RIO Tinto s reputation for social and environmental responsibility has taken a hit after a joint venture partner was accused of unethical business practices.
RIO Tinto’s reputation for social and environmental
responsibility has taken a hit after a joint venture partner was
accused of unethical business practices.
Freeport McMoRan, the operator of the world’s biggest gold mine,
Grasberg, in Indonesia’s Papua province, has paid local military
and police at least $US20 million for questionable purposes since
1998 and allowed large amounts of waste to seep into surrounding
groundwater, a detailed story in The New York Times said
A Rio spokesman declined to comment on the report, saying
questions should be directed to the mine’s operator.
Rio sold its 13 per cent stake in the American Freeport for
$US 882 million in March 2004 but has a 40 per cent interest in
copper and gold reserves discovered after 1994.
Macquarie Equities estimated the mine would give Rio $US155
million in revenue this year, falling to $US8 million by 2007 as
lower grade material was mined.
The Grasberg mine has long had a reputation for controversy.
Companies linked to former Indonesian dictator president Soeharto
received lucrative contracts from the mine.
As with Rio’s shuttered Bougainville copper mine and the former
BHP Billiton Ok Tedi mine in Papua New Guinea, waste disposal has
been problematic. And Grasberg was forced into the international
spotlight in 2003 after eight workers were killed in a landslide
that many claimed was preventable.
BHP exited its controversial Ok Tedi investment in 2001 at a
cost of $US 150 million because keeping the mine would potentially
have been at odds with its health, safety, environment and
community policy framework, the company said at the time.
BHP chief executive Chip Goodyear worked at Freeport from 1989
to 1997, finishing his service as the company’s chief financial
officer before joining BHP in 1999.
Although some of the military pay-offs mentioned in yesterday’s
story began in 1996, the bulk of the accusations concerned
Freeport’s actions after Mr Goodyear left the company.
Under Mr Goodyear’s leadership, BHP has earned a better
reputation for corporate responsibility than Rio.
Research service Corporate Monitor rated Rio’s environmental
practices as ‘adverse’ – the lowest of five ratings – in a recent
survey published by Ethical Investor magazine.
In contrast, BHP’s environmental practices were rated
‘developing’. It also outperformed Rio on social responsibility and
corporate governance ratings.
Of 15 ethical investment funds surveyed, eight held shares in
BHP while only four had a stake in Rio.
Ben Spruzen, a senior research analyst with Melbourne’s
Sustainable Investment Research Institute Service, said BHP had
been a ‘demonstrably better reporter’ than Rio on sustainability
issues in the past year and had also made a better effort to be
Rio fell 25c to $ 68.25 and BHP rose 1c to $ 22.59.
Source : www.smh.com.au