former CIA director James Woolsey in the fight against OPIC.

Freeport, now headquartered in New Orleans, manages to keep friends in high places. In 1993, the head of the pro-Suharto congressional lobby was the Senator from Louisiana, Bennett Johnson. Representative Robert Livingston, of Louisiana, invested in Freeport Copper and Gold while the House debated and voted on H.R. 322-the Mineral Exploration and Development Act. And when Jeffery Shafer, one of the directors of OPIC, recently was nominated for an appointment to Undersecretary of National Affairs, it was another Louisiana pol, this time Senator John Breaux, who voted to block the appointment until Shafer provided an explanation of OPIC’s cancellation of Freeport’s insurance. Jim Bob Moffett, head of Freeport McMoRan, is listed in Mother Jones‘ online “MoJo Wire Coin-Op Congress” survey of the top 400 people who gave the most money in campaign contributions.

Freeport’s actions abroad are not the only one’s worth tracking. In Louisiana itself, Freeport and three other companies (two of which Freeport later acquired) petitioned for a special exemption to the Clean Water Act in order to legally dump 25 billion pounds of toxic waste into the Mississippi river. Citizens protested, and Freeport’s petition was denied. Freeport then lobbied for the weakening of Clean Water Act restrictions.

The citizens of Austin, Texas, have fought to block a Freeport plan for a real estate development that will foul Barton Springs, a popular outdoor water park there.

According to a recent article in The Nation (July 31/August 7, 1995), Freeport is part of the National Wetlands Coalition, a group which wrote much of the language of a bill designed to eliminate E.P.A. oversight of wetlands areas, freeing them for exploitation. The same coalition has also lobbied to weaken the Endangered Species Act. The Nation revealed that Freeport’s political action committee since 1983 has paid members of congress over $730,000.

Scandal at UT

Freeport’s record caused an uproar at the University of Texas at Austin recently. The university’s geology department, which has done research under contract for Freeport, was recently given $2 million dollars by Jim Bob Moffett for a new building. The school’s Chancellor, William Cunningham, wanted to name the building after his friend and co-worker (Cunningham is also a Freeport Director) Moffett. Many on campus protested this development. Anthropology professor Stephen Feld resigned his position with the university over this issue, saying UT was “no longer a morally acceptable place of employment.” The protests about Cunningham’s conflict of interest-serving UT and Freeport-led to Cunningham’s resignation last December. He resigned a day after Freeport threatened to sue three professors at the University who had been loudest in protest.

Poised on the Brink

While moral victories are lauded in Texas, the real terror continues at Freeport’s plant in Indonesia.

In March of 1996, just as our last issue went to press, riots broke out at the Freeport plant in Irian Jaya (the current name for West Irian). Thousands were marching in the streets around the Freeport plant, where the military had as recently as December held and tortured in Freeport mining containers the people who lived and protested in that region. The protests are deeply rooted in the desire for the independence of the Papuans, the Amungme, and the many native inhabitants of Irian Jaya who were never Dutch, and never really Indonesian.

As we go to print, Indonesian sources report that the military has taken over the numerous Freeport Security stations around the mine. “Military Exercises” are intimidating the people who in March rioted at Freeport, causing the plant to lose two days of work and millions of dollars. Although no curfew has been called, people report a fear of being out at night.

The native Amungme tribes, the Papuans, and others are still hoping to retain independence from what they see as only a new form of colonialism: subservience to Freeport’s interests. According to a New York Times article (4/4/96), Freeport is the largest single investor in Indonesia.

With Kennedy’s support, Indonesia had a chance for real economic independence. The peoples of Irian were promised a real vote for self-government. But when Kennedy was killed, a military dictatorship was installed and paid off so that the interests of businesses like Freeport have been given higher priority than any demands of the natives whose resources are still being pillaged.

Sometimes, what we don’t understand about today’s news is what we don’t know about the Kennedy assassinati

Category: Freeport, Secret | Comments
februari 14

ANNUAL REPORT Freeport-McMoRan to SEC 2012

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10-K 1 a2012form10-k.htm FCX 2012 FORM 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 001-11307-01
Freeport-McMoRan Copper & Gold Inc.
(Exact name of registrant as specified in its charter)
Delaware
74-2480931
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
333 North Central Avenue
Phoenix, Arizona
85004-2189
(Address of principal executive offices)
(Zip Code)
(602) 366-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, par value $0.10 per share
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:  None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act  þ Yes ¨ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).           þ Yes ¨ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   þ Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).                             ¨ Yes þ No
The aggregate market value of common stock held by non-affiliates of the registrant was $33.0 billion on February 15, 2013, and $32.1 billion on June 29, 2012.
Common stock issued and outstanding was 949,530,599 shares on February 15, 2013, and 949,186,881 shares on June 29, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our proxy statement for our 2013 annual meeting of stockholders are incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) of this report.

 


FREEPORT-McMoRan COPPER & GOLD INC.
TABLE OF CONTENTS
Page
 61

 

i

 

PART I
Items 1. and 2. Business and Properties.
All of our periodic reports filed with the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, through our website, www.fcx.com, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. These reports and amendments are available through our website as soon as reasonably practicable after we electronically file or furnish such material to the SEC.
References to “we,” “us” and “our” refer to Freeport-McMoRan Copper & Gold Inc. (FCX) and its consolidated subsidiaries. References to “Notes” refer to the Notes to Consolidated Financial Statements included herein (refer to Item 8), and references to “MD&A” refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein (refer to Item 7).
PROPOSED ACQUISTIONS
In December 2012, FCX announced definitive merger agreements to acquire, in separate transactions, Plains Exploration & Production Company (PXP) and McMoRan Exploration Co. (MMR). Completion of each transaction is subject to receipt of PXP and MMR shareholder approval of their respective transactions, regulatory approvals (including United States (U.S.) antitrust clearance under the Hart-Scott Rodino Act) and other customary conditions. On December 26, 2012, the U.S. Federal Trade Commission granted early termination of the Hart-Scott Rodino waiting period with respect to both transactions. The PXP transaction is not conditioned on the closing of the MMR transaction, and the MMR transaction is not conditioned on the closing of the PXP transaction. PXP and MMR shareholder meetings to approve the respective transactions will be scheduled upon the effectiveness of the respective registration statements filed with the SEC. The transactions are expected to close in second-quarter 2013, subject to satisfaction of all conditions to closing.
Additionally in January 2013, FCX, through a newly formed joint venture, entered into a definitive agreement to acquire a cobalt chemical refinery in Kokkola, Finland, and the related sales and marketing business. The acquisition is subject to customary closing conditions, including regulatory approvals, and is expected to close in second-quarter 2013.
The information contained in this Form 10-K does not reflect the impact of us acquiring PXP, MMR or the cobalt chemical business. Refer to Notes 1 and 20 for further discussion of these proposed acquisitions.
GENERAL
We are a leading international mining company with headquarters in Phoenix, Arizona, and incorporated under the laws of the state of Delaware on November 10, 1987. We are one of the world’s largest copper, gold and molybdenum mining companies in terms of reserves and production. Our portfolio of assets includes the Grasberg minerals district in Indonesia, significant mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC). The Grasberg minerals district contains one of the largest copper and gold reserves in the world based on the latest available reserve data provided by third-party industry consultants.
We have significant reserves, resources and future development opportunities within our portfolio of assets. At December 31, 2012, consolidated recoverable proven and probable reserves totaled 116.5 billion pounds of copper, 32.5 million ounces of gold, 3.42 billion pounds of molybdenum, 321.4 million ounces of silver and 0.84 billion pounds of cobalt. Approximately 33 percent of our copper reserves are in North America, 33 percent are in South America, 27 percent are in Indonesia and 7 percent are in Africa. Approximately 95 percent of our gold reserves are in Indonesia, with our remaining gold reserves primarily in South America. Approximately 79 percent of our molybdenum reserves are in North America, with our remaining molybdenum reserves in South America. Refer to “Ore Reserves” for further discussion.
1

In North America, we currently operate seven copper mines – Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico, and two molybdenum mines – Henderson and Climax in Colorado. Certain of our North America copper mines (Sierrita, Bagdad, Morenci and Chino) also produce molybdenum concentrates.
In South America, we operate four copper mines – Cerro Verde in Peru, and El Abra, Candelaria and Ojos del Salado in Chile. In addition to copper, the Cerro Verde mine also produces molybdenum concentrates, and the Candelaria and Ojos del Salado mines produce gold and silver.
In Indonesia, PT Freeport Indonesia operates the mines in the Grasberg minerals district. In addition to copper, the Grasberg minerals district also produces significant quantities of gold and silver.
In Africa, Tenke Fungurume Mining S.A.R.L. (TFM) operates the mines in the Tenke Fungurume minerals district (the Tenke mines). In addition to copper, Tenke produces cobalt hydroxide.
A summary of our consolidated copper, gold and molybdenum production for the year 2012 by geographic location follows:
Copper
Gold
Molybdenum
North America
37
%
1
%
91
%
a
South America
34
%
9
%
9
%
Indonesia
19
%
90
%
N/A
Africa
10
%
N/A
N/A
a. For the year 2012, 53 percent of our consolidated molybdenum production in North America was from the Henderson and Climax primary molybdenum mines. The Climax molybdenum mine began commercial production in May 2012.
Refer to “Production Data” for further information.
The locations of our operating mines are shown on the map below. For information about our operating segments and financial data by geographic area refer to Note 17.
2

The diagram below shows our ownership interest in our operating mines at December 31, 2012.
COPPER, GOLD AND MOLYBDENUM
A brief discussion of our primary metals appears below. For further discussion of historical market prices of these metals refer to MD&A.
Copper
Copper is an internationally traded commodity, and its prices are determined by the major metals exchanges – the London Metal Exchange (LME), New York Mercantile Exchange (COMEX) and Shanghai Futures Exchange (SHFE). Prices on these exchanges generally reflect the worldwide balance of copper supply and demand, and can be volatile and cyclical. During 2012, LME spot copper prices ranged from a low of $3.29 per pound to a high of $3.93 per pound, averaged $3.61 per pound and closed at $3.59 per pound on December 31, 2012.
In general, demand for copper reflects the rate of underlying world economic growth, particularly in industrial production and construction. According to Wood Mackenzie, a widely followed independent metals market consultant, copper’s end-use markets (and their estimated shares of total consumption) are:
Electrical applications
34
%
Construction
31
%
Industrial machinery
13
%
Transportation
13
%
Consumer products
9
%
Gold
Gold is used for jewelry, coinage and bullion as well as various industrial and electronic applications. Gold can be readily sold on numerous markets throughout the world. Benchmark prices are generally based on London Bullion Market Association (London) quotations. During 2012, London PM gold prices ranged from a low of $1,540 per ounce to a high of $1,792 per ounce, averaged $1,669 per ounce and closed at $1,658 per ounce on December 31, 2012.
Molybdenum
Molybdenum is a key alloying element in steel and the raw material for several chemical-grade products used in catalysts, lubrication, smoke suppression, corrosion inhibition and pigmentation. Molybdenum, as a high-purity metal, is also used in electronics such as flat-panel displays and in super alloys used in aerospace. Molybdenum’s
3

end-use markets (and their estimated shares of total consumption) according to the International Molybdenum Association are:
Construction steel
40
%
Stainless steel
20
%
Chemicals
14
%
Tool and high-speed steel
10
%
Cast iron
7
%
Molybdenum metal
5
%
Superalloys
4
%
Reference prices for molybdenum are available in several publications, including Metals Week, Ryan’s Notes and Metal Bulletin. During 2012, the weekly average price of molybdenum quoted by Metals Week ranged from a low of $10.90 per pound to a high of $14.80 per pound, averaged $12.74 per pound and was $11.60 per pound on December 31, 2012.
PRODUCTS AND SALES
FCX’s consolidated revenues for 2012 primarily included sales of copper (79 percent), gold (10 percent) and molybdenum (7 percent). PT Freeport Indonesia’s sales to PT Smelting (PT Freeport Indonesia’s 25 percent owned copper smelter and refinery in Indonesia – refer to “Smelting Facilities” for further discussion) represented 11 percent of our consolidated revenues in 2012 and 2011, and 12 percent in 2010. No other customer accounted for more than 10 percent of our consolidated revenues in any of the past three years.
Refer to Note 17 for a summary of our consolidated revenues and operating income by business segment and geographic area.
Copper Products
We are one of the world’s leading producers of copper concentrate, cathode and continuous cast copper rod. During 2012, 46 percent of our mined copper was sold in concentrate, 28 percent as cathode and 26 percent as rod from our North America operations.
Our copper ores are generally processed either by smelting and refining or by solution extraction and electrowinning (SX/EW). Before being subject to the smelting and refining process, ore is crushed and treated to produce a copper concentrate with copper content of approximately 20 to 30 percent. Copper concentrate is then smelted (i.e., subjected to extreme heat) to produce copper anodes, which weigh between 800 and 900 pounds each and have an average copper content of 99.5 percent. The anodes are further treated by electrolytic refining to produce copper cathodes, which weigh between 100 and 350 pounds each and have an average copper content of 99.99 percent. Our copper cathodes are used as the raw material input for copper rod, brass mill products and for other uses. For ore subject to the SX/EW process, copper is extracted from the ore by dissolving it with a weak sulphuric acid solution. The copper content of the solution is increased in two additional solution-extraction stages and then the copper-bearing solution undergoes an electrowinning process to produce cathode that is 99.99 percent copper.
Copper Concentrate.  We produce copper concentrate at eight of our mines, of which PT Freeport Indonesia is our largest producer. In North America, copper concentrate is produced at our Morenci, Bagdad, Sierrita and Chino mines, and is generally shipped to our Miami smelter in Arizona. In South America, we produce copper concentrate at our Cerro Verde, Candelaria and Ojos del Salado mines.
Copper Cathode.  We produce copper cathode at our electrolytic refinery located in El Paso, Texas, and at 10 of our mines. In North America, SX/EW cathode is produced from our Morenci, Bagdad, Safford, Sierrita, Miami, Tyrone and Chino mines; in South America from our Cerro Verde and El Abra mines; and from our Tenke mines in Africa. Atlantic Copper S.L.U. (Atlantic Copper, our wholly owned copper smelting and refining unit in Spain – refer to “Smelting Facilities” for further discussion) and PT Smelting also produce copper cathode.
Continuous Cast Copper Rod.  We manufacture continuous cast copper rod at our facilities in El Paso, Texas; Norwich, Connecticut; and Miami, Arizona, primarily using copper cathode produced at our North America copper mines.
4

Other Copper Products.  We produce specialty copper products at our Bayway operations in Elizabeth, New Jersey. These products include specialty copper alloys in the forms of rod, bar and strip. We manufacture electrode wire for use in welding steel cans at our Norwich, Connecticut, and El Paso, Texas, facilities. We also produce copper sulfate pentahydrate for use in agricultural and industrial applications at our facility in Sierrita, Arizona. These facilities primarily use copper cathode produced at our North America mines to manufacture their end products.
Copper Sales
North America.  The majority of the copper produced at our North America copper mines and refined in our El Paso, Texas, refinery is consumed at our rod plants. The remainder of our North America copper production is sold in the form of copper cathode or copper concentrate under U.S. dollar-denominated annual contracts. Cathode and rod contract prices are generally based on the prevailing COMEX monthly average spot price for the month of shipment and include a premium. Generally, copper rod is sold to wire and cable manufacturers, while cathode is sold to rod, brass or tube fabricators. Additionally, during 2012 six percent of our North America mines’ copper sales volumes were shipped to Atlantic Copper.
South America.  Production from our South America mines is sold as copper concentrate or copper cathode under U.S. dollar-denominated, annual and multi-year contracts. Our South America mines generally sell approximately 60 to 70 percent of their copper production in concentrate and the rest as cathode. During 2012, 15 percent of our South America mines’ copper sales volumes were shipped to Atlantic Copper.
Substantially all of South America’s copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) primarily based on quoted LME monthly average spot copper prices. Revenues from South America’s concentrate sales are recorded net of treatment and refining charges (i.e., fees paid to smelters and refiners that are generally negotiated annually), including any applicable price participation charges that are based on the market price of copper. In addition, because a portion of the metals contained in copper concentrates is unrecoverable from the smelting process, revenues from South America’s concentrate sales are also recorded net of allowances for unrecoverable metals, which are a negotiated term of the contracts and vary by customer.
Indonesia.  PT Freeport Indonesia sells its production in the form of copper concentrate, which contains significant quantities of gold and silver, under U.S. dollar-denominated, long-term contracts.  PT Freeport Indonesia also sells a small amount of copper concentrates in the spot market.
A summary of PT Freeport Indonesia’s aggregate percentage concentrate sales to PT Smelting, Atlantic Copper and to third parties for the last three years follows:
2012
2011
2010
PT Smelting
52
%
44
%
36
%
Atlantic Copper
11
%
10
%
21
%
Third parties
37
%
46
%
43
%
100
%
100
%
100
%
Substantially all of PT Freeport Indonesia’s concentrate sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) primarily based on quoted LME monthly average spot copper prices. Revenues from PT Freeport Indonesia’s concentrate sales are recorded net of royalties, treatment and refining charges, and allowances for unrecoverable metals.
Africa.  TFM sells its production in the form of copper cathode under U.S. dollar-denominated contracts. Substantially all of TFM’s cathode sales provide final copper pricing in the month after the shipment date based on quoted LME monthly average spot copper prices. Revenues from TFM’s cathode sales are recorded net of royalties and also include adjustments for point-of-sale transportation costs that are negotiated in customer contracts.
Europe.  Atlantic Copper sells copper cathode directly to rod and brass mills, primarily located in Europe. Atlantic Copper has occasionally sold copper cathode to merchants. Copper cathode is generally sold under annual contracts and priced based on the LME monthly average spot price for the month of arrival at the buyer’s facilities.
Our copper mining operations provide Atlantic Copper with at least half of its concentrate requirements at market prices.
5

Following is a summary of Atlantic Copper’s concentrate purchases from our copper mining operations and third parties for the last three years:
2012
2011
2010
North America copper mines
16
%
2
%
%
South America mining
31
%
30
%
25
%
Indonesia mining
10
%
17
%
28
%
Third parties
43
%
51
%
47
%
100
%
100
%
100
%
Gold Products and Sales
We also produce gold, primarily from the Grasberg minerals district. Gold is primarily sold as a component of our copper concentrate or in slimes, which are a product of the smelting and refining process. Gold generally is priced at the average London price for a specified month near the month of shipment. Revenues from gold sold as a component of our copper concentrate are recorded net of treatment and refining charges. Revenues from gold sold in slimes are recorded net of refining charges.
Molybdenum Products and Sales
We are the world’s largest producer of molybdenum and molybdenum-based chemicals. In addition to production from our Henderson and Climax molybdenum mines, we produce molybdenum concentrate at certain of our North America copper mines, and at our Cerro Verde copper mine in Peru.
The majority of our molybdenum concentrates are processed in our own conversion facilities. Technical-grade oxide is produced from molybdenum concentrates in Sierrita, Arizona; Fort Madison, Iowa; and Rotterdam, the Netherlands. Ferromolybdenum is produced from technical-grade oxide in Stowmarket, United Kingdom, through a metallothermic reduction process. High-quality molybdenum concentrates are converted into molybdenum chemicals at Fort Madison and Rotterdam. Molybdenum generally is priced based on the average Metals Week price for the month prior to the month of shipment.
Cobalt, Silver and Other Products and Sales
We produce cobalt hydroxide at the Tenke mines. Cobalt hydroxide is priced at a discount to the average monthly low price published by Metal Bulletin for a specified month near the month of shipment. We produce silver as a component of our copper concentrate or in slimes. Silver generally is priced at the average London Bullion Market Association price for a specified month near the month of shipment. Sales of cobalt hydroxide, silver and other
metals, such as rhenium and magnetite, do not represent a significant component of our total consolidated revenues.
MINES
Following are maps and descriptions of our mining operations in North America (including both copper and molybdenum operations), South America, Indonesia and Africa.
North America
In the U.S., most of the land occupied by our copper and molybdenum mines, concentrators, SX/EW facilities, smelter, refinery, rod mills, molybdenum roasters and processing facilities is generally owned by us or is located on unpatented mining claims owned by us. Certain portions of our Bagdad, Sierrita, Miami, Tyrone, Chino, Cobre, Henderson and Climax operations are located on government-owned land and are operated under a Mine Plan of Operations or other use permit. Various federal and state permits or leases on government land are held for purposes incidental to mine operations.
6

Morenci
 
We own an 85 percent undivided interest in Morenci, with the remaining 15 percent owned by affiliates of Sumitomo Corporation. Each partner takes in kind its share of Morenci’s production.
Morenci is an open-pit copper mining complex that has been in continuous operation since 1939 and previously was mined through underground workings. Morenci is located in Greenlee County, Arizona, approximately 50 miles northeast of Safford on U.S. Highway 191. The site is accessible by a paved highway and a railway spur.
The Morenci mine is a porphyry copper deposit that has oxide and secondary sulfide mineralization, and primary sulfide mineralization. The predominant oxide copper mineral is chrysocolla. Chalcocite is the most important secondary copper sulfide mineral with chalcopyrite as the dominant primary copper sulfide.
The Morenci operation consists of a 50,000 metric ton-per-day concentrator, that produces copper and molybdenum concentrates; a 68,000 metric ton-per-day crushed-ore leach pad and stacking system; a low-grade run-of-mine (ROM) leaching system; four SX plants; and three EW tank houses that produce copper cathode. Total EW tank house capacity is approximately 900 million pounds of copper per year. Morenci’s concentrate leach, direct-electrowinning facility was commissioned in third-quarter 2007 and processed copper concentrate until early 2009 when it was placed on care-and-maintenance status. The available mining fleet consists of one hundred and three 236-metric ton and nine 363-metric ton haul trucks loaded by 12 shovels with bucket sizes ranging from 47 to 57 cubic meters, which are capable of moving over 800,000 metric tons of material per day.
During 2011, we completed the ramp up of Morenci’s mining rates to 635,000 metric tons of ore per day and milling rates to approximately 50,000 metric tons of ore per day. We are currently engaged in a project to expand mining and milling capacity at Morenci to process additional sulfide ore identified through exploratory drilling. The project is targeting incremental annual production of approximately 225 million pounds of copper in 2014 (an approximate 40 percent increase from 2012) through increases in mining rates to 815,000 metric tons of ore per day and milling rates to 115,000 metric tons of ore per day. Refer to “Development Projects and Exploration” for further discussion.
Morenci’s production, including our joint venture partner’s share, totaled 632 million pounds of copper and 3 million pounds of molybdenum in 2012, 614 million pounds of copper and 2 million pounds of molybdenum in 2011 and 514 million pounds of copper in 2010.
Morenci is located in a desert environment with rainfall averaging 13 inches per year. The highest bench elevation is 2,000 meters above sea level and the ultimate pit bottom is expected to have an elevation of 840 meters above sea level. The Morenci operation encompasses approximately 64,750 acres, comprising approximately 50,800 acres of patented mining claims and other fee lands, approximately 10,900 acres of unpatented mining claims and approximately 3,050 acres of land held by state or federal permits, easements and rights-of-way.
The Morenci operation’s electrical power is primarily sourced from Tucson Electric Power Company, Arizona Public Service Company and the Luna Energy facility (in which we own a one-third interest) in Deming, New Mexico. Although we believe the Morenci operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water rights claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Morenci operation. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings,” for further discussion.
7

Bagdad
Our wholly owned Bagdad mine is an open-pit copper and molybdenum mining complex located in Yavapai County in west-central Arizona. It is approximately 60 miles west of Prescott and 100 miles northwest of Phoenix. The property can be reached by Arizona Highway 96, which ends at the town of Bagdad. The closest railroad is at Hillside, Arizona, approximately 24 miles southeast on Arizona Highway 96. The open-pit mining operation has been ongoing since 1945, and prior mining was conducted through underground workings.
The Bagdad mine is a porphyry copper deposit containing both sulfide and oxide mineralization. Chalcopyrite and molybdenite are the dominant primary sulfides and are the primary economic minerals in the mine. Chalcocite is the most common secondary copper sulfide mineral, and the predominant oxide copper minerals are chrysocolla, malachite and azurite.
The Bagdad operation consists of a 75,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates, an SX/EW plant that can produce up to 25 million pounds per year of copper cathode from solution generated by low-grade stockpile leaching, and a pressure leach plant to process molybdenum concentrates. The available mining fleet consists of thirty 235-metric ton haul trucks loaded by five shovels with bucket sizes ranging from 40 to 56 cubic meters, which are capable of moving over 200,000 metric tons of material per day.
Bagdad’s production totaled 197 million pounds of copper and 10 million pounds of molybdenum in 2012, 194 million pounds of copper and 10 million pounds of molybdenum in 2011, and 203 million pounds of copper and 7 million pounds of molybdenum in 2010.
Bagdad is located in a desert environment with rainfall averaging 15 inches per year. The highest bench elevation is 1,200 meters above sea level and the ultimate pit bottom is expected to be 310 meters above sea level. The Bagdad operation encompasses approximately 21,750 acres, comprising approximately 21,150 acres of patented mining claims and other fee lands, and approximately 600 acres of unpatented mining claims.
Bagdad receives electrical power from Arizona Public Service Company. Although we believe the Bagdad operation has sufficient water sources to support current operations, we are a party to litigation that may set legal precedents, which could adversely affect our water rights at Bagdad and at our other properties in Arizona. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings,” for further discussion.
8

Safford
 
Our wholly owned Safford mine has been in operation since 2007 and is an open-pit copper mining complex located in Graham County, Arizona, approximately eight miles north of the town of Safford and 170 miles east of Phoenix. The site is accessible by paved county road off U.S. Highway 70.
The Safford mine includes two copper deposits that have oxide mineralization overlaying primary copper sulfide mineralization. The predominant oxide copper minerals are chrysocolla and copper-bearing iron oxides with the predominant copper sulfide material being chalcopyrite.
The property is a mine-for-leach project and produces copper cathodes. The operation consists of two open pits feeding a crushing facility with a capacity of 103,000 metric tons per day. The crushed ore is delivered to a single leach pad by a series of overland and portable conveyors. Leach solutions feed a SX/EW facility with a capacity of 240 million pounds of copper per year. A sulphur burner plant is also in operation at Safford, providing a cost-effective source of sulphuric acid used in SX/EW operations. The available mining fleet consists of twenty 235-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 31 to 34 cubic meters, which are capable of moving an average of 225,000 metric tons of material per day.
Safford’s copper production totaled 175 million pounds in 2012, 151 million pounds in 2011 and 143 million pounds in 2010.
Safford is located in a desert environment with rainfall averaging 10 inches per year. The highest bench elevation is 1,250 meters above sea level and the ultimate pit bottom is expected to have an elevation of 750 meters above sea level. The Safford operation encompasses approximately 25,000 acres, comprising approximately 21,000 acres of patented lands, approximately 3,950 acres of unpatented lands, and approximately 50 acres of land held by federal permit.
The Safford operation’s electrical power is primarily sourced from Tucson Electric Power Company, Arizona Public Service Company and the Luna Energy facility. Although we believe the Safford operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water right claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Safford operation. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings,” for further discussion.
9

Sierrita
Our wholly owned Sierrita mine has been in operation since 1959 and is an open-pit copper and molybdenum mining complex located in Pima County, Arizona, approximately 20 miles southwest of Tucson and seven miles west of the town of Green Valley and Interstate Highway 19. The site is accessible by a paved highway and by rail.
The Sierrita mine is a porphyry copper deposit that has oxide and secondary sulfide mineralization, and primary sulfide mineralization. The predominant oxide copper minerals are malachite, azurite and chrysocolla. Chalcocite is the most important secondary copper sulfide mineral, and chalcopyrite and molybdenite are the dominant primary sulfides.
The Sierrita operation includes a 102,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates. Sierrita also produces copper from a ROM oxide-leaching system. Cathode copper is plated at the Twin Buttes EW facility, which has a design capacity of approximately 50 million pounds of copper per year. In 2004, a copper sulfate crystal plant began production, which has the capacity to produce 40 million pounds of copper sulfate per year. The Sierrita operation also has molybdenum facilities consisting of a leaching circuit, two molybdenum roasters and a packaging facility. The molybdenum facilities process molybdenum concentrate produced by Sierrita, from our other mines and from third-party sources. The available mining fleet consists of twenty-five 235-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 34 to 56 cubic meters, which are capable of moving an average of 200,000 metric tons of material per day.
Sierrita’s production totaled 157 million pounds of copper and 21 million pounds of molybdenum in 2012, 177 million pounds of copper and 23 million pounds of molybdenum in 2011, and 147 million pounds of copper and 18 million pounds of molybdenum in 2010.
Sierrita is located in a desert environment with rainfall averaging 12 inches per year. The highest bench elevation is 1,160 meters above sea level and the ultimate pit bottom is expected to be 440 meters above sea level. The Sierrita operation, including the adjacent Twin Buttes site (refer to “Development Projects and Exploration” for further discussion), encompasses approximately 37,650 acres, comprising approximately 13,300 acres of patented mining claims, and approximately 24,350 acres of split-estate lands.
Sierrita receives electrical power through long-term contracts with the Tucson Electric Power Company. Although we believe the Sierrita operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water rights claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Sierrita operation. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings,” for further discussion.
10

Miami
Our wholly owned Miami mine is an open-pit copper mining complex located in Gila County, Arizona, approximately 90 miles east of Phoenix and six miles west of the city of Globe on U.S. Highway 60. The site is accessible by a paved highway and by rail.
The Miami mine is a porphyry copper deposit that has leachable oxide and secondary sulfide mineralization. The predominant oxide copper minerals are chrysocolla, copper-bearing clays, malachite and azurite. Chalcocite and covellite are the most important secondary copper sulfide minerals.
Since about 1915, the Miami mining operation had processed copper ore using both flotation and leaching technologies. Current operations include leaching by the SX/EW process. The design capacity of the SX/EW plant is 200 million pounds of copper per year. The available mining fleet consists of twenty 227-metric ton haul trucks loaded by three shovels with bucket sizes ranging from 31 to 34 cubic meters, which are capable of moving an average of 93,000 metric tons of material per day.
Miami’s copper production totaled 66 million pounds in both 2012 and 2011, and 18 million pounds in 2010.
Miami is located in a desert environment with rainfall averaging 18 inches per year. The highest bench elevation is 1,390 meters above sea level, and the ultimate pit bottom will have an elevation of 810 meters above sea level. The Miami operation encompasses approximately 9,100 acres, comprising approximately 8,750 acres of patented mining claims and other fee lands, and approximately 350 acres of unpatented mining claims.
Miami receives electrical power through long-term contracts with the Salt River Project and natural gas through long-term contracts with El Paso Natural Gas as the transporter. Although we believe the Miami operation has sufficient water sources to support current operations, we are a party to litigation that may impact our water right claims or rights to continued use of currently available water supplies, which could adversely affect our water supply for the Miami operation. Refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings,” for further discussion.
11

Tyrone and Chino
Tyrone
Our wholly owned Tyrone mine is an open-pit copper mining complex which has been in operation since 1967. It is located in southwestern New Mexico in Grant County, approximately 10 miles south of Silver City, New Mexico, along State Highway 90. The site is accessible by paved road and rail.
The Tyrone mine is a porphyry copper deposit. Mineralization is predominantly secondary sulfide consisting of chalcocite with leachable oxide mineralization consisting of chrysocolla.
Copper processing facilities consist of a SX/EW operation with a maximum capacity of approximately 100 million pounds of copper cathodes per year. The available mining fleet consists of twenty-one 240-metric ton haul trucks loaded by three shovels with bucket sizes ranging from 17 to 47 cubic meters, which are capable of moving an average of 136,000 metric tons of material per day.
Tyrone’s copper production totaled 83 million pounds in 2012, 76 million pounds in 2011 and 82 million pounds in 2010.
Tyrone is located in a desert environment with rainfall averaging 16 inches per year. The highest bench elevation is 2,000 meters above sea level and the ultimate pit bottom is expected to have an elevation of 1,500 meters above sea level. The Tyrone operation encompasses approximately 35,200 acres, comprising 18,750 acres of patented mining claims and other fee lands, and 16,450 acres of unpatented mining claims.
Tyrone receives electrical power from the Luna Energy facility and from the open market. We believe the Tyrone operation has sufficient water resources to support current operations.
Chino
Our wholly owned Chino mine is an open-pit copper mining complex located in southwestern New Mexico in Grant County, approximately 15 miles east of the town of Silver City off of State Highway 180. The mine is accessible by paved roads and by rail. Chino has been in operation since 1910.
The Chino mine is a porphyry copper deposit with adjacent copper skarn deposits. There is leachable oxide and secondary sulfide mineralization, and millable primary sulfide mineralization. The predominant oxide copper minerals are chrysocolla and azurite. Chalcocite is the most important secondary copper sulfide mineral, and chalcopyrite and molybdenite the dominant primary sulfides.
The Chino operation consists of a 36,000 metric ton-per-day concentrator that produces copper and molybdenum concentrates, and a 150 million pound-per-year SX/EW plant that produces copper cathode from solution generated by ROM leaching. The available mining fleet consists of thirty-four 240-metric ton haul trucks loaded by four shovels with bucket sizes ranging from 42 to 48 cubic meters, which are capable of moving an average of 218,000 metric tons of material per day.
During 2011, we restarted mining and milling activities at the Chino mine. Ramp up activities at Chino are continuing, with production of approximately 250 million pounds of copper per year targeted in 2014. Chino’s production totaled 144 million pounds of copper and 2 million pounds of molybdenum in 2012, 69 million pounds of copper in 2011 and 34 million pounds of copper in 2010 from residual leaching operations.
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Chino is located in a desert environment with rainfall averaging 16 inches per year. The highest bench elevation is 2,250 meters above sea level, and the ultimate pit bottom is expected to be 1,500 meters above sea level. The Chino operation encompasses approximately 118,600 acres, comprising approximately 113,200 acres of patented mining claims and other fee lands, and approximately 5,400 acres of unpatented mining claims.
Chino receives power from the Luna Energy facility and from the open market. We believe Chino has sufficient water resources to support current operations.
Henderson and Climax
Henderson
Our wholly owned Henderson molybdenum mine has been in operation since 1976 and is located approximately 42 miles west of Denver, Colorado, off U.S. Highway 40. Nearby communities include the towns of Empire, Georgetown and Idaho Springs. The Henderson mill site is located approximately 15 miles west of the mine and is accessible from Colorado State Highway 9. The Henderson mine and mill are connected by a 10-mile conveyor tunnel under the Continental Divide and an additional five-mile surface conveyor. The tunnel portal is located five miles east of the mill.
The Henderson mine is a porphyry molybdenum deposit with molybdenite as the primary sulfide mineral.
The Henderson operation consists of a large block-cave underground mining complex feeding a concentrator with a current capacity of approximately 32,000 metric tons per day. Henderson has the capacity to produce approximately 40 million pounds of molybdenum per year. The majority of the molybdenum concentrate produced is shipped to our Fort Madison, Iowa, processing facility. The available underground mining equipment fleet consists of thirteen 9-metric ton load-haul-dump (LHD) units and six 73-metric ton haul trucks, which deliver ore to a gyratory crusher feeding a series of three overland conveyors to the mill stockpiles.
Henderson’s molybdenum production totaled 34 million pounds in 2012, 38 million pounds in 2011 and 40 million pounds in 2010.
The Henderson mine is located in a mountain region with the main access shaft at 3,180 meters above sea level. The main production levels are currently at elevations of 2,200 and 2,350 meters above sea level. This region experiences significant snowfall during the winter months.
The Henderson mine and mill operations encompass approximately 11,900 acres, comprising approximately 11,850 acres of patented mining claims and other fee lands, and an approximate 50-acre easement with the U.S. Forest Service for the surface portion of the conveyor corridor.
Henderson operations receive electrical power through long-term contracts with Xcel Energy and natural gas through long-term contracts with Anadarko Energy Services Company (and effective March 1, 2013, Seminole Energy Services Company) with Xcel Energy as the transporter. We believe the Henderson operation has sufficient water resources to support current operations.
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Climax
Our wholly owned Climax mine is located 13 miles northeast of Leadville, Colorado, off Colorado State Highway 91 at the top of Fremont Pass. The mine is accessible by paved roads.
The Climax ore body is a porphyry molybdenum deposit with molybdenite as the primary sulfide mineral.
The Climax open-pit mine, which was commissioned in second-quarter 2012, includes a 25,000 metric ton-per-day mill facility. Molybdenum production from Climax totaled 7 million pounds in 2012 and is targeted to produce 20 million pounds for 2013, with the potential to produce 30 million pounds per year, depending on market conditions. The fleet consists of two hydraulic shovels and seven 177-metric ton haul trucks.
The Climax mine is located in a mountain region with snowfall averaging 23 feet per year. The highest bench elevation is approximately 4,050 meters above sea level, and the ultimate pit bottom is expected to have an elevation of approximately 3,100 meters above sea level. The operations encompass approximately 14,350 acres.
Climax operations receive electrical power through long-term contracts with Xcel Energy and natural gas through long-term contracts with Anadarko Energy Services Company (and effective March 1, 2013, Seminole Energy Services Company), with Xcel Energy as the transporter. We believe the Climax operation has sufficient water resources to support current operations.
Other North America Mines
In addition to the currently operating mines described above, we have four non-operating copper mines – Ajo, Bisbee and Tohono in Arizona, and Cobre in New Mexico – that have been on care-and-maintenance status for several years and would require additional capital investment, which could be significant, to return them to operating status.
We also own the Twin Buttes copper mine, which ceased operations in 1994 and is adjacent to our Sierrita mine in Arizona. Refer to “Development Projects and Exploration” for further discussion.
South America
At our operations in South America, mine properties and facilities are controlled through mining claims or concessions under the general mining laws of the relevant country. The claims or concessions are owned or controlled by the operating companies in which we or our subsidiaries have a controlling ownership interest. Roads, power lines and aqueducts are controlled by easements.
Cerro Verde
We have a 53.56 percent ownership interest in Cerro Verde, with the remaining 46.44 percent held by SMM Cerro Verde Netherlands B.V. (21.0 percent), Compañia de Minas Buenaventura S.A.A. (19.58 percent) and other stockholders whose shares are publicly traded on the Lima Stock Exchange (5.86 percent).
Cerro Verde is an open-pit copper and molybdenum mining complex that has been in operation since 1976 and is located 20 miles southwest of Arequipa, Peru. The site is accessible by paved highway. A majority of Cerro Verde’s
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copper cathode production is sold locally and the remaining copper cathodes and concentrate production are transported approximately 70 miles by truck and rail to the Port of Matarani for shipment to international markets.
The Cerro Verde mine is a porphyry copper deposit that has oxide and secondary sulfide mineralization, and primary sulfide mineralization. The predominant oxide copper minerals are brochantite, chrysocolla, malachite and copper “pitch.” Chalcocite and covellite are the most important secondary copper sulfide minerals. Chalcopyrite and molybdenite are the dominant primary sulfides.
Cerro Verde’s current operation consists of an open-pit copper mine, a 120,000 metric ton-per-day concentrator and SX/EW leaching facilities. Leach copper production is derived from a 39,000 metric ton-per-day crushed leach facility and a ROM leach system. This leaching operation has a capacity of approximately 200 million pounds of copper per year. The available fleet consists of thirty-two 230-metric ton haul trucks loaded by four electric shovels with bucket sizes ranging in size from 33 to 53 cubic meters and one hydraulic shovel with a bucket size of 21 cubic meters, which are capable of moving an average of 337,000 metric tons of material per day.
Cerro Verde’s production totaled 595 million pounds of copper and 8 million pounds of molybdenum in 2012, 647 million pounds of copper and 10 million pounds of molybdenum in 2011, and 668 million pounds of copper and 7 million pounds of molybdenum in 2010.
Refer to “Development Projects and Exploration” for further discussion of the large-scale expansion at Cerro Verde that would expand the concentrator facilities to 360,000 metric tons of ore per day and provide incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum beginning in 2016.
Cerro Verde is located in a desert environment with rainfall averaging 1.5 inches per year and is in an active seismic zone. The highest bench elevation is 2,753 meters above sea level and the ultimate pit bottom is expected to be 1,568 meters above sea level. Cerro Verde has a mining concession covering approximately 157,000 acres plus approximately 25 acres of owned property, and approximately 80 acres of rights-of-way outside the mining concession area.
Cerro Verde receives electrical power under long-term contracts with Kallpa Generación SA and Empresa de Generación Eléctrica de Arequipa. Water for our Cerro Verde processing operations comes from renewable sources through a series of storage reservoirs on the Rio Chili watershed that collect water primarily from seasonal precipitation. Cerro Verde’s participation in the Pillones Reservoir Project has secured water rights that we believe will be sufficient to support Cerro Verde’s current operations.
Cerro Verde has also reached an agreement with the Regional Government of Arequipa, the National Government, Servicio de Agua Potable y Alcantarillado de Arequipa S.A. (SEDAPAR) and other local institutions to allow it to finance the engineering and construction of a wastewater treatment plant for Arequipa, should Cerro Verde proceed with plans for a large-scale expansion. Once Cerro Verde obtains a license for the treated water, it would be used to supplement its existing water supplies to support the potential concentrator expansion.
For further discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”
El Abra
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We own a 51 percent interest in El Abra, and the remaining 49 percent interest is held by the state-owned copper enterprise Corporación Nacional del Cobre de Chile (CODELCO).
El Abra is an open-pit copper mining complex that has been in operation since 1996 and is located 47 miles north of Calama in Chile’s El Loa province, Region II. The site is accessible by paved highway and by rail.
The El Abra mine is a porphyry copper deposit that has sulfide and oxide mineralization. The predominant primary sulfide copper minerals are bornite and chalcopyrite. There is a minor amount of secondary sulfide mineralization
as chalcocite. The oxide copper minerals are chrysocolla and pseudomalachite. There are lesser amounts of copper-bearing clays and tenorite.
The El Abra operation consists of an open-pit copper mine and a SX/EW facility with a capacity of 500 million pounds of copper cathode per year from a 125,000 metric ton-per-day crushed leach circuit and a similar-sized ROM leaching operation. The available fleet consists of forty 220-metric ton haul trucks loaded by four shovels with buckets ranging in size from 26 to 41 cubic meters, which are capable of moving an average of 223,000 metric tons of material per day.
During 2011, we commenced production from El Abra’s sulfide ores. Production from the sulfide ore is replacing the depleting oxide copper production. El Abra’s copper production totaled 338 million pounds in 2012, 274 million pounds in 2011 and 320 million pounds in 2010.
We are also engaged in pre-feasibility studies for a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra have identified a significant sulfide resource.
El Abra is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest bench elevation is 4,180 meters above sea level and the ultimate pit bottom is expected to be 3,430 meters above sea level. El Abra controls a total of approximately 151,300 acres of mining claims covering the ore deposit, stockpiles, process plant, and water wellfield and pipeline. In addition, El Abra has land surface rights for the road between the processing plant and the mine, the water wellfield, power transmission lines and for the water pipeline from the Salar de Ascotán aquifer.
El Abra currently receives electrical power under a long-term contract with Electroandina. Water for our El Abra processing operations comes from pumping of groundwater from the Salar de Ascotán aquifer pursuant to regulatory approval. We believe El Abra has sufficient water rights to support current operations. For a discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”
Candelaria and Ojos del Salado
Candelaria
We have an 80 percent ownership interest in Candelaria, with the remaining 20 percent interest owned by affiliates of Sumitomo Corporation.
Candelaria’s open-pit copper mine has been in operation since 1993 and the underground mine has been in operation since 2005. The Candelaria copper mining complex is located approximately 12 miles south of Copiapó in northern Chile’s Atacama province, Region III. The site is accessible by two maintained dirt roads, one coming
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through the Tierra Amarilla community and the other off of Route 5 of the International Pan-American Highway. Copper concentrates are transported by truck to the Punta Padrones port facility located in Caldera, approximately 50 miles northwest of the mine.
The Candelaria mine is an iron oxide, copper and gold deposit. Primary sulfide mineralization consists of chalcopyrite.
The Candelaria operation consists of an open-pit copper mine and a 6,000 metric ton-per-day underground copper mine, which is mined by sublevel stoping, feeding a 75,000 metric ton-per-day concentrator.  The available fleet consists of forty-eight 225-metric ton haul trucks loaded by six shovels with bucket sizes ranging from 28 to 43 cubic meters, which are capable of moving 250,000 metric tons of material per day.
Candelaria’s production totaled 271 million pounds of copper and 69 thousand ounces of gold in 2012, 327 million pounds of copper and 85 thousand ounces of gold in 2011, and 300 million pounds of copper and 76 thousand ounces of gold in 2010.
Candelaria is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest bench elevation is 675 meters above sea level and the ultimate pit bottom is expected to be 32 meters below sea level. The Candelaria property encompasses approximately 13,400 acres, including approximately 125 acres for the port facility in Caldera. The remaining property consists of mineral rights owned by us in which the surface is not owned but is controlled by us, which is consistent with Chilean law.
Candelaria receives electrical power through long-term contracts with AES Gener S.A., a local energy company. Candelaria’s water supply comes from well fields in the area of Tierra Amarilla and Copiapó that draw water from the Copiapó River aquifer. Because of rapid depletion of that aquifer in recent years, Candelaria is expanding its sources of water supply. During 2010, we completed construction of a pipeline to bring water from a nearby water treatment facility. In addition, we have substantially completed the construction of a desalination plant and pipeline that will supply Candelaria’s longer term water needs. For further discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”
Ojos del Salado
We have an 80 percent ownership interest in Ojos del Salado, with the remaining 20 percent interest owned by affiliates of Sumitomo Corporation.
The Ojos del Salado operation began commercial production in 1929 and consists of two underground copper mines (Santos and Alcaparrosa) and a 3,800 metric ton-per-day concentrator. The operation is located approximately 10 miles east of Copiapó in northern Chile’s Atacama province, Region III, and is accessible by paved highway. The Ojos del Salado mines are iron oxide and copper and gold deposits. Primary sulfide mineralization consists of chalcopyrite.
The Ojos del Salado operation has a capacity of 3,800 metric tons per day of ore from the Santos underground mine and 4,000 metric tons of ore per day from the Alcaparrosa underground mine. The ore from both mines is mined by sublevel stoping since both the ore and enclosing rocks are competent. The broken ore is removed from the stopes using scoops and loaded into an available fleet of twenty-six 28-metric ton trucks, which transport the ore to the surface. The ore from the Santos mine is hauled directly to the Ojos del Salado mill for processing, and the ore from the Alcaparrosa mine is reloaded into six 54-metric ton trucks and hauled seven miles to the Candelaria mill for processing. The Ojos del Salado concentrator has the capacity to produce over 30 million pounds of copper and 9 thousand ounces of gold per year. Tailings from the Ojos del Salado mill are pumped to the Candelaria tailings facility for final deposition. The Candelaria facility has sufficient capacity for the remaining Ojos del Salado tailings.
Ojos del Salado’s production totaled 53 million pounds of copper and 14 thousand ounces of gold in 2012, 58 million pounds of copper and 16 thousand ounces of gold in 2011, and 66 million pounds of copper and 17 thousand ounces of gold in 2010.
Ojos del Salado is located in a desert environment with rainfall averaging less than one inch per year and is in an active seismic zone. The highest underground level is at an elevation of 500 meters above sea level, with the lowest underground level at 150 meters above sea level. The Ojos del Salado mineral rights encompass approximately 15,800 acres, which includes approximately 6,800 acres of owned land in and around the Ojos del
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Salado underground mines and plant site. The remaining property consists of mineral rights owned by us in which the surface is not owned but is controlled by us, which is consistent with Chilean law.
Ojos del Salado receives electrical power through long-term contracts with AES Gener S.A. Ojos del Salado’s water supply comes from well fields in the area of Tierra Amarilla and Copiapó that draw water from the Copiapó River aquifer. For a discussion of risks associated with the availability of water, see Item 1A. “Risk Factors.”
Indonesia
Ownership. PT Freeport Indonesia is a limited liability company organized under the laws of the Republic of Indonesia and incorporated in Delaware. We directly own 81.28 percent of the outstanding common stock of PT Freeport Indonesia and indirectly own 9.36 percent through our wholly owned subsidiary, PT Indocopper Investama; the Indonesian government owns the remaining 9.36 percent.
We have established certain unincorporated joint ventures with Rio Tinto plc (Rio Tinto), under which Rio Tinto has a 40 percent interest in certain assets and future production exceeding specified annual amounts of copper, gold and silver. Refer to Note 2 for further discussion of our joint ventures with Rio Tinto.
We also conduct exploration activities in Papua through two other entities: PT Irja Eastern Minerals (Eastern Minerals), of which we own 100 percent, and PT Nabire Bakti Mining (PTNBM).
Contracts of Work. PT Freeport Indonesia conducts its current exploration and mining operations in Indonesia through a Contract of Work (COW) with the Indonesian government. The COW governs our rights and obligations relating to taxes, exchange controls, royalties, repatriation and other matters, and was concluded pursuant to the 1967 Foreign Capital Investment Law, which expresses Indonesia’s foreign investment policy and provides basic guarantees of remittance rights and protection against nationalization, a framework for economic incentives and basic rules regarding other rights and obligations of foreign investors. Specifically, the COW provides that the Indonesian government will not nationalize or expropriate PT Freeport Indonesia’s mining operations. Any disputes regarding the provisions of the COW are subject to international arbitration. We have experienced no disputes requiring arbitration during the more than 40 years we have operated in Indonesia.
PT Freeport Indonesia’s original COW was entered into in 1967 and was replaced by a new COW in 1991. The initial term of the current COW expires in 2021, but can be extended for two 10-year periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. The COW allows us to conduct exploration, mining and production activities in the 24,700-acre Block A area, which is where all of PT Freeport Indonesia’s proven and probable mineral reserves and current mining operations are located. Under the COW, PT Freeport Indonesia also conducts exploration activities in the Block B area. We expect the Block B area to be reduced to approximately 413,000 acres once the Department of Energy and Mineral Resources (DEMR)
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formally accepts PT Freeport Indonesia’s relinquishment of approximately 89,000 acres. Further relinquishments may result from the COW evaluation process discussed below and in Note 14.
PT Freeport Indonesia pays royalties on copper, gold and silver under its COW, and has agreed to pay additional royalties to the Indonesian government that are not required under its COW. The additional royalties provide further support to the local governments and to the people of the Indonesian province of Papua. PT Freeport Indonesia’s share of the combined royalties totaled $93 million in 2012, $137 million in 2011 and $156 million in 2010.
Eastern Minerals is allowed to conduct exploration in Papua through a joint venture agreement under a separate COW. We expect Eastern Minerals’ exploration area to be reduced to approximately 183,000 acres once the DEMR formally accepts Eastern Minerals’ relinquishment of approximately 264,000 acres, and further relinquishments may result from the COW evaluation process discussed below and in Note 14. We have requested suspension of activities for the COW from the DEMR while awaiting receipt of permits from the Indonesian government’s Department of Forestry that would allow Eastern Minerals to resume exploration activities. We have not received a response to this request from the DEMR.
Under a joint venture agreement through PTNBM, we are allowed to conduct exploration activities under a separate COW in an area in three parcels contiguous to PT Freeport Indonesia’s Block B and one of Eastern Minerals’ blocks. We expect PTNBM’s exploration area to be reduced to approximately 200,000 acres once the DEMR formally accepts PTNBM’s relinquishment of approximately 293,000 acres, and further relinquishments may result from the COW evaluation process discussed below and in Note 14. We have also requested suspension of activities for the COW from the DEMR while awaiting receipt of permits from the Indonesian government’s Department of Forestry that would allow us to resume exploration activities. We have not received a response to this request from the DEMR.
In 2009, Indonesia enacted a new mining law, which will operate under a licensing system as opposed to the contract of work system that applies to PT Freeport Indonesia, Eastern Minerals and PTNBM. In 2011 and 2010, the Indonesian government promulgated regulations under the 2009 mining law and certain provisions that address existing contracts of work. The laws and regulations provide that contracts of work will continue to be honored until their expiration. However, the regulations attempt to apply certain provisions of the new law to existing contracts of work and may seek to apply the licensing system to any extension periods of contracts of work, even though the terms of PT Freeport Indonesia’s COW provide for two 10-year extension periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. In February 2012, a new regulation was adopted that would require mining companies in Indonesia to process all minerals domestically and possibly ban export of concentrates and other unrefined minerals. PT Freeport Indonesia’s COW includes specific provisions providing the right of PT Freeport Indonesia to export product, subject to giving priority to domestic smelting facilities, on a market basis. In connection with the obligations under its COW, in 1995, PT Freeport Indonesia constructed the only copper smelter and refinery in Indonesia, which is owned and operated by PT Smelting (refer to “Smelting Facilities” for further discussion).
In January 2012, the President of Indonesia issued a decree calling for the creation of a team of Ministers to evaluate contracts of work for adjustment to the 2009 Mining Law, and accordingly, to take steps to assess and negotiate size of work areas, government revenues and domestic processing of minerals. We have had discussions with officials of the Indonesian government and are working cooperatively to complete this evaluation process and to obtain an extension of the COW beyond 2021, as provided under the terms of the COW. The COW can only be modified by mutual agreement between PT Freeport Indonesia and the Indonesian government.
Grasberg Minerals District.  PT Freeport Indonesia operates in the remote highlands of the Sudirman Mountain Range in the province of Papua, Indonesia, which is on the western half of the island of New Guinea. We and our predecessors have been the only operator of exploration and mining activities in Block A since 1967.
The Grasberg minerals district currently has three mines in operation: the Grasberg open pit, the Deep Ore Zone (DOZ) underground mine and the Big Gossan underground mine. We also have several projects in progress in the Grasberg minerals district, primarily related to the development of the large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these underground ore bodies are expected to ramp up over several years to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2017. Refer to “Development Projects and Exploration” for further discussion.
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PT Freeport Indonesia’s production, including our joint venture partner’s share, totaled 695 million pounds of copper and 862 thousand ounces of gold in 2012, 882 million pounds of copper and 1.4 million ounces of gold in 2011 and 1.3 billion pounds of copper and 2.0 million ounces of gold in 2010.
Our principal source of power for all our Indonesian operations is a coal-fired power plant that we built in 1998. Diesel generators supply peaking and backup electrical power generating capacity. A combination of naturally occurring mountain streams and water derived from our underground operations provides water for our operations. Our Indonesian operations are in an active seismic zone and experience average annual rainfall of approximately 200 inches.
Grasberg Open Pit
We began open-pit mining of the Grasberg ore body in 1990. Open-pit operations are expected to continue through 2016. Production in the open pit is currently at the 3,190- to 3,940- meter elevation level and totaled 43 million metric tons of ore in 2012, which provided 72 percent of PT Freeport Indonesia’s 2012 mill feed.
The current equipment fleet consists of over 500 units. The larger mining equipment directly associated with production includes an available fleet of 157 haul trucks with payloads ranging from 218 to 330 metric tons and 16 shovels with bucket sizes ranging from 30 to 42 cubic meters, which mined an average of 399,000 metric tons of material per day during 2012, 486,000 metric tons per day in 2011 and 701,000 metric tons per day in 2010.
Grasberg crushing and conveying systems are integral to the mine and provide the capacity to transport up to 250,000 metric tons per day of Grasberg ore to the mill and 150,000 metric tons per day of overburden to the overburden stockpiles. The remaining overburden is moved by haul trucks.
DOZ underground mine
The DOZ ore body lies vertically below the now depleted Intermediate Ore Zone. We began production from the DOZ ore body in 1989 using open stope mining methods, but suspended production in 1991 in favor of production from the Grasberg open pit. Production resumed in September 2000 using the block-cave method and is at the 3,110-meter elevation level. Production from the DOZ mine averaged 44,600 metric tons of ore per day for the year 2012 (51,200 metric tons of ore per day in fourth-quarter 2012) and is expected to ramp up to the design rate of 80,000 metric tons of ore per day in 2013, following completion of ongoing panel repairs, resulting from the temporary shutdown and suspension of operations in fourth-quarter 2011 and early 2012. Production at the DOZ mine is expected to continue through 2019.
The DOZ mine fleet consists of over 200 pieces of mobile heavy equipment, which is capable of mining an average of 80,000 metric tons of material per day. The primary mining equipment directly associated with production and development includes an available fleet of 44 LHD units and 20 haul trucks. Each production LHD unit typically carry approximately 11 metric tons of ore. Using ore passes and chutes, the LHD units transfer ore into 55-metric ton capacity haul trucks. The trucks dump into two gyratory crushers and the ore is then conveyed to the surface stockpiles for processing.
During 2012, we completed over 1,600 meters of development drifting in support of the block-cave mining method for the DOZ mine. The success of the development of the DOZ mine, one of the world’s largest underground mines, provides confidence in the future development of PT Freeport Indonesia’s large-scale undeveloped underground ore bodies.
Big Gossan underground mine
The Big Gossan mine lies underground and adjacent to the current mill site. It is a tabular, near vertical ore body with approximate dimensions of 1,200 meters along strike and 800 meters down dip with varying thicknesses from 20 meters to 120 meters. The mine utilizes a blasthole stoping method with delayed paste backfill. Stopes of varying sizes are mined and the ore dropped down passes to a truck haulage level. Trucks are chute loaded and transport the ore to a jaw crusher. The crushed ore is then hoisted vertically via a two-skip production shaft to a level where it is loaded onto a conveyor belt. The belt carries the ore to one of the main underground conveyors where the ore is transferred and conveyed to the surface stockpiles for processing.
The Big Gossan mine averaged 1,600 metric tons of ore per day for the year 2012 (2,100 metric tons of ore per day in fourth-quarter 2012) and is expected to ramp up to full rates of 7,000 metric tons of ore per day in 2014.
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Big Gossan has over 70 pieces of mobile heavy equipment, which includes 11 loaders and 8 trucks used in development and production activities.
Description of Ore Bodies. Our Indonesia ore bodies are located within and around two main igneous intrusions, the Grasberg monzodiorite and the Ertsberg diorite. The host rocks of these ore bodies include both carbonate and clastic rocks that form the ridge crests and upper flanks of the Sudirman Range, and the igneous rocks of monzonitic to dioritic composition that intrude them. The igneous-hosted ore bodies (the Grasberg open pit and block cave, and portions of the DOZ block cave) occur as vein stockworks and disseminations of copper sulfides, dominated by chalcopyrite and, to a lesser extent, bornite. The sedimentary-rock hosted ore bodies (portions of the DOZ and all of the Big Gossan) occur as “magnetite-rich, calcium/magnesian skarn” replacements, whose location and orientation are strongly influenced by major faults and by the chemistry of the carbonate rocks along the margins of the intrusions.
The copper mineralization in these skarn deposits is dominated by chalcopyrite, but higher bornite concentrations are common. Moreover, gold occurs in significant concentrations in all of the district’s ore bodies, though rarely visible to the naked eye. These gold concentrations usually occur as inclusions within the copper sulfide minerals, though, in some deposits, these concentrations can also be strongly associated with pyrite.
The following diagram indicates the relative elevations (in meters) of our reported ore bodies.
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The following map, which encompasses an area of approximately 42 square kilometers (approximately 16 square miles), indicates the relative positions and sizes of our reported ore bodies and their locations.
Africa
TFM is organized under the laws of the DRC. We own an effective 56 percent interest in TFM, with the remaining ownership interests held by Lundin Mining Corporation (Lundin) (an effective 24 percent interest) and La Générale des Carrières et des Mines (Gécamines), which is wholly owned by the DRC government (a 20 percent non-dilutable interest).
TFM is entitled to mine in the DRC under an Amended and Restated Mining Convention (ARMC) with the DRC government. The original Mining Convention was entered into in 1996 and was replaced with the ARMC in 2005 and further amended in 2010 (approved in 2011). The current ARMC will remain in effect for as long as the Tenke concessions are exploitable.
Effective March 26, 2012, the DRC government issued a Presidential Decree approving modifications to TFM’s bylaws following a review (completed in 2010) of TFM’s existing mining contracts. Among other changes to the amended ARMC, FCX’s effective ownership in TFM was reduced from 57.75 percent to 56 percent.
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TFM pays a royalty of 2 percent of net revenues under the ARMC, which totaled $25 million in 2012, $24 million in 2011 and $20 million in 2010.
The Tenke Fungurume deposits are located in the Katanga province of the DRC approximately 110 miles northwest of Lubumbashi and are accessible by partially paved roads and by rail. The deposits are sediment-hosted copper and cobalt deposits with oxide, mixed oxide-sulfide and sulfide mineralization. The dominant oxide minerals are malachite, pseudomalachite and heterogenite. Important sulfide minerals consist of bornite, carrollite, chalcocite and chalcopyrite.
Initial copper production commenced at the Tenke mines in late March 2009; targeted copper production rates were achieved in September 2009; and the cobalt and sulphuric acid plants were commissioned in third-quarter 2009. Copper and cobalt are recovered through an agitation-leach plant. An expansion of the project to optimize the current plant and increase capacity was substantially completed in fourth-quarter 2012. The expanded mill is capable of throughput of 14,000 metric tons of ore per day, and expanded processing facilities will enable the addition of approximately 150 million pounds of copper production per year. The expansion project included mill upgrades, additional mining equipment, a new tankhouse and an additional sulphuric acid plant (which is expected to be completed in 2015).
The current equipment fleet includes one 10-cubic meter mass excavator, three 17-cubic meter mass excavators, three 12-cubic meter front-end loaders, eleven 7-cubic meter front-end loaders, thirty-two 91-metric ton haul trucks and eighteen 45-metric ton haul trucks.
Production from the Tenke mines totaled 348 million pounds of copper and 26 million pounds of cobalt in 2012, 281 million pounds of copper and 25 million pounds of cobalt in 2011 and 265 million pounds of copper and 20 million pounds of cobalt in 2010.
We continue to engage in drilling activities, exploration analyses and metallurgical testing to evaluate the potential of the highly prospective Tenke Fungurume minerals district. These analyses are being incorporated into future plans to evaluate opportunities for expansion. Future expansions are subject to a number of factors, including economic and market conditions and the business and investment climate in the DRC.
The Tenke Fungurume minerals district is located in a tropical region; however, temperatures are moderated by its higher altitudes. Weather in this region is characterized by a dry season and a wet season, each lasting about six months with average rainfall of 47 inches per year. The highest bench elevation is expected to be 1,518 meters above sea level and the ultimate pit bottom is expected to be 1,110 meters above sea level. The Tenke Fungurume deposits are covered by six exploitation permits totaling approximately 394,450 acres.
TFM has entered into long-term power supply and infrastructure funding agreements with La Société Nationale d’Electricité, the state-owned electric utility company serving the region. The results of a recent water exploration program, as well as the regional geological and hydro-geological conditions, indicate that adequate water is available during the expected life of the operation.
23

PRODUCTION DATA
Years Ended December 31,
COPPER (millions of recoverable pounds)
2012
2011
2010
2009
2008
(FCX’s net interest in %)
North America
Morenci (85%)a
537
522
437
428
626
Bagdad (100%)
197
194
203
225
227
Safford (100%)
175
151
143
184
133
Sierrita (100%)
157
177
147
170
188
Miami (100%)
66
66
18
16
19
Tyrone (100%)
83
76
82
86
76
Chino (100%)
144
69
34
36
155
Other (100%)
4
3
3
2
6
Total North America
1,363
1,258
1,067
1,147
1,430
South America
Cerro Verde (53.56%)
595
647
668
662
694
El Abra (51%)
338
274
320
358
366
Candelaria/Ojos del Salado (80%)
324
385
366
370
446
Total South America
1,257
1,306
1,354
1,390
1,506
Indonesia
Grasberg (90.64%)b
695
846
1,222
1,412
1,094
Africa
Tenke Fungurume (56%)c
348
281
265
154
Consolidated
3,663
3,691
3,908
4,103
4,030
Less noncontrolling interests
723
710
766
754
693
Net
2,940
2,981
3,142
3,349
3,337
GOLD (thousands of recoverable ounces)
(FCX’s net interest in %)
North America (100%)a
13
10
7
4
14
South America (80%)
83
101
93
92
114
Indonesia (90.64%)b
862
1,272
1,786
2,568
1,163
Consolidated
958
1,383
1,886
2,664
1,291
Less noncontrolling interests
98
139
186
258
132
Net
860
1,244
1,700
2,406
1,159
MOLYBDENUM (millions of recoverable pounds)
(FCX’s net interest in %)
Henderson (100%)
34
38
40
27
40
Climax (100%)d
7
North America copper mines (100%)a
36
35
25
25
30
Cerro Verde (53.56%)
8
10
7
2
3
Consolidated
85
83
72
54
73
Less noncontrolling interest
4
5
3
1
1
Net
81
78
69
53
72
COBALT (millions of contained pounds)
(FCX’s net interest in %)
Consolidated – Tenke Fungurume (56%)c
26
25
20
Less noncontrolling interests
11
11
8
Net
15
14
12
a.
Amounts are net of Morenci’s 15 percent joint venture partner interest.
b.
Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with terms of the joint venture agreement.
c.
Initial copper production commenced at the Tenke mines in March 2009. Effective March 26, 2012, FCX’s effective ownership interest in TFM was prospectively reduced from 57.75 percent to 56 percent.
d.
The Climax molybdenum mine began commercial operations in May 2012.
24

SALES DATA
Years Ended December 31,
COPPER (millions of recoverable pounds)
2012
2011
2010
2009
2008
(FCX’s net interest in %)
North America
Morenci (85%)a
532
521
434
459
646
Bagdad (100%)
196
201
206
225
226
Safford (100%)
175
147
155
176
107
Sierrita (100%)
162
175
152
172
184
Miami (100%)
68
59
17
16
20
Tyrone (100%)
82
79
83
85
71
Chino (100%)
132
62
35
52
174
Other (100%)
4
3
3
2
6
Total North America
1,351
1,247
1,085
1,187
1,434
South America
Cerro Verde (53.56%)
589
657
654
667
701
El Abra (51%)
338
276
315
361
365
Candelaria/Ojos del Salado (80%)
318
389
366
366
455
Total South America
1,245
1,322
1,335
1,394
1,521
Indonesia
Grasberg (90.64%)b
716
846
1,214
1,400
1,111
    Africa
Tenke Fungurume (56%)c
336
283
262
130
Consolidated sales from mines
3,648
3,698
3,896
4,111
4,066
Less noncontrolling interests
717
717
756
746
699
Net
2,931
2,981
3,140
3,365
3,367
Consolidated sales from mines
3,648
3,698
3,896
4,111
4,066
Purchased copper
125
223
182
166
483
Total copper sales, including purchases
3,773
3,921
4,078
4,277
4,549
Average realized price per pound
$
3.60
$
3.86
$
3.59
$
2.60
$
2.69
GOLD (thousands of recoverable ounces)
(FCX’s net interest in %)
North America (100%)a
13
7
5
6
16
South America (80%)
82
101
93
90
116
Indonesia (90.64%)b
915
1,270
1,765
2,543
1,182
Consolidated sales from mines
1,010
1,378
1,863
2,639
1,314
Less noncontrolling interests
102
139
184
256
134
Net
908
1,239
1,679
2,383
1,180
Consolidated sales from mines
1,010
1,378
1,863
2,639
1,314
Purchased gold
2
1
1
1
2
Total gold sales, including purchases
1,012
1,379
1,864
2,640
1,316
Average realized price per ounce
$
1,665
$
1,583
$
1,271
$
993
$
861
MOLYBDENUM (millions of recoverable pounds)
Consolidated sales from mines
83
79
67
58
71
Less noncontrolling interests
4
4
3
1
1
Net
79
75
64
57
70
Consolidated sales from mines
83
79
67
58
71
Purchased molybdenum
2
6
8
Total molybdenum sales, including purchases
83
79
69
64
79
Average realized price per pound
$
14.26
$
16.98
$
16.47
$
12.36
$
30.55
COBALT (millions of contained pounds)
(FCX’s net interest in %)
Consolidated – Tenke Fungurume (56%)c
25
25
20
Less noncontrolling interests
11
10
8
Net
14
15
12
Average realized price per pound
$
7.83
$
9.99
$
10.95
$
$
a.
Amounts are net of Morenci’s joint venture partner’s 15 percent interest.
b.
Amounts are net of Grasberg’s joint venture partner’s interest, which varies in accordance with terms of the joint venture agreement.
c.
Initial copper production commenced at the Tenke mines in March 2009. Effective March 26, 2012, FCX’s effective ownership interest in TFM was prospectively reduced from 57.75 percent to 56 percent.
25

DEVELOPMENT PROJECTS AND EXPLORATION
We have several projects and potential opportunities to expand production volumes, extend mine lives and develop large-scale underground ore bodies. Our near-term major development projects, which will require substantial additional capital investment, are presented below. Also refer to MD&A for further discussion of these projects, our other development projects and exploration activities.
Considering the long-term nature and large size of our development projects, actual costs and timing could vary from estimates. We continue to review our mine development and processing plans to maximize the value of our reserves.
Morenci. We are engaged in a project to expand mining and milling capacity at Morenci to process additional sulfide ores identified through exploratory drilling. The approximate $1.4 billion project is targeting incremental annual production of approximately 225 million pounds of copper in 2014 through an increase in milling rates from 50,000 metric tons of ore per day to 115,000 metric tons of ore per day, and mining rates from 700,000 short tons per day (635,000 metric tons per day) to 900,000 short tons per day (815,000 metric tons per day). Engineering activities are progressing and construction activities are under way.
Twin Buttes. In December 2009, we purchased the Twin Buttes copper mine, which ceased operations in 1994 and is adjacent to our Sierrita mine. The purchase provides significant synergies in the Sierrita minerals district, including the potential for expanded mining activities and access to material that can be used for Sierrita tailings and stockpile reclamation purposes. We are conducting drilling on the property and metallurgical studies to support a feasibility study expected to commence in 2013.
Cerro Verde. We are engaged in a large-scale expansion at Cerro Verde. The approximate $4.4 billion project would expand the concentrator facilities from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day and provide incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum beginning in 2016. Cerro Verde received approval of the environmental impact assessment in fourth-quarter 2012. Detailed engineering and procurement of long-lead items are under way, and construction is expected to commence in 2013.
El Abra. We are engaged in pre-feasibility studies for a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results at El Abra have identified a significant sulfide resource.
Grasberg. We have several projects in progress in the Grasberg minerals district, primarily related to the development of large-scale, high-grade underground ore bodies located beneath and nearby the Grasberg open pit. In aggregate, these ore bodies are expected to ramp up over several years to approximately 240,000 metric tons of ore per day following the currently anticipated transition from the Grasberg open pit in 2017. Development of the Deep Mill Level Zone (DMLZ) is advancing. The DMLZ is expected to commence production in 2015 and the Grasberg Block Cave mine is scheduled to commence production in 2017. Over the next five years, estimated aggregate capital spending on these projects is currently expected to average $715 million per year ($565 million per year net to PT Freeport Indonesia). Refer to MD&A for further discussion of these projects and the Common Infrastructure project.
In addition to the near-term development projects in progress in the Grasberg minerals district, we also have an additional long-term underground mine development project in the Grasberg minerals district for the Kucing Liar ore body, which lies on the southern flank of and underneath the southern portion of the Grasberg open pit at the 2,605-meter elevation level. We expect to mine the Kucing Liar ore body using the block-cave method; aggregate capital cost estimates for development of the Kucing Liar ore body are projected to approximate $2 billion (which are expected to be made between 2019 and 2031). Additionally, our current mine development plans include approximately $3 billion of capital expenditures at our processing facilities to optimize the handling of underground ore types once the Grasberg open-pit operations cease (we expect substantially all of these expenditures to be made between 2016 and 2034).
26

SMELTING FACILITIES
Atlantic Copper. Our wholly owned Atlantic Copper smelter and refinery is located on land concessions from the Huelva, Spain, port authorities, which expire in 2027.
The design capacity of the smelter is approximately 300,000 metric tons of copper per year and the refinery currently has a capacity of 285,000 metric tons of copper per year. During 2012, Atlantic Copper treated approximately 1.1 million metric tons of concentrate and scrap and produced 295,200 metric tons of copper anodes from its smelter and 274,400 metric tons of copper cathodes from its refinery.
In May 2011, Atlantic Copper successfully completed a scheduled 26-day maintenance turnaround. Major maintenance turnarounds (which take approximately 50 days to complete) typically are expected to occur approximately every eight years for Atlantic Copper, with short-term maintenance turnarounds in the interim. The next long-term maintenance turnaround is scheduled for the second half of 2013.
We made no capital contributions to Atlantic Copper in 2012 and $202 million in 2011. No capital contributions were made for the years 2005 through 2010. We also loan funds to Atlantic Copper from time to time. At December 31, 2012, loans to Atlantic Copper totaled $434 million.
PT Smelting. PT Freeport Indonesia’s 1991 COW required us to construct or cause to be constructed a smelter in Indonesia if we and the Indonesian government determined that such a project would be economically viable. In 1995, following the completion of a feasibility study, we entered into agreements relating to the formation of PT Smelting, an Indonesian company, and the construction of the copper smelter and refinery in Gresik, Indonesia. PT Smelting owns and operates the smelter and refinery. PT Freeport Indonesia, Mitsubishi Materials Corporation (Mitsubishi Materials), Mitsubishi Corporation Unimetals Ltd. (Mitsubishi) and JX Nippon Mining & Metals Corporation (Nippon) own 25 percent, 60.5 percent, 9.5 percent, and 5 percent, respectively, of the outstanding PT Smelting common stock.
PT Freeport Indonesia’s contract with PT Smelting provides for the supply of 100 percent of the copper concentrate requirements (subject to a minimum or maximum rate) necessary for PT Smelting to produce 205,000 metric tons of copper annually on a priority basis. PT Freeport Indonesia also sells copper concentrate to PT Smelting (at market rates) for quantities in excess of 205,000 metric tons of copper annually. Refer to Note 2 for further discussion of our investment in PT Smelting.
During 2012, PT Smelting treated 855,500 metric tons of concentrate and produced 198,400 metric tons of copper anodes from its smelter and 197,200 metric tons of copper cathodes from its refinery.
In May 2012, PT Smelting completed a scheduled 30-day maintenance turnaround. Major maintenance turnarounds (which range from two weeks to a month to complete) typically are expected to occur approximately every two years for PT Smelting, with significantly shorter term maintenance turnarounds in the interim. The next major maintenance turnaround is scheduled for 2014.
Miami Smelter. We own and operate a smelter at our Miami, Arizona, mining operation. The smelter has been in production for approximately 100 years and has been upgraded numerous times during that period to implement new technologies, to improve production and to comply with air quality requirements. Additionally, new air quality regulations for sulphur dioxide emissions will require the Miami smelter to implement additional new technologies to meet these requirements or limit its operations (refer to Item 1A. “Risk Factors” for further discussion).
The Miami smelter processes copper concentrate primarily from our Arizona copper mines. Concentrate processed through the smelter totaled approximately 620,000 metric tons in 2012. In addition, because sulphuric acid is a by-product of smelting concentrates, the Miami smelter is also the most significant source of sulphuric acid for our North America leaching operations.
Major maintenance turnarounds (which take approximately three weeks to complete) typically occur approximately every 14 months for the Miami smelter, with shorter term maintenance turnarounds in the interim.
27

OTHER PROPERTIES AND INVESTMENTS
Rod & Refining Operations. Our Rod & Refining operations consist of conversion facilities located in North America, including a refinery in El Paso, Texas; rod mills in El Paso, Texas, Norwich, Connecticut, and Miami, Arizona; and a specialty copper products facility in Bayway, New Jersey. We refine our copper anode production from our Miami smelter at our El Paso refinery. The El Paso refinery has the potential to operate at an annual production capacity of about 900 million pounds of copper cathode, which is sufficient to refine all of the copper anode we produce at Miami. Our El Paso refinery also produces nickel carbonate, copper telluride, and autoclaved slimes material containing gold, silver, platinum and palladium.
Molybdenum Conversion Facilities. We process molybdenum concentrates at our conversion plants in the U.S. and Europe into such products as technical-grade molybdic oxide, ferromolybdenum, pure molybdic oxide, ammonium molybdates, molybdenum disulfide and molybdenum metal powder. We operate molybdenum roasters in Sierrita, Arizona; Fort Madison, Iowa; and Rotterdam, the Netherlands.
The conversion facility located at our Sierrita copper mine consists of two molybdenum roasters that process molybdenum concentrates produced at our mines and on a toll basis for third parties. The facility produces molybdenum oxide and related products. In addition, our Bagdad copper mine has a pressure leach plant that processes molybdenum concentrates.
The Fort Madison facility consists of two molybdenum roasters, a sulphur dioxide conversion plant, a metallurgical (technical oxide) packaging facility, and a chemical conversion plant, which includes a wet-chemicals plant, sublimation equipment and molybdenum disulfide processing and packaging. In the chemical plant, molybdic oxide is further refined into various high-purity molybdenum chemicals for a wide range of uses by chemical and catalyst manufacturers. In addition to metallurgical oxide products, the Fort Madison facility produces ammonium dimolybdate, pure molybdic oxide, ammonium heptamolybdate, ammonium octamolybdate, sodium molybdate, sublimed pure molybdic oxide and molybdenum disulfide.
The Rotterdam facility consists of a molybdenum roaster, sulphuric acid plant, metallurgical packaging
facility and chemical conversion plant. The plant produces metallurgical products primarily for third parties. Ammonium dimolybdate and pure molybdic oxide are produced in the wet-chemicals plant.
We also produce ferromolybdenum for customers worldwide at our conversion plant located in Stowmarket, United Kingdom. The plant is operated both as an internal and external customer tolling facility.
McMoRan Exploration Co. (MMR). MMR is engaged in the exploration, development and production of oil and natural gas in the shallow waters of the Gulf of Mexico Shelf. In December 2010, we purchased 500,000 shares of MMR’s 5.75% Convertible Perpetual Preferred Stock for an aggregate purchase price of $500 million (refer to Note 6 for further discussion). In connection with the purchase, we entered into a registration rights agreement and a stockholder agreement with MMR. Several of our directors and executive officers also serve as directors or executive officers of MMR, and our wholly owned subsidiary FM Services Company (FM Services) provides certain executive, technical administrative, accounting, financial, tax and other services to us and to MMR on a cost-reimbursement basis. Refer to Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence,” for additional information. Also refer to Note 1 for discussion of FCX’s proposed acquisition of MMR.

SOURCES AND AVAILABILITY OF RAW MATERIALS
Our copper mining operations require significant energy, principally diesel, electricity, coal and natural gas, most of which is obtained from third parties under long-term contracts. Energy represented approximately 21 percent of our 2012 consolidated copper production costs and included purchases of approximately 255 million gallons of diesel fuel; 6,800 gigawatt hours of electricity at our North America, South America and Africa copper mining operations (we generate all of our power at our Indonesia mining operation); 700 thousand metric tons of coal for our coal power plant in Indonesia; and 1 million MMBTU (million British thermal units) of natural gas at certain of our North America mines. For 2013, we estimate energy costs will approximate 21 percent of our consolidated copper production costs.
28

Sulphuric acid is used in the SX/EW process and is produced as a by-product of the smelting process at our smelters and from our sulphur burners at the Safford and Tenke mines. Sulphuric acid needs in excess of the sulphuric acid produced by our operations are purchased from third parties.
Our mining operations also require significant quantities of water for mining, ore processing and related support facilities. Although we believe our mining operations have sufficient water rights, the loss of water rights for any of our mines, in whole or in part, or shortages of water to which we have rights, could require us to curtail or shut down mining operations. For a further discussion of risks and legal proceedings associated with the availability of water, refer to Item 1A. “Risk Factors” and Item 3. “Legal Proceedings.”

COMPETITION
The top 10 producers of copper comprise approximately 50 percent of total worldwide mined copper production. We currently rank second among those producers at approximately eight percent of total worldwide estimated mined copper production. Our competitive position is based on the quality and grade of our ore bodies and our ability to manage costs compared with other producers. We have a diverse portfolio of mining operations with varying ore grades and cost structures. Our costs are driven by the location, grade and nature of our ore bodies and the level of input costs, including energy, labor and equipment. The metals markets are cyclical and our ability to maintain our competitive position over the long term is based on our ability to acquire and develop quality deposits, hire and retain a skilled workforce and to manage our costs.

LABOR MATTERS
At December 31, 2012, we employed approximately 34,000 people (approximately 12,700 in Indonesia, 11,800 in North America, 5,400 in South America, 3,200 in Africa and 900 in Europe and other locations). Additionally, we have contractors that have personnel at many of our operations, including approximately 10,700 at our Grasberg minerals district, 10,400 at our South America mining operations, 4,000 at our Tenke Fungurume minerals district, 1,600 in North America and 400 at Atlantic Copper.
The number of employees represented by unions at December 31, 2012, and the expiration date of the applicable union agreements are listed below. Refer to Item 1A. “Risk Factors” for further information on labor agreements.
Location
Number of Unions
Number of
Union-
Represented Employees
Expiration Date
PT Freeport Indonesia – Indonesia
1
8,774
September 2013
Tenke Fungurume – DRC
6
3,216
August 2013
a
Cerro Verde – Peru
2
1,674
August 2014
El Abra – Chile
2
969
May 2016
Candelaria – Chile
2
908
December 2016
Atlantic Copper – Spain
2
422
December 2011
b
Chino – New Mexico
1
344
November 2014
Rotterdam – The Netherlands
2
57
March 2015
Bayway – New Jersey
1
40
April 2013
Aurex – Chile
1
41
December 2013
Stowmarket – United Kingdom
1
39
May 2014
a. In September 2012, TFM negotiated a 4-year salary scale with union-represented employees.
b. Negotiations are in progress while employees continue to work under the provisions of the expired contract.
29

ENVIRONMENTAL AND RECLAMATION MATTERS
The cost of complying with environmental laws is a fundamental and substantial cost of our business. For information about environmental regulation, litigation and related costs, refer to Item 1A. “Risk Factors”, and Notes 1 and 13.

COMMUNITY AND HUMAN RIGHTS
We have adopted policies that govern our working relationships with the communities where we operate and are designed to guide our practices and programs in a manner that respects basic human rights and the culture of the local people impacted by our operations. We continue to make significant expenditures on community development, education, training and cultural programs, which include:
comprehensive job training programs
basic education programs
public health programs, including malaria control and HIV testing
agricultural assistance programs
small and medium enterprise development programs
cultural preservation programs
water and sewage treatment projects
clean water access
charitable donations
In December 2000, we endorsed the joint U.S. State Department-British Foreign Office Voluntary Principles on Human Rights and Security (Voluntary Principles). Several major natural resources companies and international human rights organizations participated in developing the Voluntary Principles and have endorsed them. We participated in developing these principles and they are incorporated into our human rights policy.
We are assessing how to best integrate the United Nations Guiding Principles on Business and Human Rights into our existing human rights policy. We joined a multi-industry human rights working group to help us learn from peer companies and determine the best way to integrate human rights due diligence into our business practices and to support our Voluntary Principles program.
We believe that our social and economic development programs are responsive to the issues raised by the local communities near our areas of operation and should help us maintain good relations with the surrounding communities and avoid disruptions of mining operations. As part of our ongoing, annual commitment to sustainable community development, we have made significant investments in social programs, including in-kind support and administration, across our global operations. Over the last three years, these investments have averaged approximately $180 million per year. Nevertheless, social and political instability in the areas of our operations may adversely impact our mining operations. Refer to Item 1A. “Risk Factors” for further discussion.
South America. Cerro Verde has provided a variety of community support projects over the years. Following engagements with regional and local governments, civic leaders and development agencies, in 2006, Cerro Verde committed to support the costs for a new potable water treatment plant to serve Arequipa. In addition, an agreement was reached with the Peruvian government for development of a water storage and distribution network, which was financed by the Cerro Verde Civil Association (the Association). The Association manages contributions made by Cerro Verde for projects that focus on education, training, health, cultural preservation and basic infrastructure.
In 2011, Cerro Verde reached agreement with the Regional Government of Arequipa, the National Government, SEDAPAR and other local institutions to allow it to finance the engineering and construction of a wastewater treatment plant for Arequipa, should Cerro Verde proceed with plans for the large-scale expansion. Treating this water would improve the Rio Chili’s water quality, enhance agriculture products grown in the area and reduce waterborne illnesses.
Additionally, during 2006, the Peruvian government announced that all mining companies operating in Peru would be required to make annual contributions to local development funds for a five-year period (covering the years 2006 through 2010) when copper prices exceeded certain levels that were adjusted annually. The contribution, which expired in 2010, was equal to 3.75 percent of after-tax profits.
30

Indonesia. In 1996, PT Freeport Indonesia established the Freeport Partnership Fund for Community Development (the Partnership Fund), through which PT Freeport Indonesia has made available funding and technical assistance to support community development initiatives in the areas of health, education and economic development of the area. PT Freeport Indonesia has committed through 2016 to provide one percent of its annual revenue for the development of the local people in its area of operation through the Partnership Fund. Our share of contributions to the Partnership Fund totaled $39 million in 2012, $50 million in 2011 and $64 million in 2010.
The Amungme and Kamoro Community Development Organization (Lembaga Pembangunan Masyarakat Amungme dan Kamoro or LPMAK) oversees disbursement of the program funds we contribute to the Partnership Fund. LPMAK is governed by a board of commissioners and a board of directors, which are comprised of representatives from the local Amungme and Kamoro tribal communities, government leaders, church leaders, and one representative of PT Freeport Indonesia on each board. The Amungme and Kamoro people are original inhabitants of the land in our area of operations.
Security Matters. Consistent with our COW in Indonesia and the requirement to protect our employees and property, we have taken appropriate steps to provide a safe and secure working environment. As part of its security program, PT Freeport Indonesia maintains its own internal security department, which is unarmed and performs functions such as protecting company facilities, monitoring shipments of supplies and products, assisting in traffic control and aiding in emergency response operations. The security department has received human rights training and each member is required to certify his or her compliance with our human rights policy.
PT Freeport Indonesia’s share of costs for its internal civilian security department totaled $52 million for 2012, $37 million for 2011 and $28 million for 2010.
PT Freeport Indonesia, and all businesses and residents of Indonesia, rely on the Indonesian government for the maintenance of public order, upholding the rule of law and the protection of personnel and property. The Grasberg minerals district has been designated by the Indonesian government as one of Indonesia’s vital national assets. This designation results in the police, and to a lesser extent, the military, playing a significant role in protecting the area of our operations. The Indonesian government is responsible for employing police and military personnel and directing their operations.
From the outset of PT Freeport Indonesia’s operations, the Indonesian government has looked to PT Freeport Indonesia to provide logistical and infrastructure support and assistance for these necessary services because of the limited resources of the Indonesian government and the remote location of and lack of development in Papua. PT Freeport Indonesia’s financial support for the Indonesian government security institutions assigned to the operations area represents a prudent response to its requirements to protect its workforce and property, better
ensuring that personnel are properly fed and lodged, and have the logistical resources to patrol PT Freeport Indonesia’s roads and secure its operating area. In addition, the provision of such support is consistent with PT Freeport Indonesia’s obligations under the COW, reflects our philosophy of responsible corporate citizenship, and is in keeping with our commitment to pursue practices that will promote human rights.
PT Freeport Indonesia’s share of support costs for the government-provided security was $22 million in 2012, and $14 million for each of the years 2011 and 2010. This supplemental support consists of various infrastructure and other costs, such as food, housing, fuel, travel, vehicle repairs, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military and police.
Refer to Item 1A. “Risk Factors” for further discussion of security risks in Indonesia.
Africa. TFM has committed to assist the communities living within its concession in the Katanga province of the DRC. Initiatives include an integrated malaria control program, construction and operational support for six elementary schools, as well as renovation and construction of an additional four schools, installation of over 70 clean water wells, a public sanitation (latrines and hand washing) program reaching over 2,000 households, a mobile clinic for rural villages, and economic development programs supporting micro-credit and development of local entrepreneurs, contractors, and farmers. We have also made significant investments in infrastructure in the region that will have lasting benefits to the country, including upgrading a portion of a national road and the regional power generation and transmission systems.
31

TFM has also committed to contribute 0.3 percent of net sales revenue from production to a community development fund to assist the local communities with development of local infrastructure and related services. This fund will be a platform to work jointly with the local government and community to further assist them to fulfill their local development plans, meet basic community needs and promote good governance. Community development fund contributions totaled $4 million in both 2012 and 2011, and $3 million in 2010.
Security Matters. TFM maintains an unarmed internal security department. The national government also has assigned Mines Police to the TFM concession area. The Mines Police are a division of the Congolese National Police and are responsible for maintaining security in mining concessions throughout the DRC. TFM provides food, housing, monetary allowances and logistical support as well as direct payments to the government for the provision of the security assigned to the concession area. The total cost to TFM for this support, including in-kind support, totaled less than $1 million in each of the years 2012, 2011 and 2010.
TFM also participates in monthly security coordination meetings with host country security personnel, other mining companies, and representatives from the United Nations to discuss security issues and concerns.

ORE RESERVES
Recoverable proven and probable reserves summarized below and detailed on the following pages have been calculated as of December 31, 2012, in accordance with Industry Guide 7 as required by the Securities Exchange Act of 1934. Proven and probable reserves may not be comparable to similar information regarding mineral reserves disclosed in accordance with the guidance of other countries. Proven and probable reserves were determined by the use of mapping, drilling, sampling, assaying and evaluation methods generally applied in the mining industry, as more fully discussed below. The term “reserve,” as used in the reserve data presented here, means that part of a mineral deposit that can be economically and legally extracted or produced at the time of the reserve determination. The term “proven reserves” means reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (2) grade and/or quality are computed from the results of detailed sampling; and (3) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established. The term “probable reserves” means reserves for which quantity and grade are computed from information similar to that used for proven reserves but the sites for sampling are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
Our reserve estimates are based on the latest available geological and geotechnical studies. We conduct ongoing studies of our ore bodies to optimize economic values and to manage risk. We revise our mine plans and estimates of recoverable proven and probable mineral reserves as required in accordance with the latest available studies. Our estimates of recoverable proven and probable reserves are prepared by and are the responsibility of our employees; a majority of these estimates are reviewed and verified by independent experts in mining, geology and reserve determination.
Estimated recoverable proven and probable reserves at December 31, 2012, were determined using long-term average prices of $2.00 per pound for copper, $750 per ounce for gold and $10 per pound for molybdenum, consistent with the long-term average prices used at year-end 2011 and 2010. For the three-year period ended December 31, 2012, LME spot copper prices averaged $3.67 per pound, London PM gold prices averaged $1,480 per ounce, and the weekly average price of molybdenum quoted by Metals Week averaged $14.64 per pound.
32

The recoverable proven and probable reserves presented in the table below represent the estimated metal quantities from which we expect to be paid after application of estimated metallurgical recovery rates and smelter recovery rates, where applicable. Recoverable reserves are the part of a mineral deposit that we estimate can be economically and legally extracted or produced at the time of the reserve determination.
Recoverable Proven and Probable Reserves at December 31, 2012
Coppera
(billion pounds)
Gold
(million ounces)
Molybdenum
(billion pounds)
Silverb
(million ounces)
Cobaltb
(billion pounds)
North America
38.8
0.4
2.69
94.0
South America
38.8
1.2
0.73
110.8
Indonesia
31.0
30.9
116.6
Africa
7.9
0.84
Consolidated basisc
116.5
32.5
3.42
321.4
0.84
Net equity interestd
93.2
29.4
3.08
264.2
0.47
a.
Recoverable copper reserves include 2.9 billion pounds in leach stockpiles and 1.4 billion pounds in mill stockpiles (refer to “Mill and Leach Stockpiles” for further discussion).
b.
Determined using long-term average prices of $15 per ounce for silver and $10 per pound for cobalt, consistent with the long-term average prices used at year-end 2011 and 2010.
c.
Consolidated basis reserves represent estimated metal quantities after reduction for joint venture partner interests at the Morenci mine in North America and at the Grasberg minerals district in Indonesia.
d.
Net equity interest reserves represent estimated consolidated basis metal quantities further reduced for noncontrolling interest ownership.
33

Recoverable Proven and Probable Reserves
Estimated at December 31, 2012
Proven Reserves
Probable Reserves
Average Ore Grade
Average Ore Grade
Processing
Million
Copper
Gold
Moly
Silver
Cobalt
Million
Copper
Gold
Moly
Silver
Cobalt
Method
metric tons
%
g/t
%
g/t
%
metric tons
%
g/t
%
g/t
%
North America
Morenci
Mill
680
0.50
0.021
5
0.45
0.015
Crushed leach
417
0.52
5
0.47
ROM leach
2,826
0.18
85
0.15
Bagdad
Mill
1,016
0.34
a
0.021
1.59
225
0.30
a
0.018
1.59
ROM leach
267
0.12
223
0.10
Safford
Crushed leach
117
0.43
69
0.41
Sierrita
Mill
2,407
0.24
a
0.026
1.43
299
0.21
a
0.020
1.28
ROM leach
10
0.19
7
0.18
Miami
ROM leach
33
0.52
8
0.43
Tyrone
ROM leach
129
0.29
9
0.20
Chino
Mill
106
0.57
0.04
0.010
0.48
64
0.56
0.04
0.005
0.47
ROM leach
164
0.31
57
0.28
Henderson
Mill
111
0.172
2
0.169
Climax
Mill
74
0.183
124
0.152
Cobreb
ROM leach
70
0.40
3
0.29
8,427
0.27
a
0.016
0.61
1,185
0.22
a
0.025
0.65
South America
Cerro Verde
Mill
995
0.40
0.016
1.64
2,997
0.37
0.014
1.51
Crushed leach
43
0.52
65
0.42
ROM leach
22
0.21
72
0.20
El Abra
Crushed leach
417
0.51
111
0.44
ROM leach
137
0.33
60
0.22
Candelaria
Mill
302
0.57
0.13
2.03
13
0.60
0.15
2.20
Ojos del Salado
Mill
3
1.07
0.29
4.39
2
0.83
0.16
3.36
1,919
0.44
0.02
0.008
1.17
3,320
0.37
a
0.013
1.38
Indonesia
Grasberg open pit
Mill
162
0.99
1.18
2.67
96
0.75
0.63
2.05
Deep Ore Zone
Mill
57
0.58
0.72
2.45
119
0.56
0.71
2.29
Big Gossan
Mill
14
2.47
1.11
15.97
40
2.18
0.92
13.09
Grasberg Block Caveb
Mill
349
1.22
1.01
3.73
650
0.90
0.65
3.44
Kucing Liarb
Mill
149
1.33
1.13
7.58
271
1.20
1.03
6.06
Deep Mill Level Zoneb
Mill
69
0.92
0.74
4.61
448
0.83
0.70
4.14
800
1.15
1.03
4.43
1,624
0.93
0.74
4.14
Africa
Tenke Fungurume
Agitation leach
52
3.49
0.39
67
3.09
0.32
Total FCX – 100% Basis
11,198
0.38
0.08
0.013
0.97
a
6,196
0.52
0.19
0.012
1.95
a
a.
Grade not shown because of rounding.
b.
Undeveloped reserves that would require additional capital investment, which could be significant, to bring into production.
The reserve table above and the tables on the following pages utilize the abbreviations described below:
g/t – grams per metric ton
Moly – Molybdenum
ROM – Run of Mine
34

Recoverable Proven and Probable Reserves
Estimated at December 31, 2012
(continued)
Average Ore Grade
Recoveriesa
Proven and
Probable
Processing
Million
Copper
Gold
Moly
Silver
Cobalt
Copper
Gold
Moly
Silver
Cobalt
Method
metric tons
%
g/t
%
g/t
%
%
%
%
%
%
North America
Morenci
Mill
685
0.50
0.021
79.3
47.1
Crushed leach
422
0.52
78.1
ROM leach
2,911
0.18
44.3
Bagdad
Mill
1,241
0.34
b
0.021
1.59
85.8
59.1
70.8
49.3
ROM leach
490
0.12
24.2
Safford
Crushed leach
186
0.42
65.9
Sierrita
Mill
2,706
0.23
b
0.025
1.41
83.9
60.0
75.7
49.3
ROM leach
17
0.19
52.3
Miami
ROM leach
41
0.51
61.8
Tyrone
ROM leach
138
0.28
60.1
Chino
Mill
170
0.57
0.04
0.008
0.48
78.8
77.9
44.0
78.5
ROM leach
221
0.30
42.9
Henderson
Mill
113
0.172
84.7
Climax
Mill
198
0.164
88.9
Cobrec
ROM leach
73
0.39
50.7
9,612
South America
Cerro Verde
Mill
3,992
0.38
0.015
1.54
86.2
54.3
44.9
Crushed leach
108
0.46
79.7
ROM leach
94
0.20
48.7
El Abra
Crushed leach
528
0.49
57.0
ROM leach
197
0.30
26.4
Candelaria
Mill
315
0.57
0.13
2.03
89.2
71.9
76.3
Ojos del Salado
Mill
5
0.98
0.24
3.99
90.3
60.9
65.7
5,239
Indonesia
Grasberg open pit
Mill
258
0.90
0.98
2.44
83.7
80.6
42.9
Deep Ore Zone
Mill
176
0.57
0.71
2.34
86.7
77.5
64.2
Big Gossan
Mill
54
2.26
0.97
13.84
91.6
66.1
63.8
Grasberg Block Cavec
Mill
999
1.01
0.78
3.54
84.2
64.8
57.2
Kucing Liarc
Mill
420
1.25
1.07
6.60
85.8
46.3
38.5
Deep Mill Level Zonec
Mill
517
0.84
0.70
4.20
87.1
79.0
64.6
2,424
Africa
Tenke Fungurume
Agitation leach
119
3.26
0.35
86.0
75.6
Total FCX – 100% Basis
17,394
a.
Recoveries are net of estimated mill and smelter losses.
b.
Grade not shown because of rounding.
c.
Undeveloped reserves that would require additional capital investment, which could be significant, to bring into production.
35

Recoverable Proven and Probable Reserves
Estimated at December 31, 2012
(continued)
Recoverable Reserves
Copper
Gold
Moly
Silver
Cobalt
FCX’s
Processing
billion
million
billion
million
billion
Interest
Method
lbs.
ozs.
lbs.
ozs.
lbs.
North America
Morenci
85%
Mill
6.0
0.15
Crushed leach
3.8
ROM leach
5.0
Bagdad
100%
Mill
7.9
0.1
0.40
31.4
ROM leach
0.3
Safford
100%
Crushed leach
1.2
Sierrita
100%
Mill
11.7
0.1
1.15
60.6
ROM leach
a
Miami
100%
ROM leach
0.3
Tyrone
100%
ROM leach
0.5
Chino
100%
Mill
1.7
0.2
0.01
2.0
ROM leach
0.6
Henderson
100%
Mill
0.36
Climax
100%
Mill
0.64
Cobre
100%
ROM leach
0.3
39.3
0.4
2.71
94.0
Recoverable metal in stockpilesb
1.8
a
100% operations
41.1
0.4
2.71
94.0
Consolidatedc
38.8
0.4
2.69
94.0
Net equity interestd
38.8
0.4
2.69
94.0
South America
Cerro Verde
53.56%
Mill
28.5
0.71
89.0
Crushed leach
0.9
ROM leach
0.2
El Abra
51%
Crushed leach
3.3
ROM leach
0.3
Candelaria
80%
Mill
3.5
1.0
15.7
Ojos del Salado
80%
Mill
0.1
a
0.4
36.8
1.0
0.71
105.1
Recoverable metal in stockpilesb
2.0
0.2
0.02
5.7
100% operations
38.8
1.2
0.73
110.8
Consolidatedc
38.8
1.2
0.73
110.8
Net equity interestd
21.8
1.0
0.39
64.5
Indonesia
Grasberg open pit
e
Mill
4.3
6.5
8.7
Deep Ore Zone
e
Mill
1.9
3.1
8.5
Big Gossan
e
Mill
2.5
1.1
15.4
Grasberg Block Cave
e
Mill
18.8
16.2
65.1
Kucing Liar
e
Mill
9.9
6.7
34.3
Deep Mill Level Zone
e
Mill
8.3
9.2
45.1
100% operations
45.7
42.8
177.1
Consolidatedc
31.0
30.9
116.6
Net equity interestd
28.1
28.0
105.7
Africa
Tenke Fungurume
56%
Agitation leach
7.3
0.69
Recoverable metal in stockpilesb
0.6
0.15
100% operations
7.9
0.84
Consolidatedc
7.9
0.84
Net equity interestd
4.5
0.47
Total FCX –  100% basis
133.5
44.4
3.44
381.9
0.84
Total FCX –  Consolidated basisc
116.5
32.5
3.42
321.4
0.84
Total FCX –  Net equity interestd
93.2
29.4
3.08
264.2
0.47
a.
Amounts not shown because of rounding.
b.
Refer to “Mill and Leach Stockpiles” for additional information.
c.
Consolidated basis represents estimated metal quantities after reduction for joint venture partner interests at the Morenci mine in North America and at the Grasberg minerals district in Indonesia.
d.
Net equity interest represents estimated consolidated basis metal quantities further reduced for noncontrolling interest ownership.
e.
Our joint venture agreement with Rio Tinto provides that PT Freeport Indonesia will receive cash flow from specified annual amounts of copper, gold and silver through 2021, calculated by reference to its proven and probable reserves as of December 31, 1994, and 60 percent of all remaining cash flow.
36

In defining our open-pit reserves, we apply a “variable cutoff grade” strategy. The objective of this strategy is to maximize the net present value of our operations. We use a break-even cutoff grade to define the in-situ reserves for our underground ore bodies. The break-even cutoff grade is defined for a metric ton of ore as that equivalent copper grade, once produced and sold, that generates sufficient revenue to cover all operating and administrative costs associated with our production.
Our copper mines may contain other commercially recoverable metals, such as gold, molybdenum, silver and cobalt. We value all commercially recoverable metals in terms of a copper equivalent percentage to determine a single cutoff grade. Copper equivalent percentage is used to express the relative value of multi-metal ores in terms of one metal. The calculation expresses the relative value of the ore using estimates of contained metal quantities, metals prices as used for reserve determination, recovery rates, treatment charges and royalties. Our molybdenum properties use a molybdenum cutoff grade.
The table below shows the minimum cutoff grade by process for each of our existing ore bodies as of December 31, 2012:
Copper Equivalent Cutoff Grade (Percent)
Molybdenum
Cutoff Grade
(Percent)
Mill
Crushed or
Agitation Leach
ROM
Leach
Mill
North America
Morenci
0.25
0.19
0.03
Bagdad
0.20
0.01
Safford
0.12
Sierrita
0.18
0.07
Miami
0.05
Tyrone
0.05
Chino
0.20
0.08
Henderson
0.12
Climax
0.06
Cobre
0.17
South America
Cerro Verde
0.17
0.19
0.14
El Abra
0.11
0.08
Candelaria
0.24
Ojos del Salado
0.64
Indonesia
Grasberg open pit
0.25
Deep Ore Zone
0.70
Big Gossan
1.80
Grasberg Block Cave
0.69
Kucing Liar
0.80
Deep Mill Level Zone
0.71
Africa
Tenke Fungurume
1.23
37

Drill hole spacing data is used by mining professionals, such as geologists and geological engineers, in determining the suitability of data coverage (on a relative basis) in a given deposit type and mining method scenario so as to achieve a given level of confidence in the resource estimate. Drill hole spacing is only one of several criteria necessary to establish resource classification. Drilling programs are typically designed to achieve an optimum sample spacing to support the level of confidence in results that apply to a particular stage of development of a mineral deposit.
The following table sets forth the average drill hole spacing based on average sample distance or drill pattern spacing for proven and probable ore reserves by process type:
Average Drill Hole Spacing (in Meters)
Proven
Probable
Mining Unit
Mill
Leach
Mill
Leach
North America
Morenci
Open Pit
86
86
122
122
Bagdad
Open Pit
86
86
122
122
Safford
Open Pit
86
122
Sierrita
Open Pit
73
37
120
75
Miami
Open Pit
61
91
Tyrone
Open Pit
86
86
Chino
Open Pit
43
86
86
122
Henderson
Block Cave
38
85
Climax
Open Pit
61
122
Cobre
Open Pit
61
91
South America
Cerro Verde
Open Pit
50
50
100
100
El Abra
Open Pit
75
120
Candelaria
Open Pit
35
70
Ojos del Salado
Sublevel Stoping
25
50
Indonesia
Grasberg
Open Pit
32
88
Deep Ore Zone
Block Cave
23
58
Big Gossan
Open Stope
14
44
Grasberg
Block Cave
30
78
Kucing Liar
Block Cave
39
100
Deep Mill Level Zone
Block Cave
21
80
Africa
Tenke Fungurume
Open Pit
50
100
38

Production Sequencing
The following chart illustrates our current plans for sequencing and producing our proven and probable reserves at each of our ore bodies and the years in which we currently expect production from each ore body. The chart also shows the term of PT Freeport Indonesia’s COW. Production volumes are typically lower in the first few years for each ore body as development activities are ongoing and as the mine ramps up to full production and production volumes may also be lower as the mine reaches the end of its life. The ultimate timing of the start of production from our undeveloped mines is dependent upon a number of factors, including the results of our exploration and development efforts, and may vary from the dates shown below. In addition, we develop our mine plans based on maximizing the net present value from the ore bodies. Significant additional capital expenditures will be required at many of these mines in order to achieve the life-of-mine plans reflected below.
Mill and Leach Stockpiles
Mill and leach stockpiles generally contain lower grade ores that have been extracted from the ore body and are available for copper recovery. For mill stockpiles, recovery is through milling, concentrating, smelting and refining or, alternatively, by concentrate leaching. For leach stockpiles, recovery is through exposure to acidic solutions that dissolve contained copper and deliver it in solution to extraction processing facilities.
Because it is generally impracticable to determine copper contained in mill and leach stockpiles by physical count, reasonable estimation methods are employed. The quantity of material delivered to mill and leach stockpiles is based on surveyed volumes of mined material and daily production records. Sampling and assaying of blasthole cuttings determine the estimated copper grades of material delivered to mill and leach stockpiles.
Expected copper recovery rates for mill stockpiles are determined by metallurgical testing. The recoverable copper in mill stockpiles, once entered into the production process, can be produced into copper concentrate almost immediately.
39

Expected copper recovery rates for leach stockpiles are determined using small-scale laboratory tests, small- to large-scale column testing (which simulates the production-scale process), historical trends and other factors, including mineralogy of the ore and rock type. Ultimate recovery of copper contained in leach stockpiles can vary significantly from a low percentage to more than 90 percent depending on several variables, including type of copper recovery, mineralogy and particle size of the rock. For newly placed material on active stockpiles, as much as 70 percent of the copper ultimately recoverable may be extracted during the first year, and the remaining copper may be recovered over many years.
Processes and recovery rates are monitored continuously, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes.

Following are our stockpiles and the estimated recoverable copper contained within those stockpiles as of December 31, 2012:

Recoverable
Millions of
Average
Recovery
Copper
Metric Tons
Grade (%)
Rate (%)
(billion pounds)
Mill stockpiles
Cerro Verde
103
0.40
81.8
0.7
Candelaria
94
0.36
83.3
0.7
197
1.4
Leach stockpiles
Morenci
5,188
0.25
2.1
0.6
Bagdad
479
0.26
2.7
0.1
Safford
135
0.44
19.6
0.2
Sierrita
650
0.15
12.2
0.3
Miami
471
0.38
2.0
0.1
Tyrone
1,053
0.28
2.4
0.1
Chino
1,617
0.26
4.7
a
0.4
a
Cerro Verde
428
0.53
2.7
0.1
El Abra
452
0.40
11.5
0.5
Tenke Fungurume
22
1.21
92.5
0.6
10,495
3.0
Total FCX – 100% basis
4.4
Total FCX – Consolidated basisb
4.3
Total FCX – Net equity interestc
3.3
a.
During 2012, we completed an assessment of estimated future recovery rates within the current mine plan at our Chino leaching operations, which resulted in a downward revision of these rates and a corresponding reduction of 594 million pounds of estimated recoverable copper in Chino’s leach stockpiles.
b.
Consolidated basis represents estimated metal quantities after reduction for our joint venture partner’s interest in the Morenci mine in North America.
c.
Net equity interest represents estimated consolidated basis metal quantities further reduced for noncontrolling interest ownership.

MINERALIZED MATERIAL
We hold various properties containing mineralized material that we believe could be brought into production should market conditions warrant. However, permitting and significant capital expenditures would be required before operations could commence at these properties. Mineralized material is a mineralized body that has been delineated by appropriately spaced drilling and/or underground sampling to support the reported tonnage and average metal grades. Such a deposit cannot qualify as recoverable proven and probable reserves until legal and economic feasibility are confirmed based upon a comprehensive evaluation of development costs, unit costs, grades, recoveries and other material factors. Estimated mineralized materials as presented on the following page were assessed using prices of $2.20 per pound for copper, $1,000 per ounce for gold and $12 per pound for molybdenum.
40

Mineralized Material
Estimated at December 31, 2012
Milling Material
Leaching Material
Total Mineralized Material
Million
Million
Million
FCX’s
metric
Copper
Gold
Moly
metric
Copper
metric
Copper
Gold
Moly
Interest
tons
%
g/t
%
tons
%
tons
%
g/t
%
North America
Morenci
85%
596
0.35
0.020
2,278
0.21
2,874
0.24
0.004
Bagdada
100%
523
0.29
b
0.019
50
0.11
573
0.27
b
0.017
Safforda
100%
480
0.52
0.09
0.004
171
0.24
651
0.44
0.08
0.003
Sierritaa
100%
1,588
0.18
b
0.022
21
0.15
1,609
0.18
b
0.021
Miami
100%
11
0.50
11
0.50
Tyrone
100%
98
0.28
98
0.28
Chino
100%
62
0.49
0.013
22
0.30
84
0.44
0.011
Henderson
100%
159
0.148
159
0.148
Climax
100%
390
0.156
390
0.156
Cobre
100%
39
0.51
4
0.25
43
0.48
Ajoa
100%
948
0.32
0.06
0.006
948
0.32
0.06
0.006
Cochise/Bisbee
100%
276
0.44
276
0.44
Lone Star
100%
656
0.44
656
0.44
Sanchez
100%
175
0.29
175
0.29
Tohono
100%
204
0.70
258
0.64
462
0.67
Twin Buttesa
100%
445
0.40
0.025
53
0.21
498
0.38
0.022
South America
Cerro Verdea
53.56%
595
0.37
0.015
42
0.47
637
0.38
0.014
El Abra
51%
1,484
0.43
316
0.25
1,800
0.40
Candelariaa
80%
68
0.55
0.13
68
0.55
0.13
Indonesia
Grasberg minerals districta
54.38%c
2,341
0.63
0.55
2,341
0.63
0.55
Africa
Tenke Fungurumed
56%
72
3.60
18
3.22
90
3.52
Kisanfud
95%
56
2.33
52
2.94
108
2.62
Total FCX – 100% basis
10,050
0.43
0.14
0.017
4,501
0.34
14,551
0.40
0.10
0.012
Total FCX – Consolidated basise
9,024
4,159
13,183
Total FCX – Net equity interestf
7,842
3,974
11,815
a.
Stated tonnage also includes silver at Bagdad (1.1 g/t), Safford (1.6 g/t), Sierrita (1.1 g/t), Ajo (0.9 g/t), Twin Buttes (2.1 g/t), Cerro Verde (1.4 g/t), Candelaria (1.9 g/t) and the Grasberg minerals district (3.4 g/t).
b.
Amounts not shown because of rounding.
c.
FCX’s interest in the Grasberg minerals district reflects our 60 percent joint venture ownership further reduced by noncontrolling interest ownership.
d.
Stated tonnage also includes cobalt at Tenke Fungurume (0.31 percent) and Kisanfu (1.08 percent).
e.
Consolidated basis represents estimated mineralized materials after reduction for our joint venture partners’ interest in the Morenci mine and the Grasberg minerals district.
f.
Net equity interest represents estimated consolidated basis mineralized material further reduced for noncontrolling interest ownership.
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Item 1A. Risk Factors.
This report contains “forward-looking statements” within the meaning of United States (U.S.) federal securities laws. Forward-looking statements are all statements other than statements of historical facts, such as statements regarding projected ore grades and milling rates, projected production and sales volumes, projected unit net cash costs, projected operating cash flows, projected capital expenditures, exploration efforts and results, mine production and development plans, the impact of deferred intercompany profits on earnings, liquidity, other financial commitments and tax rates, the impact of copper, gold, molybdenum and cobalt price changes, availability of power, water, labor and equipment, reclamation and closure costs and plans, environmental liabilities and expenditures, litigation contingencies and results, future dividend payments, reserve estimates, risks associated with the completion of pending acquisitions, and anticipated political, economic and social conditions in our areas of operations. We undertake no obligation to update any forward-looking statements. Readers are cautioned that forward-looking statements are not guarantees of future performance and our actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that could cause our actual results to differ materially from those anticipated in the forward-looking statements include the following.
Financial risks
Extended declines in the market prices of copper, gold and/or molybdenum could adversely affect our earnings and cash flows and, if sustained, could adversely affect our ability to repay debt. Fluctuations in the market prices of copper, gold or molybdenum can cause significant volatility in our financial performance and adversely affect the trading prices of our debt and common stock.
Our financial results vary with fluctuations in metal market prices, including copper, gold and molybdenum (for further information about the market prices of these commodities, refer to discussion below and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). An extended decline in the market prices of these commodities could adversely affect our financial results, or our ability to repay our debt and meet our other fixed obligations, and depress the trading prices of our common stock and of our publicly traded debt securities.
Additionally, if market prices for the metals we produce decline for a sustained period of time, we may have to revise our operating plans, including curtailing production, reducing operating costs and capital expenditures and discontinuing certain exploration and development programs. We may be unable to decrease our costs in an amount sufficient to offset reductions in revenues, and may incur losses.
Substantially all of our copper concentrate and cathode sales contracts provide final copper pricing in a specified future month (generally one to four months from the shipment date) based primarily on quoted London Metal Exchange (LME) monthly average spot copper prices. Accordingly, in times of rising copper prices, our revenues benefit from adjustments to the final pricing of provisionally priced sales pursuant to contracts entered into in prior periods; in times of falling copper prices, the opposite occurs.
Copper prices have fluctuated historically, with LME spot copper prices ranging from a low of $2.76 to a high of $4.60 per pound during the three years ended December 31, 2012. Copper prices are affected by numerous factors beyond our control, including:
The strength of the U.S. economy and the economies of other industrialized and developing nations, including China, which has become the largest consumer of refined copper in the world;
Available supplies of copper from mine production and inventories;
Sales by holders and producers of copper;
Demand for industrial products containing copper;
Investment activity, including speculation, in copper as a commodity;
The availability and cost of substitute materials; and
Currency exchange fluctuations, including the relative strength or weakness of the U.S. dollar.
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Gold prices have also fluctuated historically, with the London PM gold price ranging from a low of $1,058 to a high of $1,895 per ounce during the three years ended December 31, 2012. Gold prices are affected by numerous factors beyond our control, including:
The strength of the U.S. economy and the economies of other industrialized and developing nations, including China and India;
Global or regional political or economic crises;
The relative strength or weakness of the U.S. dollar and other currencies;
Expectations with respect to the rate of inflation;
Interest rates;
Purchases and sales of gold by governments, central banks and other holders;
Demand for jewelry containing gold; and
Investment activity, including speculation, in gold as a commodity.
Molybdenum prices also fluctuate, with the Metals Week Molybdenum Dealer Oxide weekly average price ranging from a low of $10.90 to a high of $18.60 per pound during the three years ended December 31, 2012. Molybdenum prices are affected by numerous factors beyond our control, including:
The worldwide balance of molybdenum demand and supply;
Rates of global economic growth, especially construction and infrastructure activity that requires significant amounts of steel;
The volume of molybdenum produced as a by-product of copper production;
Inventory levels;
Currency exchange fluctuations, including the relative strength or weakness of the U.S. dollar; and
Production costs of U.S. and foreign competitors.
Under U.S. federal and state laws that require closure and reclamation plans for our mines, we generally are required to provide financial assurance sufficient to allow a third party to implement those plans if we are unable to do so. The U.S. Environmental Protection Agency (EPA) and state agencies may also seek financial assurance for investigation and remediation actions under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) or equivalent state regulations. The failure to comply with these requirements could have a material adverse effect on us.
We are required by U.S. federal and state laws to provide financial assurance sufficient to allow a third party to implement approved closure and reclamation plans if we are unable to do so. These laws are complex and vary from jurisdiction to jurisdiction. The laws govern the determination of the scope and cost of the closure and reclamation obligations and the amount and forms of financial assurance. EPA and state agencies may also seek financial assurance for investigation and remediation actions under CERCLA or equivalent state regulations.
In July 2009, EPA published a Priority Notice of Action identifying classes of facilities within the hardrock mining industry for which the agency will develop financial responsibility requirements consistent with the degree and duration of risk associated with the production, transportation, treatment, storage or disposal of hazardous substances. In EPA’s semi-annual regulatory agenda published on January 8, 2013, EPA indicated that it intends to propose regulations regarding hardrock mining financial responsibility in May 2014. It is uncertain how the new requirements, if promulgated, will affect the amount and form of our existing and future financial assurance obligations.
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The amount of financial assurance we are required to provide will vary with changes in laws, regulations and reclamation and closure requirements and cost estimates. As of December 31, 2012, our financial assurance obligations associated with closure and reclamation costs totaled $970 million, of which $601 million was in the form of parent company guarantees and financial capability demonstrations. Our ability to continue to provide financial assurance in the form of parent guarantees and financial capability demonstrations depends on our ability to meet financial tests. Certain of the ratios in these tests are significantly more rigorous for companies that do not have an investment grade rating from a state-approved ratings service. We are currently rated investment grade by Standard & Poor’s Rating Services (S&P), Fitch Ratings and Moody’s Investors Service (Moody’s). If we fail to maintain our investment grade rating, we would be subject to these more rigorous tests, in which case the regulatory agencies may require us to provide alternative forms of financial assurance, such as letters of credit, surety bonds or collateral. Depending on our financial condition and market conditions, these other forms of financial assurance may be difficult or costly to provide. Issuance of letters of credit under our credit facilities would reduce our available liquidity. Failure to provide the required financial assurance could result in the closure of mines. As of December 31, 2012, we had limited financial assurance obligations associated with CERCLA-related remediation obligations, although EPA and certain states are increasing the use of financial assurance requirements for such obligations.
For additional information and for discussion of mine closure laws impacting our international operations, refer to the environmental risk factor “Mine closure regulations impose substantial costs on our operations.”
Movements in foreign currency exchange rates could negatively affect our operating results.
The functional currency for most of our operations is the U.S. dollar. All of our revenues and a significant portion of our costs are denominated in U.S. dollars; however, some costs and certain asset and liability accounts are denominated in local currencies, including the Indonesian rupiah, Australian dollar, Chilean peso, Peruvian nuevo sol, euro and South African rand. Generally, our results are positively affected when the U.S. dollar strengthens in relation to those foreign currencies and adversely affected when the U.S. dollar weakens in relation to those foreign currencies. Refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” for a summary of the estimated impact of changes in foreign currency rates on our annual operating costs.
From time to time, we may implement currency hedges intended to reduce our exposure to changes in foreign currency exchange. However, our hedging strategies may not be successful, and any of our unhedged foreign exchange payments will continue to be subject to market fluctuations.
International risks
Our international operations are subject to political, social and geographic risks of doing business in foreign countries.
We are a global mining company with substantial assets located outside of the U.S. We conduct international mining operations in Indonesia, Peru, Chile and the Democratic Republic of Congo (DRC). Accordingly, in addition to the usual risks associated with conducting business in foreign countries, our business may be adversely affected by political, economic and social uncertainties in each of these countries. Such risks include:
Renegotiation, cancellation or forced modification of existing contracts,
Expropriation or nationalization of property,
Changes in a foreign country’s laws, regulations and policies, including those relating to labor, taxation, royalties, divestment, imports, exports, trade regulations, currency and environmental matters,
Political instability, bribery, extortion, corruption, civil strife, acts of war, guerrilla activities, insurrection and terrorism,
Foreign exchange controls, and
The risk of having to submit to the jurisdiction of a foreign court or arbitration panel or having to enforce the judgment of a foreign court or arbitration panel against a sovereign nation within its own territory.
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Our insurance does not cover most losses caused by the above described risks. Accordingly, our exploration, development and production activities outside of the U.S. could be substantially affected by factors beyond our control, some of which could materially and adversely affect our financial position or results of operations.
Our international operations must comply with the U.S. Foreign Corrupt Practices Act and similar anti-corruption and anti-bribery laws of the foreign jurisdictions in which we operate. There has been a substantial increase in the global enforcement of these laws. Although we have a compliance program in place designed to reduce the likelihood of violations of such laws, any violation could result in significant criminal or civil sanctions.
We are involved in several significant tax proceedings and other tax matters with the Indonesian and Peruvian tax authorities (refer to Note 13 for further discussion of these matters).
Because our Grasberg minerals district is our most significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties and security risks in Indonesia.
Indonesia has faced political and social uncertainties, including separatist movements and civil and religious strife in a number of provinces. In particular, several separatist groups are opposing Indonesian rule over the province of Papua, where our Grasberg minerals district is located, and have sought political independence for the province. In response, Indonesia enacted regional autonomy laws, which became effective January 1, 2001. The manner in which those laws are being implemented and the degree of political and economic autonomy that they may bring to individual provinces, including Papua, are uncertain and are ongoing issues in Indonesian politics. In Papua, there have been sporadic attacks on civilians by separatists and sporadic but highly publicized conflicts between separatists and the Indonesian military. Social, economic and political instability in Papua could materially and adversely affect us if it results in damage to our property or interruption of our activities.
Maintaining a good working relationship with the Indonesian government is important to us because our mining operations there are among Indonesia’s most significant business enterprises and are conducted pursuant to a Contract of Work (COW) with the Indonesian government. Partially because of their significance to Indonesia’s economy, the environmentally sensitive area in which they are located, and the number of people employed, our operations are occasionally the subject of criticism in the Indonesian press and in political debates, and have been the target of protests and occasional violence.
Between July 2009 and February 15, 2013, there were 37 shooting incidents in and around the Grasberg minerals district, including along the road leading to our mining and milling operations, which resulted in 15 fatalities and 57
injuries. The investigation of these matters is continuing. We have taken precautionary measures, including limiting the use of the roads to secured convoys. The Indonesian government has responded with additional security forces and expressed a commitment to protect the safety of the community and our operations. Prolonged limitations on access to the road could adversely affect operations at the mine. The safety of our workforce is a critical concern, and PT Freeport Indonesia is working cooperatively with the Indonesian government to address security issues.
During 2011, PT Freeport Indonesia was adversely affected by labor disruptions, including an eight-day work stoppage in July 2011 and an approximate three-month strike that concluded in December 2011. The strike involved civil unrest, transportation blockades, sabotage of important operating facilities and violence. Additionally, during first-quarter 2012, PT Freeport Indonesia experienced work interruptions in connection with its efforts to resume normal operations and temporarily suspended operations.
Large numbers of illegal miners have continued to operate along the river used to transport the tailings from the mill to the lowlands in PT Freeport Indonesia’s government-approved tailings management area. The illegal miners have periodically clashed with police who have attempted to move them away from our facilities. In 2006, the illegal miners temporarily blocked the road leading to the Grasberg mine and mill in protest, and PT Freeport Indonesia temporarily suspended mining and milling operations as a precautionary measure.
We cannot predict whether additional incidents will occur that could disrupt or suspend our Indonesian operations. If additional violence or other disruptive incidents occur, it could adversely affect our business and profitability in ways that we cannot predict at this time.
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We will not mine all of our ore reserves in Indonesia before the initial term of our COW expires.
PT Freeport Indonesia is entitled to mine in Indonesia under its COW with the Indonesian government. The initial term of the current COW expires in 2021, but can be extended for two 10-year periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. Our proven and probable ore reserves in Indonesia reflect estimates of minerals that can be recovered through the end of 2041 and our current mine plan has been developed, and our operations are based on the assumption that we will receive the two 10-year extensions. As a result, we will not mine all of these ore reserves during the initial term of the current COW, and there can be no assurance that the Indonesian government will approve the extensions. Prior to the end of 2021, we expect to mine 28 percent of aggregate proven and probable recoverable ore at December 31, 2012, representing 34 percent of PT Freeport Indonesia’s share of recoverable copper reserves and 46 percent of its share of recoverable gold reserves.
We have had discussions with the Indonesian government regarding the implications of the 2009 mining law, and are working cooperatively to complete the government’s contract of work evaluation process and to obtain an extension of the COW beyond 2021, as provided under the terms of the COW (refer to Part I, Items 1 and 2., “Business and Properties – Mines, Indonesia” for further discussion). The outcome of these discussions may result in revisions to certain terms of the COW.
Our COWs in Indonesia are subject to termination if we do not comply with our contractual obligations, and if a dispute arises, we may have to submit to the jurisdiction of a foreign court or arbitration panel.
PT Freeport Indonesia’s COW and other COWs in which we have an interest were entered into under Indonesia’s 1967 Foreign Capital Investment Law, which provides guarantees of remittance rights and protection against nationalization. Our COWs can be terminated by the Indonesia government if we do not satisfy our contractual obligations, which include the payment of royalties and taxes to the government and the satisfaction of certain mining, environmental, safety and health requirements.
Certain forestry laws and designations as well as prevailing environmental laws and regulations may conflict with or overlap with the mining rights established under our COW. Although our COW grants to PT Freeport Indonesia the unencumbered right to operate in accordance with the COW, certain government agencies could seek to impose additional restrictions on PT Freeport Indonesia that could affect exploration and operating requirements.
At times, certain government officials and others in Indonesia have questioned the validity of contracts entered into by the Indonesian government prior to May 1998 (i.e., during the Suharto regime, which lasted over 30 years), including PT Freeport Indonesia’s COW, which was signed in December 1991. We cannot provide assurance that the validity of, or our compliance with, the COWs will not be challenged for political or other reasons. PT Freeport Indonesia’s COW and our other COWs require that disputes with the Indonesian government be submitted to international arbitration. Accordingly, if a dispute arises under the COWs, we face the risk of having to submit to the jurisdiction of a foreign court or arbitration panel, and if we prevail in such a dispute, we will face the additional risk of having to enforce the judgment of a foreign court or arbitration panel against Indonesia within its own territory.
The Tenke Fungurume minerals district is located in the Katanga province of the DRC, and may be adversely affected by security risks and political, economic and social instability in the DRC.
During 2009, we completed construction activities and commenced copper and cobalt production at the Tenke Fungurume (Tenke) mine located in the DRC. Since gaining independence in 1960, the DRC has undergone outbreaks of violence, changes in national leadership and financial crises. These factors heighten the risk of abrupt changes in the national policy toward foreign investors, which in turn could result in unilateral modification of concessions or contracts, increased taxation, denial of permits or permit renewals or expropriation of assets. As part of a review of all mining contracts by the Ministry of Mines (the Ministry) in the DRC, in February 2008, we received notification that the Ministry wished to renegotiate several material provisions of Tenke Fungurume Mining S.A.R.L.’s (TFM) mining concessions. In October 2010, the DRC government concluded its review of TFM’s existing mining contracts and confirmed that they are in good standing. In connection with the review, TFM made several commitments that were reflected in amendments to its mining contracts, which were signed by the parties in December 2010, approved by a ministerial council in March 2011, and a Presidential Decree was issued in April 2011. In addition, effective March 26, 2012, the DRC government issued a Presidential Decree approving
46

modifications to TFM’s bylaws. Among other changes to the Amended and Restated Mining Convention (ARMC), FCX’s effective ownership in TFM was reduced from 57.75 percent to 56 percent.
Political, economic, social and security risks in the DRC are generally outside of our control and could adversely affect our business. These risks include legal and regulatory uncertainties; exposure to an environment of governmental corruption and bribery; attempts to increase taxes or claims for fees and penalties by governmental officials, including retroactive claims; security risks resulting from political instability in the DRC; and risk of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism.
In addition to ongoing conflict in the eastern region of the DRC, there have been a limited number of reported acts of violence in the Katanga province where the Tenke Fungurme minerals district is located. The safety of our workforce at all of our operations is our highest priority, and TFM works cooperatively with government officials to address security issues; however, no assurance can be given that conflict or random acts of violence will not occur near or impact TFM’s operations.
Accordingly, the Tenke Fungurume minerals district and its future development projects may be substantially affected by factors beyond our control, any of which could adversely affect our operating results, interrupt our operations or result in a loss of all or part of our investment in the DRC.
Terrorist attacks and violence near our operations and throughout the world and the potential for additional future terrorist acts and violence have created economic and political uncertainties that could materially and adversely affect our business.
Refer to the international risk factor “Because our Grasberg minerals district is our most significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties in Indonesia” for more information about a series of shooting incidents near our Grasberg minerals district.
In July 2009, two suicide bombers set off explosions inside of the JW Marriott and Ritz-Carlton hotels in Jakarta, Indonesia, that killed nine people and injured 53 others, including two of our Indonesia-based executives.
In October 2005, three suicide bombers killed 19 people and wounded over 100 in the Indonesian province of Bali, which is 1,500 miles west of our mining and milling operations. In September 2004, 11 people were killed and over 200 injured by a car bomb detonated in front of the Australian embassy in Jakarta. In August 2003, 12 people were killed and over 100 were injured by a car bomb detonated outside of the JW Marriott Hotel in Jakarta, Indonesia. In October 2002, a bombing killed 202 people in Bali. Indonesian authorities arrested 35 people in connection with this bombing and 29 of those arrested have been tried and convicted. The same international terrorist organizations are suspected in each of these incidents. In November 2005, Indonesian police raided a house in East Java that resulted in the death of other accused terrorists linked to the bombings discussed above. Our mining and milling operations were not interrupted by these incidents, but PT Freeport Indonesia’s corporate office in Jakarta had to relocate for several months following the bombing in front of the Australian embassy. In addition to the Bali, JW Marriott Hotel and Australian embassy bombings, there have been anti-American demonstrations in certain sections of Indonesia reportedly led by radical Islamic activists.
No assurance can be given that additional terrorist incidents and acts of violence will not occur. If there were to be additional terrorist incidents or acts of violence, particularly at or near our operations, there could be no assurance that the occurrence of such events would not have a material adverse impact on our business and results of operations.
Operational risks
Our business is subject to operational risks that could adversely affect our business.
Mines by their nature are subject to many operational risks, some of which are outside of our control. These operational risks, which could adversely affect our business, operating results and cash flows, include the following:
Earthquakes, floods and other natural disasters;
The occurrence of unusual weather or operating conditions and other force majeure events;
47

The failure of equipment or processes to operate in accordance with specifications, design or expectations;
Accidents;
Wall failures and rock slides in our open-pit mines, and structural collapses in our underground mines;
Interruption of energy supply;
Lower than expected ore grades or recovery rates;
Metallurgical and other processing problems;
Unanticipated ground and water conditions;
Adverse claims to water rights, adverse outcomes of pending water adjudications and shortages of water to which we have rights;
Adjacent land ownership or usage that results in constraints on current or future mine operations;
Delays in the receipt of or failure to receive necessary government authorizations, approvals or permits;
Delays in transportation and disruptions of supply routes; and
The inability to obtain satisfactory insurance coverage.
Managing the volume of waste rock, leach material and tailings produced in our mining operations also presents significant environmental, safety and engineering challenges and risks. We maintain large leach pads and tailings impoundments containing viscous material, which must be monitored for structural stability and leakages; our tailings impoundments in arid areas must have effective programs to suppress fugitive dust emissions; and we must effectively monitor and treat acid rock drainage. In Indonesia, we use a river transport system for tailings management, which presents other risks, as discussed elsewhere in these risk factors. The failure to adequately manage these risks could result in significant personal injury, loss of life, property damage and damage to the environment, both in and around our areas of operations, as well as damage to production facilities and delays in or curtailments of production.
Our business may also be impacted by information technology disruptions. Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. We have experienced cybersecurity incidents in the past and may experience them in the future. We believe that we have implemented appropriate measures to mitigate potential risks to our technology and our operations from these information technology disruptions. However, given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to production downtimes, operational delays, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.
Labor unrest and activism could disrupt our operations and may adversely affect our business, financial condition, results of operations and prospects.
As further described in Part I, Items 1 and 2., “Business and Properties – Labor Matters,” we are party to labor agreements with various unions that represent employees at our operations. Labor agreements are negotiated on a periodic basis, and the risk exists that labor agreements may not be renewed on reasonably satisfactory terms to us or at all. We cannot predict what issues may be raised by the collective bargaining units representing our employees and, if raised, whether negotiations concerning those issues will be concluded successfully. Our production and sales volumes could be significantly reduced and our business, financial condition and results of operations adversely affected by significant reductions in productivity or protracted work stoppages at one or more
48

of our operations. Additionally, if we enter into a new labor agreement with any union that significantly increases our labor costs relative to our competitors, our ability to compete may be materially and adversely affected.
During 2011, PT Freeport Indonesia was adversely affected by labor disruptions, including an eight-day work stoppage in July 2011 and an approximate three-month strike that concluded in December 2011. The strike involved civil unrest, transportation blockades, sabotage of important operating facilities and violence. Additionally, during first-quarter 2012, PT Freeport Indonesia experienced work interruptions in connection with its efforts to resume normal operations and temporarily suspended operations.
In fourth-quarter 2011, there was an approximate two-month labor strike at Cerro Verde during the negotiation of a new labor agreement. The strike did not have a significant impact on production, and a new three-year agreement with the union was reached in late December 2011.
As of December 31, 2012, approximately 50 percent of our labor force was covered by collective bargaining agreements, and approximately 35 percent of our labor force is covered by agreements that will expire within one year.
If we do not successfully negotiate new collective bargaining agreements with our union workers, we may incur prolonged strikes and other work stoppages at our mining operations, which could adversely affect our business, financial condition and results of operations.
Our mining production depends on the availability of sufficient water supplies.
Our operations require significant quantities of water for mining, ore processing and related support facilities. Our operations in North and South America are in areas where water is scarce and competition among users for continuing access to water is significant. Continuous production at our mines is dependent on our ability to maintain our water rights and claims, and the continuing physical availability of the water supplies.
At our North America operations, certain of our water supplies are supported by surface water rights, which give us the right to use public waters for a statutorily defined beneficial use at a designated location. In Arizona, we are a participant in two active general stream adjudications in which, for over 30 years, the Arizona courts have been attempting to quantify and prioritize surface water claims for two of the state’s largest river systems, which affect four of our operating mines (Morenci, Safford, Sierrita and Miami). The legal precedent set in these proceedings may also affect our Bagdad mine. Groundwater has historically been treated differently from surface water under Arizona law, which has generally allowed land owners to pump at will, subject to the doctrine of reasonable use. However, court decisions in one of the adjudications have concluded that groundwater pumping may affect surface water, thereby bringing the pumping within the jurisdiction of the general stream adjudications. The effort to define the boundaries between groundwater and surface water remains contested, however, and is currently a primary focus of one of those adjudications. Because groundwater accounts for approximately 40 percent of Arizona’s water supplies, the re-characterization of any significant portion of that water as surface water could jeopardize the ability of consumers, farmers, ranchers, municipalities, and industrial users like us, to continue to access water supplies that have been relied on for decades. Because we are a significant user of groundwater in Arizona, we are an active participant in the adjudication proceedings.
In Colorado, our surface water and groundwater rights are subject to adjudication and we are involved in legal proceedings to resolve disputes regarding priority and administration of rights, including priority of some of our rights for the Climax molybdenum mine. In New Mexico, our surface water and groundwater rights are fully licensed or have been fully adjudicated.
Water for our Cerro Verde mining operation comes from renewable sources through a series of storage reservoirs on the Rio Chili watershed that collect water primarily from seasonal precipitation. Due to occasional drought conditions and the possibility that climate change will reduce precipitation levels, temporary supply shortages are possible that could affect our current and planned Cerro Verde operations. Cerro Verde has been conducting water studies to assess opportunities for additional supplies to support current operations and potential future expansion projects. Cerro Verde has reached an agreement with the Regional Government of Arequipa, the National Government, Servicio de Agua Potable y Alcantarillado de Arequipa S.A. (SEDAPAR) and other local institutions to allow it to finance the engineering and construction of a wastewater treatment plant, should Cerro Verde proceed with plans for a large-scale concentrator expansion. Once Cerro Verde obtains a license for the treated water, it would be used to supplement its existing water supplies to support the concentrator expansion.
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Water for our El Abra mining operation comes from the continued pumping of groundwater from the Salar de Ascotán aquifer. In 2010, El Abra obtained regulatory approval, subject to certain conditions, for the continued pumping of groundwater from the Salar de Ascotán aquifer for its sulfide processing plant, which began operations in 2011. We believe that El Abra has sufficient water rights to support current operations, however, a change to the sulfide ore project, such as increased production or mill processing, would require additional water beyond our sulfide groundwater pumping, which is permitted through 2021. El Abra is also conducting studies to assess the feasibility of constructing a desalination plant near the Pacific Ocean to treat seawater for possible increased sulfide ore production or mill processing.
Water for our Candelaria and Ojos del Salado mining operations is drawn from the Copiapó River aquifer. Because of rapid depletion of this aquifer in recent years, Candelaria is expanding its sources of water supply. During 2010, we completed construction of a pipeline to convey reclaimed water from a nearby water treatment facility to our Candelaria mine. In addition, we have substantially completed the construction of a desalination plant and pipeline that will supply Candelaria’s longer term water needs.
Although each of our operations currently has access to sufficient water supplies to support current operational demands, some supplies are subject to unresolved claims by others, and additional supplies that may be needed to support expanded operations are expensive, in short supply, and can be difficult to access because of logistical and legal obstacles. Moreover, we cannot predict the potential outcome of pending or future legal proceedings on our water rights, claims and uses. The loss of a water right, loss of continued use of a currently available water supply, or inability to expand our water resources could materially and adversely affect our mining operations, by significantly increasing the cost of water, forcing us to curtail operations, preventing us from expanding operations or forcing premature closures, thereby increasing and/or accelerating costs or foregoing profitable operations.
Increased production costs could reduce our profitability and cash flow.
Our copper mining operations require significant energy, principally diesel, electricity, coal and natural gas. For the year 2012, energy represented approximately 21 percent of our consolidated copper production costs. An inability to procure sufficient energy at reasonable prices could adversely affect our profits, cash flow and growth opportunities.
Our consolidated copper production costs are also affected by the prices of commodities we consume or use in our operations, such as sulphuric acid, grinding media, steel, reagents, liners, tires, explosives and diluents. The prices of such commodities are influenced by supply and demand trends affecting the mining industry in general and other factors outside our control and such prices are at times subject to volatile movements. Increases in the cost of these commodities could make our operations less profitable. Increases in the costs of commodities that we consume or use may also significantly affect the capital costs of new projects.
Also refer to the environmental risk factor “Regulation of greenhouse gas emissions and climate change issues may increase our costs and adversely affect our operations and markets” for discussion of the potential for increased energy costs.
In addition to the usual risks encountered in the mining industry, our Indonesia operations involve additional risks because they are located on unusually difficult terrain in a very remote area.
The Grasberg minerals district is located in steep mountainous terrain in a remote area of Indonesia. Because of these conditions, we have had to overcome special engineering difficulties and develop extensive infrastructure facilities. In addition, the area receives considerable rainfall, which has led to periodic floods and mudslides. The mine site is also in an active seismic area and has experienced earth tremors from time to time. Our insurance may not sufficiently cover an unexpected natural or operating disaster.
In April 2011, two PT Freeport Indonesia employees died in an accident when a portion of the Deep Ore Zone (DOZ) mine experienced an uncontrolled muck flow. The area was temporarily shut down during the investigation of the accident.
In September 2008, a small scale failure encompassing approximately 75,000 metric tons of material occurred at our Grasberg open pit. There were no injuries or property damage. The event caused a delay in our access to the
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high-grade section of the open pit and, as a result, a portion of the metal expected to be mined in the second half of 2008 was deferred to future periods.
In March 2006, a mud/topsoil slide involving approximately 75,000 metric tons of material occurred from a mountain ridge above service facilities supporting PT Freeport Indonesia’s mining facilities. Three contract workers were fatally injured in the event. The material damaged a mess hall and an adjacent area. As a result of investigations by PT Freeport Indonesia and the Indonesian Department of Energy and Mineral Resources, we conducted geotechnical studies to identify and address any potential hazards to workers and facilities from slides. The existing early warning system for potential slides, based upon rainfall and other factors, has also been expanded.
In October 2003, a slippage of material occurred in a section of the Grasberg open pit, resulting in eight fatalities. In December 2003, a debris flow involving a relatively small amount of loose material occurred in the same section of the open pit resulting in only minor property damage. The events caused us to alter our short-term mine sequencing plans; normal production activities resumed in second-quarter 2004.
No assurance can be given that similar events will not occur in the future.
In addition to the usual risks encountered in the mining industry, our Africa mining operation involves additional risks because it is located in a remote area of the DRC.
The Tenke Fungurume minerals district is located in a remote area of the DRC and is subject to additional challenges, including:
Severely limited infrastructure, including road, bridge and rail access that is in disrepair and receives minimal maintenance;
Limited and possibly unreliable energy supply from antiquated equipment and from power distribution corridors that are not maintained;
Challenges in obtaining experienced personnel;
Security risks; and
Limited health care in an area plagued by disease and other potential endemic health issues, including malaria, cholera and HIV.
Additionally, due to limited rail access, we currently truck a significant portion of the production from the Tenke mines approximately 1,900 miles to ports in South Africa. The Tenke Fungurume minerals district and its future development may be substantially affected by factors beyond our control, which could adversely affect their contribution to our operating results and increase the cost of future development.
The volume and grade of ore reserves that we recover and our rate of production may be more or less than anticipated.
Our ore reserve amounts are determined in accordance with Industry Guide 7 as required by the Securities Exchange Age of 1934, and are estimates of the mineral deposits that can be economically and legally extracted or produced at the time of the reserve determination. The determination of reserves involves numerous uncertainties with respect to the ultimate geology of the ore bodies, including quantities, grades and recovery rates, and estimates may change as new data becomes available. Estimating the quantity and grade of reserves requires us to determine the size, shape and depth or our ore bodies by analyzing geological data, such as samplings of drill holes, tunnels and other underground workings. In addition to the geology of our mines, assumptions are required to determine the economic feasibility of mining these reserves, including estimates of future commodity prices and demand, the mining methods we use and the related costs incurred to develop and mine our reserves. A sustained decrease in commodity prices may result in a reduction in economically recoverable ore reserves. These factors may result in variations in the volumes of mineral reserves that we report from period to period.
There are also uncertainties inherent in estimating quantities of ore reserves and copper recovered from mill and leach stockpiles. The quantity of copper delivered to mill and leach stockpiles is based on surveyed volumes of mined material and daily production records. Sampling and assaying of blasthole cuttings determine the estimated
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copper grade contained in the material delivered to the mill and leach stockpiles. Processes and recovery rates are monitored regularly, and recovery rate estimates are adjusted periodically as additional information becomes available and as related technology changes. Accordingly, the volume and grade of ore reserves recovered, rates of production and copper recovered from stockpiles may be less than anticipated.
We must continually replace reserves depleted by production. Our exploration activities may not result in additional discoveries.
Our ability to replenish our ore reserves is important to our long-term viability. Produced ore reserves must be replaced by further delineation of existing ore bodies or by locating new deposits in order to maintain production levels over the long term. Exploration is highly speculative in nature. Our exploration projects involve many risks, require substantial expenditures and may not result in the discovery of sufficient additional mineral deposits that can be mined profitably. Once a site with mineralization is discovered, it may take several years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish recoverable proven and probable reserves and to construct mining and processing facilities. As a result, there is no assurance that current or future exploration programs will be successful. There is a risk that depletion of reserves will not be offset by discoveries or acquisitions.
Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business.
There are many risks and uncertainties inherent in all development projects. The economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, metallurgical recoveries, capital and operating costs and estimated future prices of the relevant minerals. The capital expenditures and time required to develop new mines or other projects are considerable, and changes in costs or construction schedules can adversely affect project economics. Moreover, underground mining is generally more expensive than surface mining as a result of higher capital costs, including costs for modern mining equipment and construction of extensive ventilation systems. Therefore, it is possible that actual costs and economic returns may differ materially from our estimates. Refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of our current development projects.
New development projects have no operating history upon which to base estimates of future cash flow. These development projects also require the successful completion of feasibility studies, acquisition of governmental permits, acquisition of land, power and water, and ensuring that appropriate community infrastructure is developed by third parties to support such projects. It is possible that we could fail to obtain the government approvals necessary for the operation of a project, in which case, the project may not proceed, either on its original timing or at all. It is not unusual for new mining operations to experience unexpected problems during the start-up phase, resulting in delays in producing revenue and increases in capital expenditures.
The development of underground mines is subject to additional risks, including the following:
Unanticipated geologic, geotechnical and hydrogeologic conditions;
Challenges related to hiring and training personnel required for underground mining activities;
Larger than expected dilution of ore associated with block caving and stoping mining methods; and
Unanticipated delays in the development of major access and supporting infrastructure due to engineering changes, late delivery of critical components and longer than planned construction periods.
Some of these risks could result in delays to production startup and a loss or reduction in minable tons. There can be no assurance that the occurrence of such events or conditions would not have a material adverse impact on our business and results of operations.
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Environmental risks
Our operations are subject to complex and evolving environmental laws and regulation. Compliance with environmental regulatory requirements involves significant costs and may constrain our expansion opportunities.
Our mining, development, exploration and production activities, both in the U.S. and internationally, are subject to extensive laws and regulations governing occupational health, mine safety, generation, transportation and disposal of hazardous toxic substances, waste disposal, air emissions and water discharges, remediation of the environment, protection of endangered and protected species, and other related matters. Compliance with these laws and regulations imposes substantial costs, which we expect will continue to increase over time because of increased regulatory oversight, adoption of increasingly stringent environmental standards, as well as other factors.
For example, under the Clean Air Act, EPA recently lowered the National Ambient Air Quality Standards (NAAQS) for sulfur dioxide. The area around our smelter in Miami, Arizona, has sulfur dioxide levels in excess of the new standard, and the smelter is the primary contributor to those levels. As a result, we will be required to limit the smelter’s operations or install expensive pollution control equipment that will significantly reduce those emissions. Additionally, any expansion of the smelter will be constrained by, or be significantly more expensive because of, these new standards.
In addition, EPA has recently proposed rules that, if effective, would reclassify some mineral processing materials as “hazardous waste” under the Federal Resource Conservation and Recovery Act, which would reverse long-standing EPA regulatory determinations and subject the industry to significant new and costly waste management requirements.
We also believe there has generally been more aggressive application of the Endangered Species Act, resulting in increases in the number of protected species and expansive designations of their critical habitat, which may make obtaining federal permits and securing additional water resources more time-consuming, unpredictable and expensive.
Other regulation under consideration by environmental regulatory agencies include provisions that would impose additional restrictions on waterway discharges, and regulate environmental impacts of radioactive materials associated with mining operations and expand regulation of solid wastes, among other things.
Adoption of these or similar new environmental regulations or more stringent application of existing regulations may materially increase our costs and constrain our U.S. expansion opportunities.
In addition to compliance with environmental regulation at our operating sites, we incur significant costs for remediating environmental conditions on properties that have not been operated in many years.
Freeport-McMoRan Corporation (FMC), and many of its affiliates and predecessor companies have been involved in exploration, mining, milling, smelting and manufacturing in the U.S. for more than a century. Activities that occurred in the late 19th century and the 20th century prior to the advent of modern environmental laws were not subject to environmental regulation and were conducted before American industrial companies understood the long-term effects of their operations on the surrounding environment. With the passage of CERCLA in 1980, companies like FMC became legally responsible for environmental remediation on properties previously owned or operated by them, irrespective of when the damage to the environment occurred or who caused it. That liability is often shared on a joint and several basis with all other owners and operators, meaning that each owner or operator of the property is fully responsible for the clean-up, although in many cases some or all of the other historical owners or operators no longer exist, do not have the financial ability to respond or cannot be found. As a result, because of our acquisition of FMC in 2007, many of the subsidiary companies we now own are responsible for a wide variety of environmental remediation projects throughout the U.S., and we expect to spend substantial sums annually for many years to address those remediation issues. We are also subject to claims where the release of hazardous substances is alleged to have damaged natural resources. At December 31, 2012, we had more than 100 active remediation projects (including damaged natural resource claims) in the U.S. in 28 states.
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At December 31, 2012, we had $1.2 billion recorded in our consolidated balance sheet for environmental obligations attributed to CERCLA or analogous state programs and for estimated future costs associated with environmental matters at closed facilities or closed portions of certain operating facilities. Our environmental obligation estimates are primarily based upon:
Our knowledge and beliefs about complex scientific and historical facts and circumstances that in many cases involve events that occurred many decades ago;
Our beliefs and assumptions regarding the nature, extent and duration of remediation activities that we will be required to undertake and the estimated costs of those remediation activities, which are subject to varying interpretations; and
Our beliefs regarding the requirements that are imposed on us by existing laws and regulations and, in some cases, the expected clarification of uncertain regulatory requirements that could materially affect our environmental obligation estimates.
Significant adjustments to these estimates are likely to occur in the future as additional information becomes available. The actual environmental costs ultimately may exceed our current and future accruals for these costs, and any such changes could be material.
In addition, remediation standards imposed by EPA and state environmental agencies have generally become more stringent over time. For example, in some cases, EPA has applied increasingly costly requirements regarding remediation of contaminated water bottom sediments. Continued application of these types of standards could have an adverse impact on our ultimate cleanup costs at the Newtown Creek site in New York City. Additionally, imposition of more stringent remediation standards poses a risk that additional remediation work could be required at sites that we have already remediated to the satisfaction of the responsible governmental agencies, and may increase the risk of toxic tort litigation.
Refer to Note 13 for further discussion of our environmental obligations.
During 2012, we incurred environmental capital expenditures and other environmental costs (including our joint venture partners’ shares) to comply with applicable environmental laws and regulations that affect our operations of $612 million, compared with $387 million in 2011 and $372 million in 2010. For 2013, we expect to incur approximately $600 million of aggregate environmental capital expenditures and other environmental costs. The timing and amounts of estimated payments could change as a result of changes in regulatory requirements, changes in scope and costs of reclamation activities, the settlement of environmental matters and as actual spending occurs.
An adverse ruling in one or more pending legal proceedings involving environmental matters could have a material adverse effect on us.
As described in Note 13, we are a defendant in numerous, and in some cases significant, litigation matters involving alleged environmental contamination, alleged environmental toxic torts and complex interpretations of environmental regulations. An adverse ruling in one or more of those matters could have a material adverse effect on our results of operations, financial condition and cash flow.
Our Indonesia mining operations create difficult and costly environmental challenges, and future changes in environmental laws, or unanticipated environmental impacts from those operations, could require us to incur increased costs.
Mining operations on the scale of our Indonesia operations involve significant environmental risks and challenges. Our primary challenge is to dispose of the large amount of crushed and ground rock material, called tailings, that results from the process by which we physically separate the copper-, gold- and silver-bearing materials from the ore that we mine. Our tailings management plan, which has been approved by the Indonesian government, uses the river system near our mine to transport the tailings to an engineered area in the lowlands where the tailings and natural sediments are managed in a deposition area. Lateral levees have been constructed to help contain the footprint of the tailings and to limit their impact in the lowlands.
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Another major environmental challenge is managing overburden, which is the rock that must be moved aside in the mining process to reach the ore. In the presence of air, water and naturally occurring bacteria, some overburden can generate acid rock drainage, or acidic water containing dissolved metals that, if not properly managed, can adversely affect the environment.
From time to time, certain Indonesian government officials have raised questions with respect to our tailings and overburden management plans, including a suggestion that we implement a pipeline system rather than our river transport system for tailings management and disposition. Because our Indonesia mining operations are remotely located in steep mountainous terrain and in an active seismic area, a pipeline system would be costly, difficult to construct and maintain, and more prone to catastrophic failure, and could therefore involve significant potentially adverse environmental issues. Based on our own studies and others conducted by third parties, we do not believe that a pipeline system is necessary or practical.
In connection with obtaining our environmental approvals from the Indonesian government, we committed to perform a one-time environmental risk assessment on the impacts of our tailings management plan. We completed this extensive environmental risk assessment with more than 90 scientific studies conducted over four years and submitted it to the Indonesian government in December 2002. We developed the risk assessment study using internationally recognized methods with input from an independent review panel, which included representatives from the Indonesian government, academia and non-governmental organizations. The risks identified during this process were in line with our impact projections of the tailings management program contained in our environmental approval documents.
Since 2005, PT Freeport Indonesia has participated in the Indonesian government’s PROPER (Program for Pollution Control, Evaluation and Rating) program. The last PROPER audit where the Indonesian Ministry of Environment issued PT Freeport Indonesia a rating was in 2010, for which a Blue rating was issued acknowledging PT Freeport Indonesia’s environmental management practices as being in compliance with the laws and regulations in Indonesia. In 2011, a PROPER audit of PT Freeport Indonesia was performed, however the Indonesian Ministry of Environment did not issue a rating for PT Freeport Indonesia. A PROPER audit of PT Freeport Indonesia was not performed in 2012 because of security conditions that existed.
Mine closure regulations impose substantial costs on our operations.
Our U.S. operations are subject to various federal and state permitting requirements that include mine closure and mined-land reclamation obligations. These requirements are complex and vary depending upon the jurisdiction. The laws govern the determination of the scope and cost of the closure and reclamation obligations and the amount and forms of financial assurance sufficient to allow a third party to meet the obligations of those plans if we are unable to do so. In general, our U.S. mines are required to review estimated closure and reclamation costs on either a periodic basis or at the time of significant permit modifications and post increasing amounts of financial assurance as required. It is uncertain how potential EPA requirements for financial assurance will affect the timing of periodic closure cost reviews or the scope of closure activities.
In July 2011, the Chilean senate passed legislation regulating mine closure, which became effective November 2012 and established new requirements for closure plans. Our Chilean operations will be required to update closure plans and provide financial assurance for these obligations. Revised closure plans for our Chilean mine sites are due in November 2014.
Cerro Verde is subject to regulation under the Mine Closure Law administered by the Peruvian Ministry of Energy and Mines. Under the closure regulations, mines must submit a closure plan that includes the reclamation methods, closure cost estimates, methods of control and verification, closure and post-closure plans and financial assurance. The updated closure plan for the Cerro Verde mine expansion must be submitted to the Peruvian regulatory authorities in December 2013.
In December 2009, PT Freeport Indonesia submitted its revised mine closure plan to the Department of Energy and Minerals Resources for review and has addressed comments received during the course of this review process. In December 2010, the President of Indonesia issued a regulation regarding mine reclamation and closure, which requires a company to provide a mine closure guarantee in the form of a time deposit placed in a state-owned bank in Indonesia. In accordance with its COW, PT Freeport Indonesia is working with the Department of Energy and
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Mineral Resources to review these requirements, including discussions of other options for the mine closure guarantee.
We cannot predict at this time the cost of these closure plans or the levels or forms of financial assurance that may be required, which amounts could be substantial.
At December 31, 2012, we had asset retirement obligations (AROs) of $1.1 billion recorded in our consolidated balance sheet. ARO cost estimates may increase or decrease significantly in the future as a result of changes in closure regulations, changes in engineering designs and technology, permit modifications or updates, changes in mine plans, inflation or other factors and as actual reclamation spending occurs. Refer to Note 13 for further discussion.
Regulation of greenhouse gas emissions and climate change issues may increase our costs and adversely affect our operations and markets.
Many scientists believe that emissions from the combustion of carbon-based fuels contribute to greenhouse effects and, therefore, contribute to climate change. In 2012, our worldwide total greenhouse gas emissions, measured as carbon dioxide equivalent emissions, were approximately 10 million metric tons, divided between direct (59 percent) and indirect (41 percent) emissions. Most of our direct emissions are from fuel combustion in haul trucks, followed by the combustion of fuels to provide energy for roasting, smelting and other processes. Indirect emissions are generally the emissions of outside providers from whom we purchase electricity for use in our operations. Our direct emissions are in Indonesia (54 percent), North America (28 percent), South America (11 percent), and Europe and Africa (7 percent). Our indirect emissions are in North America (73 percent), South America (24 percent) and Europe (3 percent).
A number of governments have introduced or are contemplating regulatory initiatives designed to control and reduce greenhouse gas emissions. In June 2010, the EPA issued final regulations under the Clean Air Act for the control of greenhouse gases from new large stationary sources and major modifications to existing large stationary sources. This and other federal greenhouse gas regulations have been challenged in judicial proceedings. Certain of our operations, including the Miami smelter, could be materially affected by these regulations if plant expansions exceed applicable thresholds. In addition, anticipated future EPA regulations covering large fossil fuel fired power plants may materially increase energy costs at our operations. The U.S. may also become a party to international agreements to reduce greenhouse gas emissions, which could lead to new regulations affecting our U.S. operations. The December 1997 Kyoto Protocol established greenhouse gas emission targets for developed countries that ratified the Protocol. In 2012, parties to the Kyoto Protocol agreed to a second commitment period beyond the original December 2012 expiration date. Although the U.S. has not ratified the Kyoto Protocol, the U.S. continues to participate in global climate summits that may lead to an agreement in the future.
Since 2006, we have participated in the Carbon Disclosure Project, which is a voluntary initiative that promotes standardized reporting of greenhouse gas emissions and reduction efforts. In 2009, we formed a multi-departmental greenhouse gas task force to pursue ways to improve the energy efficiency of our operations and reduce greenhouse gas emissions, including evaluating potential reductions in emissions from our haul trucks. However, because of longer and steeper mining hauls as our open pits expand and deepen, and increases in use of electricity as we increase production capacity, we expect increases in our total greenhouse gas emissions.
From a medium and long-term perspective, we are likely to experience increased costs relating to our greenhouse gas emissions as a result of regulatory initiatives in the U.S. and other countries in which we operate. In addition, the cost of electricity that we purchase from others may increase if our suppliers incur increased costs from the regulation of their greenhouse gas emissions. We cannot predict the magnitude of any increased costs at this time, given the wide scope of potential regulatory changes in the many countries in which we operate.
The potential physical impacts of climate change on our operations are highly uncertain, and would vary by operation based on particular geographic circumstances. These may include changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities, and changing temperatures. These effects may adversely impact the cost, production and financial performance of our operations.
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Other risks
If market prices for our commodities decline, the carrying values of inventories and long-lived assets may be impaired, which could require charges to operating income that could be material.
Declines in the market price of copper, among other factors, could cause us to record lower of cost or market (LCM) inventory adjustments and could also result in a write-down of the carrying value of long-lived assets, which would potentially have a material adverse impact on our results of operations and stockholders’ equity, but would have no effect on cash flows.
During fourth-quarter 2008, we concluded that the then-current economic environment and significant declines in copper and molybdenum prices represented significant adverse changes in our business requiring us to evaluate our long-lived assets and goodwill for impairment. As a result, we recorded significant impairment and LCM inventory charges. Refer to Item 6. “Selected Financial Data” for a summary of these charges.
Unanticipated litigation or negative developments in pending litigation could have a material adverse effect on our results of operations and financial condition.
We are a party to the litigation described in Note 13 and in Item 3. “Legal Proceedings” and a number of other litigation matters, including asbestos exposure cases, disputes over the allocation of environmental remediation obligations at Superfund and other sites, disputes over water rights and disputes with regulatory authorities. The outcome of litigation is inherently uncertain and adverse developments or outcomes can result in significant monetary damages, penalties or injunctive relief against us, limitations on our property rights, or regulatory interpretations that increase our operating costs. If any of these disputes results in a substantial monetary judgment against us or an adverse legal interpretation is settled on unfavorable terms, or otherwise affects our operations, it could have a material adverse effect on our operating results and financial condition.
We depend on our senior management team and other key employees, and the loss of any of these employees could adversely affect our business.
Our success depends in part on our ability to attract, retain and motivate senior management and other key employees. Achieving this objective may be difficult because of many factors, including fluctuations in global economic and industry conditions, competitors’ hiring practices, cost reduction activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be very intense. We must continue to recruit, retain and motivate senior management and other key employees to maintain our current business and support our future projects. A loss of such personnel could prevent us from capitalizing on business opportunities, and our operating results could be adversely affected.
Our holding company structure may impact your ability to receive dividends.
We are a holding company with no material assets other than the capital stock of our subsidiaries. As a result, our ability to repay our indebtedness and pay dividends is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, loan, debt repayment or otherwise. Our subsidiaries do not have any obligation to make funds available to us to repay our indebtedness or pay dividends. Dividends from subsidiaries that are not wholly owned are shared with other equity owners. Cash at our international operations is also subject to foreign withholding taxes upon repatriation into the U.S.
In addition, our subsidiaries may not be able to, or be permitted to, make distributions to enable us to repay our indebtedness or pay dividends. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. Our rights to participate in any distribution of our subsidiaries’ assets upon their liquidation, reorganization or insolvency would generally be subject to the prior claims of the subsidiaries’ creditors, including any trade creditors.
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Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult.
Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. These provisions:
Authorize our Board of Directors (the Board) to issue preferred stock without stockholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us;
Establish advance notice requirements for nominations to the Board or for proposals that can be presented at stockholder meetings;
Limit removal of directors for cause only;
Limit who may call stockholder meetings; and
Require the approval of the holders of two thirds of our outstanding common stock to enter into certain business combination transactions, subject to certain exceptions, including if the consideration to be received by our common stockholders in the transaction is deemed to be a fair price.
These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors other than the candidates nominated by the Board.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit large stockholders from consummating a merger with, or acquisition of, us.
These provisions may deter an acquisition of us that might otherwise be attractive to stockholders.
Risks associated with the proposed acquisitions of Plains Exploration & Production Company (PXP) and McMoRan Exploration Co. (MMR)
Our proposed acquisitions of PXP and MMR may present certain risks to our business and operations.
On December 5, 2012, we announced definitive merger agreements to acquire PXP and MMR. The proposed acquisitions present numerous risks, including the following:
The possibility that the expected benefits of each transaction may not materialize in the timeframe expected or at all, or may be more costly to achieve than anticipated;
That either or both of the transactions may not be timely completed, or completed at all;
Our ability to obtain financing required in connection with the transactions, and the increase in our indebtedness that would result from entering into such financing;
That prior to the completion of the transactions or thereafter, our business or the respective businesses of PXP and MMR may not perform as expected due to transaction-related uncertainty or other factors;
That the parties are unable to successfully implement integration strategies following closing of the transactions;
That required approvals to consummate the mergers, including the required approvals of the stockholders of each of PXP and MMR, are not obtained or other closing conditions are not satisfied in a timely manner or at all;
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Stockholder reaction to the proposed acquisitions;
Risks associated with the ownership and operation of oil and gas assets and the other assets of each of PXP and MMR, which differ from those in the mining industry and include, among others, risks relating to oil and gas exploration, drilling and development (including ultra deep drilling) and operating in the deep water of the Gulf of Mexico;
Our ability to retain key employees of each of the parties; and
Whether or not one or both of the transactions are completed, the proposed acquisitions may require diversion of the attention of our management and other key employees from ongoing business activities, including the pursuit of other opportunities that could be beneficial to us.
In addition, we have incurred substantial costs in connection with the proposed acquisitions, a significant amount of which are required to be paid whether or not the transactions are completed. One or more of these factors could negatively affect our business, financial condition or results of operations.
Refer to Note 1 for further discussion of the proposed acquisitions of PXP and MMR.
Pending litigation against us, PXP and MMR could result in injunctions preventing completion of either or both of the proposed acquisitions and the payment of damages in the event one or both of the transactions is completed.
In connection with the proposed acquisitions, stockholders of each of FCX, PXP and MMR have filed numerous derivative lawsuits against us and class action lawsuits against us, PXP and MMR, among others. Among other remedies, the plaintiffs in these lawsuits seek to enjoin the proposed acquisitions. We may be subject to additional stockholder lawsuits during the pendency of the proposed acquisitions. These lawsuits could prevent or delay completion of one or both of the proposed acquisitions and result in substantial costs to us, including any costs associated with the indemnification of directors. The defense or settlement of any lawsuit or claim that remains unresolved may adversely affect our business, financial condition or results of operations.
Refer to Note 13 for further discussion of shareholder litigation that could have a material adverse effect on our results of operations and financial condition.
Consummating the PXP merger, but failing to complete the MMR merger could have consequences under the Clayton Antitrust Act (the Clayton Act) and negatively affect the combined company’s future business and financial results.
If the PXP merger is completed, but the MMR merger is not completed, then the boards of directors and executive management of FCX and MMR may need to be reconstituted in order to comply with the Clayton Act. Subject to certain de minimis exceptions, Section 8 of the Clayton Act prohibits individuals from serving as directors or officers of two competing corporations when each corporation has capital, surplus and undivided profits in excess of $27.8 million. Currently, FCX and MMR share overlapping board and management members, an overlap that is expected to continue even after the PXP merger is consummated, unless the MMR merger is also consummated. In the event that the PXP merger closes without the MMR merger also closing, the U.S. Department of Justice or Federal Trade Commission could investigate whether the combined company and MMR are competitors for purposes of the Clayton Act, and could seek to eliminate the interlock by securing resignation of the interlocked individuals or by pursuing injunctive relief. Private plaintiffs could also bring suits against the combined company seeking an injunction against the interlock. The potential distraction from operations, loss of key executive talent and cost of litigation could adversely affect the combined company’s business, financial condition or result of operations.

Item 1B.  Unresolved Staff Comments.
Not applicable.
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Item 3. Legal Proceedings.
We are involved in numerous legal proceedings that arise in the ordinary course of our business or are associated with environmental issues arising from legacy operations conducted over the years by Freeport-McMoRan Corporation (FMC) and its affiliates. We are also involved periodically in inquiries, investigations and other proceedings initiated by or involving government agencies, some of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Management does not believe, based on currently available information, that the outcome of any legal proceeding will have a material adverse effect on our financial condition; although individual outcomes could be material to our operating results for a particular period, depending on the nature and magnitude of the outcome and the operating results for the period. Below is a discussion of our material water rights legal proceedings. Refer to Note 13 for discussion of our other material legal proceedings.
Water Rights
Our operations in the western United States (U.S.) require significant quantities of water for mining, ore processing and related support facilities. Continuous operation of our mines is dependent on our ability to maintain our water rights and claims and the continuing physical availability of the water supplies. In the arid western U.S., water rights are often contested, and disputes over water rights are generally time-consuming, expensive and not necessarily dispositive unless they resolve both actual and potential claims. The loss of a water right, loss of continued use of a currently available water supply, or inability to expand our water resources could materially and adversely affect our mining operations by significantly increasing the cost of water, forcing us to curtail operations, preventing us from expanding operations or forcing premature closures, thereby increasing and/or accelerating costs and foregoing profitable operations.
At our North America operations, certain of our water supplies are supported by surface water rights, which give us the right to use public waters for a statutorily defined beneficial use at a designated location. In Arizona, we are a participant in two active general stream adjudications in which, for over 30 years, the Arizona courts have been attempting to quantify and prioritize surface water claims for two of the state’s largest river systems, which affect four of our operating mines (Morenci, Safford, Sierrita and Miami). The legal precedent set in these proceedings may also affect our Bagdad mine. Groundwater has historically been treated differently from surface water under Arizona law, which has generally allowed land owners to pump at will, subject to the doctrine of reasonable use. However, court decisions in one of the adjudications have concluded that groundwater pumping may affect surface water, thereby bringing the pumping within the jurisdiction of the general stream adjudications. The effort to define the boundaries between groundwater and surface water remains contested, however, and is currently the principal focus of one of those adjudications. Because groundwater accounts for approximately 40 percent of Arizona’s water supplies, the re-characterization of any significant portion of that water as surface water could jeopardize the ability of consumers, farmers, ranchers, municipalities, and industrial users like us, to continue to access water supplies that have been relied on for decades. Because we are a significant user of groundwater in Arizona, we are an active participant in the adjudication proceedings.
In Re the General Adjudication of All Rights to Use Water in the Little Colorado Water System and Sources, Apache County, Superior Court, No. 6417, filed on or about February 17, 1978. The principal parties, in addition to us, include: the state of Arizona; the Salt River Project; the Arizona Public Service Company; the Navajo Nation, the Hopi Indian Tribe; the San Juan Southern Paiute Tribe; and the U.S. on behalf of those tribes, on its own behalf, and on behalf of the White Mountain Apache Tribe.
In Re The General Adjudication of All Rights to Use Water in the Gila River System and Sources,
Maricopa County, Superior Court, Cause Nos. W-1 (Salt), W-2 (Verde), W-3 (Upper Gila), and W-4 (San Pedro). This case was originally initiated in 1974 with the filing of a petition with the Arizona State Land Department and was consolidated and transferred to the Maricopa County Superior Court in 1981. The principal parties, in addition to us, include: the state of Arizona; the Gila Valley Irrigation District; the Franklin Irrigation District; the San Carlos Irrigation and Drainage District; the Salt River Project; the San Carlos Apache Tribe; the Gila River Indian Community (GRIC); and the U.S. on behalf of those tribes, on its own behalf, and on behalf of the White Mountain Apache Tribe, the Fort McDowell Mohave-Apache Indian Community, the Salt River Pima-Maricopa Indian Community, and the Payson Community of Yavapai Apache Indians.
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The Maricopa County Superior Court issued a decision in 2005 in the Gila River adjudication that directed the Arizona Department of Water Resources (ADWR) to prepare detailed recommendations regarding the delineation of the “sub-flow” zone of the San Pedro River basin, a tributary of the Gila River. According to the court, the sub-flow zone is the subsurface area adjacent to the river where the court may find that groundwater is connected to the surface water such that groundwater pumping may reduce surface flows.  Although we have minimal interests in the San Pedro River basin, a decision that re-characterizes groundwater in that basin as surface water may set a precedent for other river systems in Arizona that could have material implications for many commercial, industrial, municipal and agricultural users of groundwater, including our Arizona operations.
ADWR produced its recommendations in June 2009, and those recommendations were objected to by numerous parties on both sides of the issue. ADWR responded to those objections in January 2011. Following a three-day hearing held in late January 2012, at which various parties provided testimony and oral argument regarding the strengths and weaknesses of ADWR’s technical approach to characterizing underground flows as groundwater or surface water, the court directed ADWR to submit a further report detailing the additional work it deemed necessary to properly delineate the San Pedro River basin subflow zone. On October 12, 2012, the court issued an order instructing ADWR to conduct additional technical work and issue revised subflow zone maps for the San Pedro River basin. On October 17, 2012, the Arizona Supreme Court announced the appointment of a replacement for the judge who had presided over the case for more than 10 years as a result of his appointment to the federal bankruptcy court. The new presiding judge is the fourth judge to preside over the case since its inception almost 40 years ago. On January 10, 2013, the new presiding judge heard oral arguments regarding the additional work to be performed by ADWR in order to develop revised subflow zone maps for the San Pedro River basin and issued an order instructing ADWR to complete additional technical work and submit a new report by April 1, 2014. Given the legal and technical complexity of this adjudication, its long history, and its long-term legal, economic and political implications, it is difficult to predict the timing or the outcome of this issue or of the overall adjudication. If we are unable to satisfactorily resolve the issues being addressed in this adjudication, our ability to pump groundwater could be diminished or curtailed, and our operations at Morenci, Safford, Sierrita, Miami and Bagdad could be adversely affected.
Prior to January 1, 1983, various Indian tribes filed suits in the U.S. District Court in Arizona claiming superior rights to water being used by many other water users, including us, and claiming damages for prior use in derogation of their allegedly superior rights. These federal proceedings have been stayed pending the Arizona Superior Court adjudications.
In 1998, we and several other parties entered into a water rights settlement agreement with GRIC, one of the largest claimants in the Gila River Adjudication, that was later included in a comprehensive water rights settlement under the Arizona Water Settlements Act of 2004. Finalization of the GRIC settlement is subject to contingencies, and the comprehensive settlement has been challenged by other parties. If we are unable to resolve the contingencies in the GRIC settlement and defeat the third-party challenges, our water rights in the Gila River watershed could be diminished, and our operations at Morenci, Safford, Sierrita and Miami could be adversely affected.
United States v. Gila Valley Irrigation District, United States District Court, District of Arizona, was initiated in 1925 by the U.S. to settle conflicting claims to water rights in portions of the Gila River watershed. A decree settling the claims of various parties was entered in 1935, after we were dismissed from the case without prejudice. In 1988, GRIC intervened, challenging uses of water in the Gila River watershed, which may affect our ability to divert water from Eagle Creek, Chase Creek or the San Francisco River for operation of our Morenci mine, pursuant to decreed rights and an agreement between us and the Gila Valley Irrigation District. Our Morenci operations also purchased farm lands with water rights in 1997, 1998 and 2008 that could be affected by the outcome of this proceeding. Impairment of our water claims in the Gila River watershed could adversely affect the operations of our Morenci and Safford mines.

Item 4. Mine Safety Disclosures.
The safety and health of all employees is our highest priority. Management believes that safety and health considerations are integral to, and compatible with, all other functions in the organization and that proper safety and health management will enhance production and reduce costs. Our approach towards the health and safety of our workforce is to continuously improve performance through implementing robust management systems and providing adequate training, safety incentive and occupational health programs.
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Our objective is zero work place injuries and occupational illnesses. We measure progress toward achieving our objective against regularly established benchmarks, including measuring company-wide Total Recordable Incident Rates (TRIR). During 2012, our TRIR (including contractors) was 0.58 per 200,000 man-hours worked, compared to the preliminary metal mining sector industry average reported by the U.S. Mine Safety and Health Administration (MSHA) for 2012 of 2.25 per 200,000 man-hours worked. Our TRIR (including contractors) was 0.61 per 200,000 man-hours worked in 2011 and 0.65 per 200,000 man-hours worked in 2010, compared to MSHA’s metal mining sector industry average of 2.29 per 200,000 man-hours worked in 2011 and 2.53 per 200,000 man-hours worked in 2010.
Refer to Exhibit 95.1 for mine safety disclosures required in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Executive Officers of the Registrant.
Certain information as of February 15, 2013, about our executive officers is set forth in the following table and accompanying text:
Name
Age
Position or Office
James R. Moffett
74
Chairman of the Board
Richard C. Adkerson
66
Director, President and Chief Executive Officer
Michael J. Arnold
60
Executive Vice President and Chief Administrative Officer
Kathleen L. Quirk
49
Executive Vice President, Chief Financial Officer and Treasurer
James R. Moffett has served as Chairman of the Board since May 1992. Mr. Moffett previously served as the Chief Executive Officer from July 1995 until December 2003. He has also served as Co-Chairman of the Board of McMoRan Exploration Co. (MMR) since September 1998, and President and Chief Executive Officer since May 2010.
Richard C. Adkerson has served as President since January 2008 and also from April 1997 to March 2007, Chief Executive Officer since December 2003 and a director since October 2006. Mr. Adkerson previously served as Chief Financial Officer from October 2000 to December 2003. Mr. Adkerson has also served as Co-Chairman of the Board of MMR since September 1998.
Michael J. Arnold has served as Executive Vice President since March 2007 and Chief Administrative Officer since December 2003.
Kathleen L. Quirk has served as Executive Vice President since March 2007, Chief Financial Officer since December 2003 and Treasurer since February 2000. Ms. Quirk previously served as Senior Vice President from December 2003 to March 2007. Ms. Quirk has also served as the Senior Vice President of MMR since April 2002 and as Treasurer since January 2000.
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PART II
Category: Freeport | Comments
februari 10

Decolonization To Recolonization of West Papua – Part 1

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The influence of Colonialization by European Empires around the World made unsatisfied welfare of Indigenous peoples around the world until today like Aborigine in Australia, Indian in USA, Maori in New Zealand, Kanaky in New Caledonia, West Papuan in Indonesia, Acehnese in Indonesia, Rapanui in Chili, etc.

The competition of Colonialist to controlled the territories of Indigenous’ lands and natural resources made them fighting likely Axis Power and Allies Power in Second World War from 1939 to 1945 and they established United Nations Organization to keep the World Peace.

Before Second World War, West Papua were an Non Self Governing Territory although Tidore Kingdom and Dutch Kingdom claimed their territory but no Government Official over there. So, after Second World War in 1945 Dutch, France, UK and USA prepared meeting in Canberra, Australia on 6 February 1947 to established South Pacific Commission, SPC. In Article 2 of the Charter of SPC said that “The Territorial of SPC in the Western including Netherlands New Guinea or West Papua”.

After Dutch transferred the Sovereignty of Netherlands Indies or Indonesia in 27th December 1949, Indonesia want to claimed West Papua but failed. So, in 28th September 1950 UN General Assembly established Resolution 129 (V) for Independent of Indonesia from Non Self Governing Territories list and also UN General Assembly established Resolution 448 (V) in 12 December 1950 to setup Netherlands New Guinea as Non Self Governing Territories but in 1961 Indonesia sent their troops to occupied West Papua or Netherlands New Guinea finally USA President John. F. Kennedy pushed Dutch to transferred the Administration of West Papua to United Nations Temporary Executives Authority, UNTEA in 1 October 1962 thus UNTEA transferred to Indonesia in 1 May 1963.

But after under Indonesia annexation, they never continued to processed Self Government for West Papua according to UN General Assembly Resolution 448 (V) and they want to made Recolonization. Different with Dutch that they want to processed Decolonization according to UN General Assembly Resolution 448 (V).

Film Maker: John Anari
Writer: John Anari
Narator: John Anari and Google Voice
Music by Hibou and Eyuser Group
Producer: West Papua Melanesia, WPLO
Year: 2016

Category: History | Comments
januari 8

Conclusion of Indonesia’s 1969 Takeover of West Papua Not by “Free Choice”

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CHAPTER ELEVEN
CONCLUSIONS

Some Arguments For and Against Papuan Self-Determination
The purpose of this thesis has been to provide a detailed examination of how the 1962 New York Agreement was put into practice, with a particular emphasis on the role of the United Nations.

Some academics, while acknowledging that the human and political rights of the Papuans – “a relatively small number of people” – were denied, emphasise the Agreement’s achievement of preventing of a war that would not have been in the West’s interests. [1] It has also been argued that genuine Papuan self-determination might have “set in train the dissolution of innumerable ethnically complex states whose main claim to unity derives from the colonial mandate. The consequences of this for the stability of the international system could be incaluable.” [2] Also on this issue, May and de Silva wrote:

Separatism could be and is a powerful destabilizing force. It has generally been held at bay by that even more powerful force – Asian nationalism embodied in the post-colonial state system of Asia. Separatist movements in the Third World, in general, find that the great obstruction they face is a widespread hostility to disturbing the status quo. Because practically everyone is vulnerable to the pull of indigenous – and often, external – separatist forces, it is seen to be in everyone’s interest to help existing post-colonial nation-states  resist  threats  to  their  integrity  from  indigenous  as  well  as external separatist force. [3]

Furthermore, one can question how genuine a force was “Papuan nationalism” among the traditional tribal societies that predominated in West New Guinea during the 1960’s. Benedict Anderson argues that the 1969 Papuan rebellions were “ethnic” and “local,” not clear manifestations of Papuan nationalism. “Being anti-Indonesian doesn’t automatically mean being ‘nationalist.’” [4]

For other commentators, the relevant issue was that the Agreement, and its relatively peaceful implementation, was an example of a successful UN intervention which could serve as a model for future operations, particularly those involving the temporary administration of a territory. [5]  The dispute and its settlement have also been studied as an example of effective conflict resolution. [6]

On the other hand, in an argument which I believe is relevant to the case of the  West  Papuans  under  Indonesian  rule,  Mullerson  asserts  that,  while  there  is  no right to secession in international law:

when  a  minority  is  denied  its  rights  and  is  oppressed  and discriminated  against,  it  is  thereby  rejected  by  the  majority.  The majority  rejects  and  alienates  the  minority  leaving  it  outside  the society.  Thereby  the  minority  becomes  not  simply  ethnically  or religiously distinct,…but also socially, economically and politically different from the majority. We can say that the minority, due to the policy of the majority which does not permit the minority to fully develop  its  identity,  acquires  characteristics  similiar  to  those  of colonial  peoples.  It  can  survive  as  a  distinct  group  only independently of the majority. Therefore, the principle of the self-determination  of  peoples  becomes  directly  relevant  to  such minorities. [7]

One can also argue that, as a result of Jakarta’s deliberate policy (initiated in the  1960s)  of  settling  hundreds  of  thousands  of  non-Papuans  in  the  territory,  the indigenous population’s situation may soon be comparable with that of the aborigines of Australia and the native Americans. On the issue of such peoples, a delegate at the first session of the UN Working Group on Indigenous Populations in 1982, declared :

Those  peoples  we  call  indigenous  peoples  are  nothing  more  than colonial peoples who were missed by the great wave of global de-colonisation  following  the  Second  World  War,  particularly  where independence  was  granted,  not  to  the  oppressed  inhabitants  of  a territory but to an intrusive and alien group newly arrived. [8] 

As previously noted, on the specific issue of West Papuan self-determination, Constantin Stavropoulos, the UN legal counsel, advised U Thant in June 1962 that there  was  a  “strong  presumption”  in  favour  of  self-determination  for  the  West Papuans,  “irrespective  of  the  legal  stands  or  interests  of  other  parties  to  the question.” [9]

Supporters of this position often refer to the 1960 UNGA resolution on the granting of independence to colonial peoples. In particular they cite article 5 which calls for immediate steps to be taken:

…in  Trust  and  Non-Self-Governing  Territories  or  all  other territories which have not yet attained independence, to transfer all powers to the peoples of those territories, without any conditions or reservations,  in  accordance  with  their  freely  expressed  will  and desire…..in  order  to  enable  them  to  enjoy  complete  independence and freedom. [10]

However, one can counter this by pointing out that the resolution was only
intended to address the issue of European colonialism. This is made clear in article 6
which is a deliberate rejection of separatism:

Any attempt aimed at the partial or total disruption of national unity and  the  territorial  integrity  of  a  country  is  incompatible  with  the purposes and principles of the Charter of the United Nations. [11]

I would contend, though, that since West New Guinea was recognised by the UN in 1960 as a Non-Self-Governing Territory, article 5 was directly applicable to its case, while article 6 was irrelevant. As a consequence, this resolution remains a key factor in the case for West Papuan self-determination.

Implementation of the New York Agreement
Important as all these arguments are, the purpose of this thesis has not been to assess the legitimacy of  the West Papuans’ right to self-determination, because this right had already been explicitly acknowledged and guaranteed by The Netherlands and Indonesia when they signed the New York Agreement. Furthermore, by agreeing to play a central role in the implementation of this Agreement, the UN Secretariat undertook a responsibility to ensure that it was properly fulfilled.

Specifically, under this Agreement, The Netherlands, Indonesia and the UN had an obligation to protect the political rights and freedoms of the Papuans, and to ensure  that  self-determination  took  place  freely  in  accordance  with  international practice. On both these points, the three parties failed, and they did so deliberately because genuine Papuan self-determination was never considered as a serious option by any of them once the Agreement had been signed.

On  the  UN’s  role  in  the  Agreement’s  implementation,  it  is  clear  that  the Secretariat’s priority throughout was to ensure that the territory became a recognised part of Indonesia with the minimum of controversy and disruption. This was a role that had been assigned to the UN by Washington in 1962 and U Thant saw no reason to deviate from it. This was “big power” Cold War politics in which the rights of the Papuans counted for nothing. Indeed it would have been almost inconceivable for it to be otherwise.

Discussing the attitude of the Secretariat following the signing, Markin notes:

As Jakarta then established proceedures [for the Act] to ensure the outcome  it  wanted,  it  found  that  the  pressure  it  had  encountered during the talks for a meaningful exercise had abated significantly. The Americans, who had repeatedly assured the Netherlands during that time that they would ‘stand accountable by our principles’ by insisting on a self-determination process that was a ‘reality and not a mockery’, began shortly after the signing ceremony to argue that the responsibility for ensuring a fair exercise really lay with the UN and the Netherlands. Around the same time, the Dutch were losing much  of  their  will  to  press  this  issue  as  the  topic  of  West  New Guinea faded from the Netherlands political scene with the renewal of economic and political relations with Indonesia. And with neither the  US  nor  the  Netherlands  pressing  the  issue,  the  UN  had  little incentive to do so. [12]

To  fulfil  its  role  adequately,  the  UN  tolerated  Indonesian  interference  and intimidation  of  the  Papuans  and  itself  throughout  the  UNTEA  period.  A  specific example of this was the banning in December 1962 of the planned Papuan nationalist march.  Although  UNTEA  claimed  the  organisers  had  called  it  off,  it  was  in  fact banned by UNTEA as a direct result of a threat by the Indonesian Government to U
Thant that its armed forces could react violently if the march was not prohibited. [13]

The UN Secretariat also lied publicly as part of a policy of collaboration with Jakarta  during  UNTEA.  Specifically,  Narasimhan  stated  in  February  1963  that  the UN’s decision to withdraw from West New Guinea on 1 May was in response to the wishes  of  the  Papuan  population.  In  fact  confidential  reports  from  senior  UNTEA officials, and the UN Secretariat, clearly demonstrate that they believed the majority of  Papuans  did  not  want  to  be  ruled  by  Indonesia.  These  senior  officials  also concluded  that  expressions  of  pro-Indonesian  Papuan  sentiment  were  the  result  of deliberate  manipulation  by  Jakarta.  But  the  same  reports  made  clear  that  the  UN wished to depart no later than 1 May (and debated pulling out as early as February), because it assessed, accurately, that growing Indonesian dominance of the territory’s security and administration meant that even the appearance of UN authority could not be sustained beyond this point. Furthermore, the 1 May handover date seems to have already  been  agreed  by  the  Dutch  and  Indonesians  before  the  signing  of  the Agreement. [14]

Following  UNTEA’s  withdrawal,  the  Agreement  states  that  a  number  UN ‘experts’  were  to  remain  to  assist  and  participate  in  preparations  for  the  Act.  But when  Indonesia  ignored  U  Thant’s  initial  approach  on  the  issue,  the  Secretary-General made no effort to press them further, and the matter was effectively dropped until its mention in the UNGA report of November 1969.

Significantly,  there  is  evidence  that  the  UN  Secretariat  and  the  Dutch  had already  privately  agreed  with  Jakarta  in  1963  that  they  would  not  object  to  the eventual  Act  being  carried  out  solely  via  a  number  of  ‘representative’  councils, without any direct voting on the issue by the population. This agreement to deny a direct vote even in the urban areas, was a fundamental abrogation of responsibility by both  the  Netherlands  and  the  UN,  and  cannot  be  justified  on  the  grounds  of  West Papuan ‘primitiveness.’ To demonstrate this, one need only look at the organisation’s  treatment of political developments over the border.

In  1962,  following  a  visit  to  Australian New Guinea, the UN’s Trusteeship Council  (which  included  members  from  India,  China  and  the  USSR)  produced  a report  noting  that  a  Legislative  Council,  with  the  first  elected  representatives,  had already been established. It then concluded that it was now possible:

…to  plan  for  a  Parliament  of  Papua  and  New  Guinea  of  about  a hundred  members  elected  on  the  basis  of  direct  election  and  by adult  suffrage  under  a  system  of  single  member  constituencies.  It proposed that all preparations for elections on this basis should be put  in  hand  immediately  and  completed  not  later  than  the  end  of 1963. 15

Two years later a House of Assembly was formed in the territory with 44 of the  64  members  directly  elected  by  the  population.  The stark contrast  in  the  UN’s  treatment of self-determination between East and West New Guinea demonstrates a cynical degree of hypocrisy by both the Secretariat and involved member states.

The UN and the Act
When a UN team returned in 1968, it was only sixteen in number and its head, Ortiz Sanz, spent at least half his time in Jakarta. Furthermore, it is clear that the task given it by U Thant was not, as laid down in the Agreement, to ‘advise, assist and participate’ in arrangements for an act of Papuan self-determination. Instead its role, in conjunction with the Secretariat, was to see that the final part of the Agreement could be completed with the minimum of controversy in such a way that Indonesian sovereignty  over  West  New  Guinea  would  be  confirmed  and  the  UN’s responsibilities for the territory discharged. To facilitate this, the UN endeavoured to persuade Indonesia that a sufficient level of genuine Papuan participation should be included in the Act to minimise the opportunity for potential critics to question its validity.

An  example  of  this  was  the  UN’s  genuine  attempt  to  ensure  some  Papuan participation in the process devised by Jakarta for selecting members of the special assemblies.  Both  U  Thant  and  Ortiz  Sanz  emphasised  privately  and  publicly  the   importance  that  they  attached  to  there  being  some  democratic  dimension  to  these selections.  In  the  Secretary-General’s  final  report,  much  was  made  of  Jakarta’s agreement  to  hold  fresh  elections  in  some  areas  where  UN  officials  had  not  been present. In reality, though, this was a token gesture, and one can conclude that there was no genuine free participation by the people in the selection process.

Another possible example of UN efforts to involve the Papuans in the Act was Ortiz Sanz’s suggestion of a “mixed method.” Although open to manipulation, one can argue that it took into account different levels of political development around the territory, and could have produced at least an indication of public feeling.

But any method which permitted some genuine Papuan opinion to emerge was intolerable to Jakarta, and the reason is clear when one considers the evidence from non-Indonesian eyewitnesses of Papuan opinion throughout the 1960’s. Effectively all of them, including foreign and UN officials as well as journalists, privately (or publicly in the case of journalists) acknowledged the overwhelming unpopularity of Indonesia in the eyes of those Papuans who had some experience of their administration.

Whether the Secretariat ever genuinely supported this method is unlikely, particularly in view of its possible prior private acceptance to omit all direct voting in the Act. While Rolz-Bennett may have urged Indonesia to “record some negative votes” to provide the appearance of legitimacy, a free and direct vote in the towns would have given too accurate a picture of Jakarta’s deep unpopularity. While the final result could still have been manipulated to show a majority in favour of Indonesia, the UN’s objective of confirming Indonesian sovereignty with a minimum of controversy would not have been achieved.

Ortiz Sanz may, as Sudjarwo suspected, have proposed this method without proper consultation with New York. In the first months following his appointment, there is certainly evidence, albeit indirect from Australian diplomats, that he favoured a  greater  degree  of  free  Papuan  participation  than  the  Secretariat.  His communications  to  Sudjarwo  and  New  York  on  the  mixed  method  seem  genuine enough.

Nonetheless, with no realistic possibility that Jakarta would have accepted any direct  voting,  it  is  probable  that  this  option  was  raised  simply  as  a  public demonstration of UN concern for the political rights of the Papuans.

Although the UN’s efforts to  provide ‘the appearance of legitimacy’ failed, one can argue that the lack of significant international interest in the Act made this largely irrelevant at the time.

Having failed on this issue, U Thant and Ortiz Sanz focused their attention instead  on  collaborating  with  Jakarta  in  its  efforts  to  prevent  any  international criticism  of  the  Act  emerging.  In  this  effort  they  were  assisted  by  other  states including  the  Netherlands,  Australia  and  the  UK  who  all  privately  lobbied  those countries, particularly in Africa, which it was feared might condemn the result.

As part of this campaign, Ortiz Sanz deliberately misrepresented the extent of Papuan hostility to Indonesian rule. This was clearly illustrated in the false assertion contained in his report to the UNGA that the majority of petitions he received during his time in West Irian were pro-Indonesian.

For such an apparently experienced politician and diplomat, Ortiz Sanz was remarkably naive in his dealings with Sudjarwo, and was often out-maneouvred by him  and  other  Indonesian  officials  and  military  officers.  Nonetheless,  as  with UNTEA,  he  could  not  have  been  confident  of  support  from  the  Secretariat  in  any significant disagreements with Jakarta. This might explain his reluctance, particularly in  the  final  months,  to  confront  the  Indonesians  over  their  systematic  denial  of political  and  human  rights  in  the  territory.  In  the  end,  though,  he  was  a  man  with traditional  views  towards  the  treatment  of  ‘primitive  peoples,’  and  seems  to  have found little difficulty in justifying his part in the UN’s involvement.

When  the  New  York  Agreement  was  signed,  none  of  those  who  had  been involved were under any illusion that it would permit Papuan self-determination. But despite this, the Agreement guaranteed the Papuans political and human rights. It also guaranteed  them  the  right  to  self-determination.  In  the  event,  these  rights  were neffectively  discarded  by  Indonesia  and  legitimised  by  the  UN’s  involvement  and support. This was the case with UNTEA, but it was particularly evident in the year leading up to the ironically titled “Act of Free Choice.” If the UN’s motive in 1962 was to prevent a damaging Dutch/Indonesian war, there was no such justification in 1969. However, with no significant international pressure to protect the Papuans, U Thant evidently saw no reason to undermine the West’s policy of encouraging and supporting the anti-communist President Suharto.

In 1997, Prime Minister Julius Chan of PNG commented:

It  would  certainly  help  some  of  us  to  really  understand  the procedures  used  in  the  West  Irian  case  so  as  to  avoid  a  similar situation in these other Pacific countries [such as New Caladonia] still seeking independence from colonial powers. [16]

Despite  this,  neither  PNG,  or  any  other  state  has  so  far  been  prepared  to challenge the legitimacy of Jakarta’s ownership. Even newly-liberated East Timor is unlikely  to  champion  the  Papuan  cause. [17]   Furthermore,  with  nearly  half  the opulation  now  non-Papuan, [18]   even  recognition  by  Jakarta  that  the  Act  was unrepresentative,  would  not  necessarily  move  the  resource-rich  territory  closer towards the independence now openly demanded by many of its people. But it would, perhaps, mark the beginning of a more honest relationship between Indonesia and its reluctant Papuan citizens.

More  recently,  in  response  to  the  Dutch  Foreign  Minister’s  decision  to sanction a historical re-examination of the Act, Van Middelkoop the (GPV) MP who initiated  the proposal  responded  “At  last  we  can  look  the  Papuans  straight  in  the eyes.” [19]  It  remains  to  be  seen  whether  the  UN  Secretariat  wishes  to  join  them  in returning to an issue it so deliberated washed its hands of thirty years ago.

Conclusions
 

Notes

1.  Markin, “The West New Guinea Dispute”, p.482.

2.  Henderson, West New Guinea, the Dispute and its Settlement, p.252.

3.  De Silva & May Internationalization of Ethnic Conflict, p.3.

4.  E-mails to author from Benedict Anderson 1 and 8 February 2000.

5.  Rikhye, The Thin Blue Line, p.159; Arthur Rovine, The First 50 Years: The
Secretary-General in World Politics 1920-1970, (Leiden: A.W. Sijthoff, 1970)
pp.362-368.

6.  Markin, “The West New Guinea Dispute”; Henderson, West New Guinea, the
Dispute and its Settlement.

7.  Rein Mullerson, International Law, Rights and Politics, (London: Routledge,
1994), pp.71, 77.

8.  Quoted in R.L. Barsh, “Indigenous people: An Emerging Object of International
Law” American Journal of International Law, (1986) p.376, quoted in Richard
Mulgan, “Should Indigenous Peoples have Special Rights?” Orbis (Journal of World
Affairs, Philadelphia), Vol 33 No.3 (Summer 1989), pp. 375-388.

9.  UN: Series 100 Box 2 File 7. C. Stavropoulos to U Thant, 29 June 1962.

10.  UNGA Resolution 1514, Article 5, 14 December 1960.

11.  ibid, Article 6.

12.  Markin, “The West New Guinea Dispute”, pp.479-480.

13.  See Chapter 3 p.76 above.

14.  See Chapter 3 p.65 above.

15.  UNGA Official Records: Seventeenth Session Supplement No.4 (A/5204) Report
of the Trusteeship Council 20 July 1961 – 20 July 1962. (UN, New York, 1962).

16.  Letter to author from Prime Minister Julius Chan of PNG, 5 August 1996.

17.  Conversation between author and J. Ramos Horta, London, 21 October 1998.

18.  Possible solutions for this include the controversial policy implemented by the
newly  independent  Baltic  states  in  the  early  1990’s  to  deal  with  the  presence  of
significant numbers of Russian immigrants. These ethnic Russians were effectively
disenfranchised  by  restrictive  citizenship  legislation  (see  Mullerson,  “International
Law,  Rights  and  Politics”,  pp.111-113).  Another  option  would  be  one  based  upon
that adopted by the UN Security Council for the planned act of self-determination in
Western  Sahara.  Participants  would  be  limited  to  those  listed  in  the  1974  Spanish
census of the territory, thereby excluding recent migrants deliberately moved in by
Morocco which claims sovereignty. With no equivalent census available for Papua,
another form of eligibility would be necessary, perhaps involving some evidence of
tribal affiliation.

19.  “Transfer of New Guinea Investigated”, Algemeen Dagblad (Rotterdam), 10
December 1999. English translation provided by PaVo (Foundation Study and
information Papuan Peoples), Utrecht, Netherlands.

december 31

Freeport-McMoRan Elects Gerald J. Ford Non-Executive Chairman and Names James R. Moffett Chairman Emeritus

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fcxPHOENIX–(BUSINESS WIRE)– Freeport-McMoRan Inc. (NYSE:FCX) announced today that James R. Moffett, Chairman of the Board, co-founder, and long-time executive, will step down from FCX’s Board of Directors and as Executive Chairman. Mr. Moffett, who has been named Chairman Emeritus, has agreed to become a consultant to the FCX Board, including providing advisory services in support of the company’s ongoing discussions with the Indonesian Government regarding its Contract of Work.

The Board has elected Gerald J. Ford as Non-Executive Chairman. Mr. Ford has served as FCX’s Lead Independent Director since 2013.

Richard C. Adkerson, Vice Chairman, continues as President and Chief Executive Officer.

“During his over 50-year career in the natural resource industry, Jim Bob has become an icon as an explorationist,” said Gerald J. Ford. “Freeport-McMoRan has been built from his exceptional leadership, strong work ethic and vast knowledge of both the industry and our company’s operations.”

Richard C. Adkerson, stated: “It has been an honor and a privilege to have benefited from Jim Bob’s broad experience, commitment and support throughout the years.”

Salute to Jim Bob, Chief Geologist

“Jim Bob has been our chief geologist and has demonstrated great passion for exploration throughout his career,” said Mr. Adkerson. “He was instrumental in the discovery and development of our Grasberg deposit in Indonesia, which has grown to become one of the world’s largest copper and gold deposits.”

Mr. Moffett has served as Executive Chairman of FCX since 2003 and previously served as FCX’s Chief Executive Officer from 1995 to 2003. In 1969, Mr. Moffett and two associates founded McMoRan Oil & Gas Co., which developed into one of America’s leading independent oil and gas companies. In 1981, Mr. Moffett led the effort to merge McMoRan Oil & Gas Co. and Freeport Minerals Company. The merger resulted in the establishment of FCX’s former parent company, which became a global natural resource company. He served as its Chairman and Chief Executive Officer from 1984 until its acquisition in 1997.

Mr. Moffett has also been a noted civic leader and has received many awards during his career, including the 1990 Horatio Alger Association of Distinguished Americans Award. In 2000, he received the Association’s Norman Vincent Peale Award for his exceptional humanitarian contributions to society. He is also a member of the University of Texas McCombs School of Business Hall of Fame and the American Mining Hall of Fame, Mining Foundation of the Southwest.

FCX is a premier U.S.-based natural resources company with an industry-leading global portfolio of mineral assets, significant oil and gas resources and a growing production profile. FCX is the world’s largest publicly traded copper producer.

FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America; the Tenke Fungurume minerals district in the DRC; and significant U.S. oil and natural gas assets in the Deepwater GOM, onshore and offshore California and in the Haynesville natural gas shale, and a position in the Inboard Lower Tertiary/Cretaceous natural gas trend onshore in South Louisiana.

Source: Freeport-McMoRan Inc.

Freeport-McMoRan Inc.

Financial:

Kathleen L. Quirk, 602-366-8016

or

David P. Joint, 504-582-4203

or

Media:

Eric E. Kinneberg, 602-366-7994

– See more at: http://investors.fcx.com/investor-center/news-releases/news-release-details/2015/Freeport-McMoRan-Elects-Gerald-J-Ford-Non-Executive-Chairman-and-Names-James-R-Moffett-Chairman-Emeritus/default.aspx#sthash.zD7SDBNU.dpuf

Category: Freeport | Comments
december 26

UN Security Council Report 23 October 2015 on West Papua

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After 54 Years, UN Security Council, UNSC keep silent on West Papua issues but today this year 2015 they spoke after received a pressured Letter from UN Secretary General Ban Ki-Moon.
 
In this report, UNSC told about UN General Assembly Resolution 1542 (XV) of 15 December 1960 that established East Timor as Non Self Governing Territories but they forgot to put UN General Assembly Resolution 448 (V) of 12 December 1950 that established West Papua or Netherlands New Guinea as Non Self Governing Territories.
This is our Statement that we gave to UN Secretary General through his Special Secretary in his Office Room 37th floor, UN Headquarter on 23 April 2015 after we spoke in United Nations Permanent Forum on Indigenous Issues 21 April 2015.  In this Statement we pushed UN Secretary General to setup UN General Assembly Resolution 448 (V) into the Agenda of UNGA. (Download our Statement : click here)
 

United Nations                                                                                 S /2015/809


 

UN Wmblem Gold

 Security Council                                                             Distr.: General
23 October 2015



Original: English Letter dated 21 October 2015 from the Secretary-General

addressed to the President of the Security Council  

I  refer  to  my  letter  dated  21  July  2014  addressed  to  the  President  of  the
Security Council forwarding a letter from Mahmoud Abbas, President of the State of
Palestine  (S/2014/514),  in  which  he  requested  that  “the  territory  of  the  State  of
Palestine be placed under an international protection system by the United Nations”,
with the central aim of “ensuring the protection of the Palestinian people”.
As the crisis in the Occupied Palestinian Territory continued to unfold during
the  summer  of  2014,  the  Secretariat  undertook  an  internal  review  of  historical
precedents  for  regimes  that  have  been  devised  to  provide  varying  forms  of
protection for areas of territory and their inhabitants. In view of enquiries that the
Secretariat has received and the interest that has been generated, I have decided to
share this review with the members of the Security Council.
I  would  underline  that  this  paper  does  not  propose  any  particular  system  or
systems of protection for the Occupied Palestinian Territory; nor is it in any sense
an options paper. It is, rather, a summary of a number of historical precedents that
was compiled for the purpose of assisting and informing any future work that might
take place within the Secretariat on this subject.
I should be grateful if you would bring the present letter and its annex to the
attention of the members of the Security Council.

(Signed)

BAN Ki-moon


 

Annex  

    Administration of territory by the League of Nations and the United Nations

VIII.  West Irian (1962-1963)

    Brief chronology of events  

1.  Sovereignty  over  West  Irian  was  not  fully  clarified  at  the  time  of  the
independence  of  Indonesia  in  1949.  The  territory  was  subsequently  contested
between Indonesia and the Netherlands.
2.  Through  the  good  offices  of  the  Secretary-General,  the  negotiations  between
Indonesia  and  the  Netherlands  resulted  in  the  Agreement  concerning  West  New
Guinea  (West  Irian)  and  the  Memorandum  of  Understanding  on  cessation  of
hostilities, concluded between the two States in 1962, and the exchange of letters on
cessation of hostilities, concluded among the two States and the United Nations in
the same year. These instruments provided for the deployment to West Irian of the
United  Nations  Temporary  Executive Authority  (UNTEA)  and  the  United  Nations
Security Force (UNSF).
3.  Based  on  the  Memorandum  of  Understanding,  United  Nations  military
observers  were sent to West Irian between August and September 1962 to  monitor
the  ceasefire  between  Indonesia  and  the  Netherlands.  The  General  Assembly
subsequently  adopted  resolution  1752  (XVII)  of  21  September  1962,  which
authorized  the  Secretary-General  “to  carry  out  the  tasks  entrusted  to  him  in  the
Agreement”.  The  administration  of  West  Irian  was  formally  transferred  from  the
Netherlands  to  UNTEA  and  UNSF  was  deployed  in  October  1962.  The
administration was then transferred from UNTEA to Indonesia in May 1963.

    Legal basis  

4.  The  following  instruments  provided  a  legal  basis  for  the  role  of  the  United
Nations in West Irian:

(1)  1962 Agreement concerning West New Guinea (West Irian);
(2)  1962 Memorandum of Understanding on cessation of hostilities;
(3)  1962 exchange of letters on cessation of hostilities;
(4)  General Assembly resolution 1752 (XVII) of 21 September 1962.

    Structure of the Temporary Executive Authority and the Security Force  

5.  UNTEA, which is dealt with in articles III to XIII of the 1962 Agreement, was
composed as follows:
(1)  Administrator,  appointed  by  the  Secretary-General  (1962  Agreement,
article IV);
(2)  Staff from the Netherlands, Indonesia and third States, appointed by the
Administrator (1962 Agreement, article IX).
6.  UNSF, which is dealt with in article VII of the 1962 Agreement and paragraph
7 of the 1962 Memorandum of Understanding, was composed as follows:
(1)  Force Commander, appointed by the Secretary-General;
(2)  Infantry  personnel (1,500),  aircraft personnel (76)  and international  and
local civilian staff.

Role of the United Nations  

7.  The  main  role  of  the  United  Nations  was  to  take  over  the  administration  of
West Irian from one State (the Netherlands) and hand it on to another (Indonesia).
Its main tasks were as follows:
(1)  UNTEA:
(i)  Full authority to administer West Irian (1962 Agreement);
(ii)  Transfer all or part of the  administration to Indonesia (1962 Agreement,
article XII);
(iii)  Use  the  Papuan  police  as  UNSF  and  the  Indonesian  armed  forces  to
maintain law and order (1962 Agreement, article VII);
(iv)  Recruit UNTEA staff (1962 Agreement, article IX);
(v)  Issue travel documents to Papuans (1962 exchange of letters);
(2)  UNTEA Administrator: promulgate new laws and regulations and amend
them (1962 Agreement, article XI);
(3)  UNSF:  supplement  existing  Papuan  police  to  maintain  law  and  order
(1962 Agreement, article VII).
 
    References

1.  Agreement concerning West New Guinea (West Irian), 15 August 1962, United
Nations, Treaty Series, vol. 437, No. 6311 (p. 273).
2.  Memorandum  of  Understanding  on  cessation  of  hostilities,  15  August  1962,
United Nations, Treaty Series, vol. 437, No. 6312 (p. 296).

3.  Exchanges  of  letters  on  cessation  of  hostilities,  15  August  1962,  United
Nations, Treaty Series, vol. 437, p. 294.
4.  Memorandum of Understanding and related letters on certain financial matters
during the period of administration of West New Guinea (West Irian) by the United
Nations  Temporary  Executive  Authority  (UNTEA),  15  August  1962,  United
Nations, Treaty Series, vol. 437, No. 6312 (p. 300).
5.  Exchange of letters concerning the issue of passports and consular protection
during the  administration of West  New  Guinea (West  Irian) by the  United  Nations
Temporary Executive Authority (UNTEA), 15 August 1962, United Nations,  Treaty
Series, vol. 437, No. 6312 (p. 304).
6.  Two aide-memoires concerning the modalities of the transfer of authority over
West  New  Guinea  (West  Irian),  United  Nations,  Treaty  Series,  vol.  437,  No.  6312
(p. 310).
7.  General Assembly resolution 1752 (XVII) of 21 September 1962.

 

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Source:  https://archives.un.org/sites/archives.un.org/files/files/Finding%20Aids/2015_Finding_Aids/AG-059.pdf