Grasberg Mine - History

History

In 1936, Dutch geologist Jean Jacques Dozy was a member of an expedition that scaled Mount Carstensz, the highest mountain in the Dutch East Indies. While there, he made notes of a peculiar black rock with greenish coloring, and spent several weeks estimating the extent of the gold and copper deposits. In 1939, he filed a report about the Ertsberg (Dutch for "ore mountain"). He was working for Nederlandsche Nieuw Guinea Petroleum Maatschappij (NNGPM), an exploration company formed by Shell in 1935, with 40% Standard Vacuum Oil (Mobil) interest and 20% Far Pacific investments (Chevron subsidiary).

In March 1959 the New York Times published an article revealing the Dutch were searching for the mountain source of alluvial gold which had been flowing into the Arafura Sea. Geologist Forbes Wilson, working for the Freeport mining company in August 1959 after reading Dozy's 1936 report, immediately prepared to explore the Ertsberg site. In 1960 the expedition, led by Forbes Wilson and Del Flint, confirmed the huge copper deposits at the Ertsberg. It was financed by Freeport Sulphur, whose directors included Godfrey Rockefeller, Texaco chairman Augustus Long, and Robert Lovett.

The mine was the first under the new Suharto administration's (see New Order) 1967 foreign investment laws intended to attract foreign investment to Indonesia's then ruined economy. Built at 4,100 metres (14,000 ft) above sea level in one of West Papua's most remote areas, it involved a capital and technology input well beyond Indonesia's resources at the time. Construction cost was $US175 million, $US55 million above the original budget. A 116 km road and pipeline, port, airstrip, power plant and a new town called "Tembagapura" (literally: copper town) were built. It officially opened in 1973 (although the first ore shipment was in December 1972), and was expanded by Ertsberg East, which opened in 1981. Steep aerial tramways are used to transport equipment and people. Ore is dropped 600 metres (2,000 ft) from the mine, concentrated and mixed with water to form a 60:40 slurry. The slurry is then pumped through a 166 km pipeline through mountains, jungle and swamp to the port at Amamapare, dried and shipped. Each tonne of dry concentrate contains 317 kilograms of copper, 30 grams of gold and 30 grams of silver.

In 1977 the rebel group Free Papua Movement attacked the mine. The group dynamited the main slurry pipe, which caused tens of millions of dollars in damage, and attacked the mine facilities. The Indonesian military reacted harshly, killing at least 800 people.

By the mid-1980s, the original mine had been largely depleted. Freeport explored for other deposits in the area. In 1988, Freeport identified reserves valued at $40 billion at Grasberg (Dutch, "Grass Mountain"), just 3 kilometres (1.9 miles) from the Ertsberg mine. The winding road to Grasberg, the H.E.A.T. (Heavy Equipment Access Trail), was estimated to require $12 million to $15 million to be built. An Indonesian road-builder who had contributed to the Ertsberg road took a bulldozer and drove it downhill sketching the path. The road cost just $2 million when completed.

The 2003–2006 boom in copper prices increased the profitability of the mine. The extra consumption of copper for Asian electrical infrastructure overwhelmed copper supply and caused prices to increase from around $1500/ton to $8100/ton ($0.70/lb to $4.00/lb).