Brief on Inco in Sulawesi, Indonesia

Brief on Inco in Sulawesi, Indonesia

November, 2003

Catherine Coumans, MiningWatch Canada

Background:

Inco Ltd. owns 59% of shares in PT Inco in Indonesia. In 1968 PT Inco signed a Contract of Work with the government of Indonesia (President Soeharto), which was effective for 30 years and covered an exploration area of some 6.6 million hectares in Sulawesi. This area was gradually reduced to 218,528 hectares. The concession covers parts of three provinces: South Sulawesi (54.17%), Central Sulawesi (16.76%), and Southeast Sulawesi (29.06%). In 1996, PT Inco negotiated an extension of its Contract of Work to the year 2025 with President Soeharto, before he was forced out of power. Inco operates a nickel mining and smelting operation in Sorowako, South Sulawesi. Inco is Canada's largest mining investor in Indonesia and the second largest mining investment in Indonesia. PT Inco produces raw nickel, 80 % of which is exported to Japan.

Inco Ltd. also mines tin, copper and zinc in a concession of 106,489 hectares in Maluku under the name PT Ingold Maluku I, 85% of the shares of which are held by Inco as Maluku Holding Inc. In West Sumatra and Jambi, Inco mines gold on a concession of 350,6000 hectares under the name PT Ingold Sumatera Satu (99% of the shares are held by Inco as Ingold Holding Indonesia Inc.). In Wamena, West Papua, Inco operates on a holding of 1,069,273 hectares as PT Ingold Antarea through its 88% shareholding in Irianjaya Holding Inc.

Primary Concerns Related to Inco's activities in Sulawesi:
· Severe environmental degradation related to PT Inco's operations in Sorowako, South Sulawesi, particularly of the Larona River ecosystem and Matano Lake.
· Environmental degradation related to PT Inco's exploration activities in Central Sulawesi.
· Human rights abuses related to forced land evictions with inadequate or non-existent compensation and unsettled land rights cases on PT Inco's concession areas in South Sulawesi and Central Sulawesi.
· Increased violence, conflict, and militarization around PT Inco's Sorowako operations and Central Sulawesi exploration area.
· There are several demonstrations against PT Inco in Sulawesi each year, the most recent being on October 7, 2003.
· Massive and continuous flooding of villages along the Larona River damaging homes and crops as a result of PT Inco's Larona hydroelectric dam.
· Almost 47% of Inco's Contract of Work areas in Sulawesi are located in protected forest reserves. Indonesia's 1999 Forestry Act No. 41 bans open-pit mining in protected forests. Inco is part of an international mining lobby asking the Indonesian government to convert 11.4 million hectares of protected forest into mining areas.

There is a large coalition of Indonesian Non-Governmental Organizations concerned about Inco's operations in Indonesia including a coalition focusing specifically on Inco called Coalition for Justice and the Future of the Earth made up of: JATAM, WAHLI (Friends of the Earth), AMAN, POKJA PA-PSDA, JKPP, HUMA and KpSHK.

South Sulawesi:

This is the location of PT Inco's nickel mine and smelter in Sorowako and the locus of the longest running protests to PT Inco's operations, started in 1977, on the basis of severe environmental degradation and human rights concerns. In particular, there have been frequent fish kills in water bodies around the plant and in Lake Matano where fish deformities have also been reported. Air pollution related to the mining and smelting activities are suspected in a high incidence of asthma and other respiratory diseases in the community especially among children. There are unresolved issues around forced land evictions and unpaid compensation. In particular the Karonsi'e Dongi indigenous community was displaced without compensation. PT Inco executives now play golf where the Dongi used to have their fruit trees. "Our cultural assets that are located within PT Inco's concession area have been taken over unjustly. We have lost everything to defend and continue our generation, as we are now spread over various regions in Indonesia." Naomi Mantana, a Karoni'e Dongi indigenous woman impacted by PT Inco's Sarowako operations. There are tensions as a result of unfulfilled promises of free health care, education, electricity, clean water and priority in employment. There is a high level of militarization in this area and frequent clashes between villagers and PT Inco security and other police forces in the area. Most recently, Sorowakan citizens burned down a police station located in front of PT Inco's transportation department. The visa archives of the foreign workers at PT Inco were destroyed. Reports put the cost of losses at hundreds of millions of Rupiah.

Central Sulawesi:

PT Inco is planning to expand its operations in its 36,000 hectares concession in Central Sulawesi onto the indigenous lands of the Onepute Jaya and Bahumontefe communities. These two communities have protested this planned expansion onto their lands as early as May 2001 through a demonstration in front of the Local Assembly Level I in Central Sulawesi. Village heads rejecting the planned exploration on their land read out a declaration. Nonetheless, PT Inco has started to drill test pits. 700 families need to be relocated for Inco's expansion to go ahead. The provincial government, at a cost of US$800,000, relocated 200 families; PT Inco initially refused to pay for the relocation of the remaining 500 families, but later offered to pay 13 billion Rupiah (US$ 1.4 million) of the estimated cost of 25 billion Rupiah needed to move the 500 families. . Inco has stated that economic and security concerns in the area are not conducive to attaining the investment dollars needed, estimated at US$ I billion, to develop the project. Inco's delayed development of this area has now led to open conflict with the local government authorities who complain that Inco has held onto this land for some 30 years impeding alternative development and that Inco only pays US$1 per year per hectare. While Inco is battling demands by provincial authorities to start operations in the area or forfeit its rights, Onepute Jaya and Bahumontefe communities continue to challenge Inco's planned activities. On October 7, 2003 the communities of Onepute Jaya and Bahumontefe issued a statement demanding land certificates for communities that have been resettled, inclusion in negotiations with Inco about the project, and promises for shareholdership should the project go ahead.

Southeast Sulawesi:

Inco has held mining rights in Southeast Sulawesi over 65,000 hectares of land since the early 1970s. The local Governor Ali Mazi has been very vocal in his protestations that this area has not been contributing economically to the local population as Inco has held the land but refused to develop it for three decades. Inco pays only US$1 per hectare per year in annual land rent. Discussions in 2002 with Indonesia's second-largest mining company, PT Aneka Tambang appear to have led to an agreement with Inco in 2003 to start joint development of this land.