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To NZ Minister of Finance: Freeport Investment = Blood Money

Indonesia Human Rights Committee,
Box 68-419,

11 December, 2011

The Indonesia Human Rights Committee has renewed its call for the Superannuation Fund and all other Crown Financial Institutes to divest from Freeport McMoran.

A major article in the most recent Metro exposes the ongoing violence at the Freeport mine at West Papua and makes it clear that an investment in Freeport does indeed amount to ‘Blood Money’.

Letter to the Minister of Finance follows.
For further information: Maire Leadbeater: 09-815-9000 or 0274-436-957

# # #

Hon Bill English,
Minister of Finance,
Parliament Buildings,

10 December, 2011

Dear Mr English,

The Indonesia Human Rights Committee would like to draw to your attention an excellent article in the December issue of Metro magazine. This article, by Karen Abplanalp entitled “Blood Money” raises key issues concerning the investment of the New Zealand Superanuation Fund in the Freeport McMoran Company and its joint venture partner Rio Tinto. These companies mine for copper and gold in Indonesian-controlled West Papua.

The New Zealand Superannuation Fund lists an investment of $1,813,120 in Freeport McMoran in its equity holdings as at 30 June, 2011. It also lists holdings amounting to $15,713,964 in Rio Tinto UK and Rio Tinto Australia. We are aware that other Crown Financial Institutes such as the Earthquake Commission and the Accident Compensation Corporation also invest in either Freeport McMoran or Rio Tinto Ltd.

As you are aware, the Indonesia Human Rights Committee has made many representations both to the Board of Guardians of the Super Fund and to Government urging that the Superannuation Fund should divest from all holdings in Freeport McMoran and Rio Tnto. We believe that there is an overwhelming case for this action on ethical, environmental and human rights grounds.
The article points out that the Superannuation Fund has clear principles opposing corruption. However, Freeport continues to make direct payments to the police and the military who provide the security at the mine. In late October, The chief of Indonesian police, Timor Pradopo, admitted that his officers receive regular payments of ‘lunch money’ from Freeport. A Freeport spokesperson has also acknowledged that last year, his company paid US $14 million to the National Police. These funds provide cash and supporting facilities, such as meals and transportation.

Freeport also continues to provide funds to the Indonesian military and in 2008 as it disclosed to the US Securities and Exchange Commission, that direct payments of ‘less than’ $1.6m were made to 1,850 soldiers.

Surely these direct payments are a form of corruption? In West Papua violence and corruption go hand in hand. Because the security forces have a major ‘off-budget’ financial stake in the mining operation it is widely alleged that they are behind many of the grave human rights abuses that take place, including murders, disappearances and cases of torture.

In the article, the Superannuation Fund’s executives suggest that Freeport may be improving its record in human rights. But where is the evidence for this? Since September 15, the date when a legal strike began at the Freeport mine, there have been at least 11 shooting incidents in the Freeport area, resulting in the death of at least 9 civilians and serious injury to at least 18 persons. Two of the 9 killed were protesters from the Freeport workers union who were shot at by the police during a rally. There are also ongoing reports of both security forces and company harassment of the striking workers.

Freeport’s management of waste is considered to be among the worst of any mine in the world, particularly as it continues to use the discredited method of riverine disposal of tailings. This has created a massive deposition area or dead zone in places up to 15 metres deep, and devastated a vast area of once pristine rainforest, alpine valleys and a mangrove estuary.

The local people continue to express their deep distress about the impact of the mine and in November a local official said that the tailings along the south coast had resulted in the sea water becoming much shallower than it was before, and even causing flooding in some of the local villages.

As the Metro article points out, Freeport does not provide any independent third party assessment of its environmental record. The giant Norway Pension Fund divested from Freeport McMoran in 2006 and in 2008 announced its decision to divest from Freeport’s joint venture partner Rio Tinto Incorporated. The Ethics Council of the Norway Fund concluded that the mine was responsible for severe and irreversible environmental damage and also that dialogue with company representatives had been ineffective

Surely it is time for New Zealand’s Superfund and other Crown Financial Institutes to divest from Freeport McMoran Ltd and Rio Tinto Ltd. Otherwise we risk being seen as hypocritical in our declared support for international environmental and human rights standards and international standards of ethical investing.

Yours sincerely,

Maire Leadbeater
(for the Indonesia Human Rights Committee)

Copy to Hon Murray McCully,
Minister of Foreign Affairs,
Parliament Buildings,



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