US mining giant faces fight with Indonesia – by Olivia Rondonuwu (The West Australian – December 23, 2013)

High in the snow-capped mountains, the sight of tribesmen roaming in loincloths contrasts sharply with that of miners using hi-tech machinery to extract gold and copper ore at a huge US-owned facility in remote Indonesia.

The heavily-guarded complex is the resource-rich Indonesia’s biggest mine and has been a controversial presence for more than five decades — accused of environmental devastation and extracting huge wealth while giving too little back to a poverty-wracked area.

On a rare visit by the foreign media to Freeport McMoRan’s Grasberg complex in Papua province, AFP saw first-hand the challenge of mining at one of the world’s biggest gold and copper mines, where thin oxygen makes it difficult for workers to breathe.

Now, the company faces a fight with the state as it looks to extend its contract at a time when emboldened politicians are taking aim at foreign miners with measures forcing them to leave more of their profits in the country.

Indonesia is transforming into a freewheeling democracy and booming economy, with mining firms among foreign companies under scrutiny in what critics say is a climate of rising economic nationalism.

“There is the feeling that Freeport has taken a lot and has shared poorly with the local area,” said a government source familiar with ongoing negotiations to extend the mining giant’s contract.

Authorities have demanded foreign miners give up full ownership of their mining assets in the country, pay higher taxes on mineral exports and build smelters in Indonesia instead of shipping ore abroad to be processed.

“It’s as if I have rented a house for 20 years, but 10 years after it has all been agreed the owner comes to you and says ‘this is unfair, I must hike the rent’,” said Tony Wenas of the Indonesian Mining Association.

Freeport vigorously defends its operations in Indonesia, noting it is the single biggest taxpayer to the state.

Ruby Seba, Freeport Indonesia vice president of technical affairs, said the company sought to get its contract extended to 2041 as it aims to build what it says will be the world’s biggest underground mine at Grasberg.

“It wouldn’t be fair for us to put aside money to invest and suddenly have our contract severed,” he said.

For many, government action to get more back from foreign companies is overdue, with Freeport seen as a symbol of foreign exploitation in Indonesia.

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