Word: freeporters
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Indonesia is the site of Freeport's most important asset, the Grasberg open-pit mine, developed under the auspices of the Suharto regime. A giant crater scooped out of a mountainside in the jungles of Irian Jaya, on the Indonesian half of the island of New Guinea, the $60 billion mother lode contains one of the world's largest single deposits of copper and gold...
...golf with the ruler and friendships with his family and business cronies. Indeed, Suharto interests own a multimillion-dollar stake in the Grasberg mine, which surely did not hurt Moffett's effort to maintain mining rights there on favorable terms. The deal was so sweet, in fact, that Freeport has long been the world's lowest-cost producer of copper, a key industrial metal...
...since Suharto's ouster a year ago, Freeport's future in Indonesia has been called into question. The company's status and the allocation of its royalty payments have become a campaign issue. The company has denied any illegal behavior and notes that as one of Indonesia largest taxpayers, "it would be unusual if [we] did not maintain a close business relationship with the government of Indonesia and its officials, including then President Suharto." Fair enough, but in April, Standard & Poor's lowered its rating on $3.3 billion worth of Freeport debt and preferred stock, citing the firm's ties...
...Freeport's woes extend beyond politics. Mining isn't a particularly popular industry, given the propensity to insult the planet in order to get at ores. And this is not a particularly good time to be in the mining business, what with the price of commodities bouncing off all-time lows. Freeport's profits have gone down the shaft, with earnings off 33% in its last quarter, to $129 million. Perhaps that's one reason why Moffett and other senior executives skipped the company's annual meeting last month. Certainly he's used to confrontation, having had to deal with...
...strict capitalists among Freeport's shareholders might be happier were that the case. The company's stock last week closed at about $14, down from $36 three years ago. Low copper and gold prices, which the company obviously can't control, clearly have hurt; but some shareholders also complain that despite a cost-cutting campaign dubbed "Hunker Down and Go," Moffett's 1998 compensation of $4.5 million plus stock options is out of line with Freeport's sagging performance...