INCO IN INDONESIA: the destruction and the dilemmas

Down to Earth No. 42, August 1999

A new DTE report prepared for Down to Earth by Roger Moody, Nostromo Research, May 1999

The world's leading nickel producer is the Canadian company INCO. Together with the privatised Russian conglomerate Norilsk, and another Canadian mining multinational, Falconbridge, INCO supplies nearly half of the global requirement for this strategic metal, which is a vital component for stainless steel and crucial to military hardware. Inco also prides itself on being among the world's lowest-cost miners of nickel - if not the lowest. This is due primarily to its operations at Soroako, in South Sulawesi, Indonesia. which is currently the world's fourth largest supplier of nickel in matte (an intermediate product which contains 75% nickel).

However, Inco is facing unprecedented challenges to its global position. The market price of nickel toppled drastically in 1998, its share price almost collapsed and its market rating that year was among the worst of north American mining corporations (although the market price has picked up modestly since, while the cost of production has also tended to go down). These setbacks closely followed Inco's acquisition of rights to Labrador's Voisey's Bay nickel deposit, allegedly the world's biggest. However, that "coup" was also problematic. It not only geared up Inco's borrowings (to the tune of $4.3 billion), but brought the company into conflict with Indigenous Peoples, particularly the Innu nation, a substantial proportion of whose land claims affects the Voisey's Bay region. Then, the provincial Newfoundland government (whose writ covers Labrador) demanded that Inco should finance the local construction of a hydro power plant, in order to keep added value within the province: it is a demand which Inco has so far resisted. Meanwhile the workforce at Sudbury, Ontario - site of Inco's most important operations - has been cut back, and unions have been demanding that Voisey's Bay ore should be smelted and processed there.

Halfway across the world in the south Pacific, further competition to Inco's pre-eminence has been increasing, with the rapid "development" of new nickel capacity in Australia and a potentially cheaper method of mining lateritic ores. Recent decisions taken in Cuba and Kanaky (New Caledonia - where Inco also has a major nickel project) also threaten Inco's future sales in far eastern markets as, to a lesser extent, do expansion plans by Indonesia's other nickel miner, PT Aneka Tambang. PT INCO (Inco's 58% owned and managed complex in Indonesia) has long been reliant on demand by Japan, to which it sells virtually all its output. Finally, there is the growing prospect that, as demokrasi and transformasi follow reformasi, in Indonesia, Inco's hold over vast, unexploited, deposits of lateritic ore will be challenged by both Indigenous communities and environmental organisations who, after thirty years of repression, are now beginning to assert their demands.

It is on these new challenges that the new DTE report primarily focuses. Divided into three sections, it is based on a field trip carried out in March 1999 for Minewatch Asia-Pacific (MWAP) by the well known researcher and mining critic, Roger Moody, of Nostromo Research. The first section examines the impacts of the Larona hydro electric project, which supplies virtually all the power needs for the Soroako mining-smelting complex, and which is now undergoing a major expansion.

The second section assesses the impacts of twenty years exploitation in Soroako, on workers, other residents, and the environment. Lastly, the report records the grievances of the original, Indigenous inhabitants, who were dislocated by the Soroako project, and it spotlights the demands of those living in Bahomotefe-Bahutopi, site of the deposits which Inco has said it will soon mine, in order to sustain its operations at Soroako 25 years into the next century.

One important conclusion of this research is that, unless market conditions improve dramatically (currently a forlorn hope) Inco has to decide, well within the next two years, where it will concentrate its dwindling investment capacity. This sets up a major potential conflict between the job prospects of workforces in Sudbury and Soroako, the rights of Indigenous Peoples in Canada and Indonesia, and the demands of government (provincial and national) in both countries for increased income from that investment. In March this year, after a lengthy review process, a qualified go-ahead was given for the Voisey's Bay mine: one of the qualifications was that the Innu should resolve their land claims demands, before construction commences - a stipulation which, if implemented, would likely ensure Innu support for the project.

There is a therefore an urgent need for workers and residents in these two regions to be aware of Inco's global strategy and to consult with each other on shared and divergent interests, in order not to be used as "pawns" in either a corporate, or a governmental game play.

To read the full report go to 'Inco in Indonesia, the destruction and the dilemmas'. Hard copies can be obtained by sending a stamped, addressed A4 envelope to Down to Earth, 59 Athenlay Road, London SE15 3EN.