Norway Fund Blacklists Rio Tinto

Finance Ministry has barred investments in the Anglo-Australian mining company because of concerns over environmental damage at a mine in Indonesia.

OSLO, Norway (AP) -- Norway's sovereign wealth fund has barred investments in the Anglo-Australian mining company Rio Tinto PLC because of concerns over environmental damage at a mine in Indonesia, the Finance Ministry said Tuesday.

It said Rio Tinto is a joint venture partner in the Grasberg mine with U.S-based Freeport McMoRan Copper & Gold Inc., which was blacklisted by the Norwegian fund in 2006.

Finance Minister Kristin Halvorsen said that the mining operation was causing "severe environmental damage" and that the fund's Council on Ethics had determined that Rio Tinto was directly involved through its participation in the mine.

"There are no indications to the effect that the company's practices will be changed in future," Halvorsen said. "The Fund cannot hold ownership interests in such a company."

Rio Pinto spokesman Nick Cobban said the environmental measures at the mine were deemed satisfactory by independent audits. He also said that even though Rio Pinto owns a 40 percent stake in the mine, it is Freeport which runs the operations.

"We are surprised and disappointed by the ministry's decision," Cobban said.

Norway, a major exporter of oil and natural gas, sets aside surplus central government revenue in the Government Pension Fund -- Global for foreign investment to avoid overheating the domestic economy. It is currently worth about 2 trillion kroner ($360 billion).

Acting on advice from the ethics council, The Finance Ministry said it decided in April to secretly start selling off its approximately 5 billion kroner ($890 million) holding in Rio Tinto.

"The Grasberg mine discharges very large amounts of tailings directly into a natural river system; approximately 230,000 tons or more per day," the ministry said. "Moreover, there is a high risk that acid rock drainage from the company's waste rock and tailings dumps will cause lasting ground and water contamination."

The ministry also said it decided to continue its investments in U.S.-based Monsanto Co., which develops genetically modified plants, despite recommendations by the council to exclude the firm over concerns it was using child labor in India.

According to the Ministry, Norway's ownership activities in Monsanto "have contributed to a significant reduction in the use of child labor in the company's hybrid cotton seed production in India."

More in Global