PT Kelian: A Case Study of Global Operations

Published by MAC on 2001-07-13

Rio Tinto: Global Compact Violator - PT Kelian: A Case Study of Global Operations

By Danny Kennedy
Project Underground
July 13, 2001

Rio Tinto could be a poster child for corporate malfeasance. The largest mining company in the world, Rio Tinto has headquarters both in Melbourne, Australia and London, England and operations on all continents except Antarctica. For years, Rio Tinto has had a reputation for being responsible for environmental and human rights violations at its mines and smelters. Prior Rio Tinto corporate incarnations (most immediately Rio Tinto Zinc and Conzinc Riotinto Australia) were regularly embroiled in controversy. Accusations of corporate misdeeds include suppressing trade unions at their Australian operations, exposing workers in a uranium mine in Namibia to radiation, and negligence and complicity in the civil war in Papua New Guinea where Conzinc Riotinto used to operate a major copper mine.

Rio Tinto executives are conscious of the need to clean up the company's tarnished image. Their efforts range from joining a business organization that promises to create models of business/community partnerships, to signing United Nations' Global Compact in July 2000. Our research, which covers the period since last July, raises serious doubts as to whether Rio Tinto lives up to the principles outlined in the Compact.

We focus on Rio Tinto's record in Indonesia, specifically on a gold mine known as PT Kelian Equatorial Mining (PT KEM or PT Kelian) in Kalimantan, one of several mines the company operates in Indonesia. We find that just at this one mine alone (90% owned by Rio Tinto) there are disturbing human rights and environmental abuses that violate the principles laid out in the Global Compact.

In particular, there is evidence that Rio Tinto, at its PT Kelian mine in Kalimantan, has violated Principle 1 ("support and respect the protection of internaiotna human rights with in their sphere of influence") and Principle 8 (undertake initiatives to promote grreater environmental responsibility) of the Global Compact.

Human Rights at the PT Kelian Mine

Last year, the Indonesian government's National Human Rights Commission investigated allegations of abuses at the Kelian mine and found egregious violations. The Commission's report reveals that the Indonesian military and company security forcibly evicted traditional miners, burned down villages, and arrested and detained protestors since the mine opened in 1992. Local people have systematically lost homes, lands, gardens, fruit trees, forest resources, family graves and the right to mine for gold in the river, according to the Human Rights Commission. PT KEM employees have also been named in a number of incidents of sexual harassment, rape and violence against local women between 1987 and 1997. These included abuse and rape committed by senior company staff against local Dayak women.

The Spring of 2000 saw unprecedented direct action by local people and mine workers protesting against these injustices at Rio Tinto's PT Kelian gold mine (as well as similar protests at the Kaltim Prima coal mines in Kalimantan.) These protests were the culmination of a two year old, escalating human rights campaign by the community. Hundreds of Dayak villagers blockaded access to the mine, preventing supplies of lime (used to treat acid waste) and diesel fuel oil getting through to the mine site on the Kelian river. The blockades continued for several weeks in April, May and June, forcing the company to suspend operations for the first time since the mine started production in 1992. Several community leaders were detained by police and brought downriver for interrogation. One man was imprisoned for several weeks for "initiating a blockade."

The direct action stemmed from a 1998 agreement by PT Kelian to negotiate with a community organization known by the acronym LKMTL, following community demands presented at annual shareholders' meetings in London and Melbourne. Rio Tinto and the Indonesian Forum on the Environment, known by its acronym WALHI, were parties to this agreement. Government officials (who historically have sided with foreign corporations in Indonesia) were to be kept out the process. The negotiations -- to cover land compensation, the human rights abuses by mining staff and Indonesian security personnel, pollution and mine closure plans -- reached deadlock in April last year.

"In the name of the Kelian community of West Kutai district, East Kalimantan, Indonesia, we state that PT Kelian Equatorial Mining has not been genuinely committed to settling the issues and demands raised by the people. The company has only paid lip service to various activities -- community development projects, recruitment of local workers, environmental management and mine closure plans -- as a form of propaganda," states a message from the community presented to Rio Tinto's Annual General Meeting in England last year. "PT Kelian has attempted to prolong the settlement of local peoples' demands by introducing delays and not sticking to schedules it has drawn up for various reasons which are not logical."

Negotiations reached a stalemate when PT Kelian had systematically refused to meet community demands for fair compensation for land appropriated by the company for its operations. Then Kelian, after dragging its feet on this issue for two years, reneged the terms of the negotiations with LKMTL by bringing the local district head into the meetings and by opening separate negotiations with a group backed by him. Unlike LKMTL, which was established through a community meeting of 2000 people, the government-backed team had no mandate from most local residents.

The blockades were finally lifted in mid-June of 2000 when mediation took place. It was agreed that the new group should also be allowed to negotiate, but only on land compensation. PT Kelian favored the new team led by village officials, who were prepared to settle for much less than the grassroots organization. The company's tactic successfully divided the community and by August LKMTL was forced to accept terms for compensation for land taken for access roads for the mine site, a river port and land used for company housing.

As negotiations moved into human rights issues PT Kelian continued to undermine LKMTL's position as the community's representative by working with district officials to settle the dispute. In October last year, the Indonesian environmental group WALHI issued a strongly-worded statement announcing its withdrawal from the negotiations on the grounds that Rio Tinto had sought to split the community for its own advantage, had misled and insulted LKMTL and were not genuinely committed to the terms and spirit of the original agreement.

Soon after WALHI pulled out of the negotiations, Rio Tinto's Indonesian director, Noke Kiroyan, announced the corporation's commitment to improving community relations "The time has come to be more flexible, to allow the smaller voices to be heard, to be more democratic and to be more fair," he declared in an address to the Indonesian Investment Summit on Mining and Energy in Jakarta.

However, no real progress has been made in resolving the dispute over the last year, despite Rio Tinto's commitment to respect human rights made through the Global Compact.

Rio Tinto's Environmental Record at PT Kelian

Rio Tinto also is accused of environmental abuses affecting the health of the surrounding community. The Kelian mine produces over 14 tons of gold per year using the cyanide heap-leaching process which produces contaminated tailings. The tailings are held in a dam and treated in a polishing pond near the Kelian River. Water from the polishing pond pours into the river through an outlet. The company claims that the water is clean while the community says that people cannot drink or bathe in the water because it causes skin lesions and stomach aches.

By contrast, Rio Tinto's environmental policy - posted on the corporation's website - promises its mining operations will minimally affect the environment. "We will maintain high standards in environmental protection while complying with Indonesian and International environmental legislation," according to the policy.

PT Kelian promises to "communicate openly with the community and other stakeholders" and hopes to be "at the forefront of the Indonesian mining industry in environmental performance."

But activists tell a different story. "The Kelian mine has consistently manipulated environmental reports," says Mohammed Ramli, spokesperson for the Indonesian Mining Advocacy Network, known as JATAM.

"Locals suffer from skin rashes when the bathe in the river," he adds. "They can no longer catch the fish they rely upon as a protein source, and the water is so contaminated with insufficiently treated mine wastes that it's too dangerous to drink."

The Mineral Policy Institute, an Australian watchdog group, accuses Rio Tinto of operating overseas to avoid environmental regulation. "They would never get away with it here in Australia-so why should they over there?" says Institute director Geoff Evans, referring to Rio Tinto's operations in Indonesia.

Unfortunately the human rights and environmental violations at the PT Kelian mine are typical of Rio Tinto operations. But even if we look at the mining giant's record at this one mine alone, it provides sufficient reason for the United Nations Secretary General to suspend Rio Tinto's membership in the Global Compact until the company has seriously cleaned up its practices.

Danny Kennedy is the former Director of Project Underground, a watchdog group that monitors mining and oil industries world-wide. He currently works on Greenpeace's California Global Warming and Energy Campaign.