Minerals, Wealth and Progress - Mining and the Environment: From Ore to Metal - page 21

A case in point illustrating the complex inter-connected political, economic, social, and
environmental linkages of a large mine to the host region is Freeport's massive copper and
gold mine in Papua, East Indonesia ( Case 1.4 ).

1.4 WHAT MAKES THE MINING INDUSTRY DIFFERENT?

Clearly the mining industry differs in significant ways from other industrial sectors. For
one, mining influences the economic profile of most countries, which are either mineral
producers or mineral products consumers, or in many cases both. For another, as discussed
in a later section, mining has a unique risk profile. But there are other characteristics that
are unique to mining. The pressure-state-impact- response model, illustrated in Figure 1.6 ,
helps to elaborate some mining-specific characteristics (partly drawing from the excellent
text by Marshall 2001).

The Drivers - Demand and Supply

The demand curve in the mining industry differs in significant ways from other sectors
in that it is very long and highly variable. Demand for minerals and thus mining is as old
as civilization, and probably much older, and is unlikely to change in the future, irrespec-
tive of socio-economic or technological changes. The demand for a core of basic mineral
commodities such as iron, copper, gold, silver, and lead is as old as history, although the
spectrum of minerals has widened as new technologies required new elements, includ-
ing uranium for energy production, and silicon for computers and communications infra-
structure. Demand for a specific commodity, however, fluctuates greatly with time, as do
market prices. Unlike the patterns in other industrial sectors, suspension and resumption
of mining activities is common in response to changing demand and price. The recent
reprocessing of mine tailings in Romania to extract gold is a good example of response to a
large rise in price.
Finding new economic mineral deposits to match increased demand is also difficult.
Exploration often lasts five to ten years, with environmental assessment, feasibility study
preparation, and ongoing stakeholder consultations leading to necessary government
approvals, taking an additional two to three years.

The demand for a core of basic
mineral commodities such as
iron, copper, gold, silver, and lead
is as old as history.

CASE 1.4
Freeport's Massive Copper and Gold Mine in Papua, East Indonesia

Mining the world's richest gold and copper deposit in
one of the remotest areas on Earth. The closest most
people will ever get to the mining operations of Freeport-
McMoRan Copper & Gold in remote Papua is a computer
tour using Google Earth.
Royal Dutch Shell fi rst found minerals in the 1930s
on an expedition to the nearby Carstenz Glacier, one of
the few equatorial glaciers on Earth. In 1959, Freeport

Sulphur, now named Freeport- McMoRan, arrived. Systematic
exploration began in the 1970s, leading to development of
the Ertsberg (the Dutch word for ore mountain) open Pit
mine. In 1991, the massive Grasberg deposit was discov-
ered nearby, just as the Ertsberg deposit was depleted. The
Grasberg and associated ore bodies have proven reserves
of 46 million ounces of gold and about 40m tons of cop-
per, according to the company's 2004 annual report.

As Freeport prospered into a company with $ 2.3
billion in revenues, it also became among the biggest
- in some years the biggest - source of revenue for the
Indonesian government. It remains so. Freeport states that
it provided Indonesia with about $ 15 billion in direct and
indirect benefi ts between 1992 and 2005, almost 2 percent
of the country's gross domestic product (GDP). With a daily
ore production rate of well over 200,000 tons and a gold