Freeport McMoRan: Solid Environmental Citizen

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With Earth Day approaching, it's particularly gratifying when a wonderfully run company, which happens to be a significant international player in a vital industry, also places environmental concerns at the top of its strategic and operational agenda. That's apparently the case at Freeport McMoRan Copper & Gold (NYSE: FCX  ) .

The Fool's disclosure rules keep preventing me from buying this company, because I can't stop writing about this leading participant in the increasingly important copper industry. Last November, New Orleans-based Freeport announced a nearly $26 billion offer for Arizona's Phelps Dodge, a company twice its size. The merger was consummated last month, and the resulting company appears unusually sound, thanks to strong copper prices driven by rapidly escalating Chinese demand for the base metal.

The remote and far-flung nature of Freeport's mines -- with facilities in North and South America and Asia (and a likely expansion to Africa) -- and the sometimes brutal environmental impact of such mining are crucial factors for this company. But unlike many of its competitors, Freeport considers environmental and social concerns just as important as its economic interests.

To demonstrate its environmental and social concern, the company has annually published a 60-plus-page, sumptuously illustrated report on its efforts to improve local economies and befriend the area's native population. The 2005 version (the most recent published) deals extensively with the company's activities and programs in Papua, Indonesia, near the company's giant Grasberg copper facility.

Copper mining gets greener
Supervised by Dr. Rusdian Lubis, an Indonesian native and veteran of the World Bank's environmental program for Africa, Freeport takes numerous steps to reduce the ecological impact of its mining operations.

For example, Freeport has constructed an efficient system at its Indonesian facilities to manage tailings -- the "finely ground natural rock residue from the processing of mineralized ore," according to the company. A physical flotation process separates the copper- and gold-bearing minerals from the host rock, avoiding the use of mercury, cyanide, or other potentially harmful chemicals. In addition, Freeport has constructed levees to set aside a specific area for controlled tailings separation and disposal.

The company also tries to serve the best interests of the indigenous populations in its operating areas, adhering to strong social, employment, and human rights policies. In Papua, for instance, it has sought to learn more about the Papuan people, including their history and their changing circumstances. As the company's 2005 report states, "We understand the need of the unique peoples of Papua to preserve their cultural traditions and we are committed to helping them accomplish this goal."

Since 1992, Freeport has invested more than $425 million in Indonesia for social infrastructure that directly benefits the Papuan people, including schools, hospitals, recreational facilities, and places of worship. It currently employs more than 2,000 Papuans at Grasberg. And since that same 1992 base year, it has purchased more than $3.7 billion in locally produced goods and services.

It seems that Freeport has anted up in its ongoing displays of social and environmental concern. It's especially encouraging when that approach is tied to a company that appears to offer solid opportunities to Foolish investors.

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Fool contributor David Lee Smith does not own shares in the companies mentioned. He welcomes your questions or comments. The Fool has a disclosure policy.


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