Q&A-How Freeport’s row over its Indonesian mining contract has escalated – by Fergus Jensen (Reuters U.S. – February 24, 2017)


Feb 24 U.S. mining giant Freeport-McMoRan Inc warned this week that it could take the Indonesian government to arbitration and seek damages over a contractual dispute that has halted operations at the world’s second-biggest copper mine. Marking a sharp escalation in the row, the government also said it would go to arbitration if no resolution was reached.

Here are some questions and answers on the contract dispute: WHAT IS AT STAKE FOR FREEPORT AND INDONESIA? Freeport’s 2016 copper sales from Indonesia were worth about $2.4 billion, up 130 percent since 1996. This year, its Grasberg mine is due to contribute around a third of Freeport’s global copper sales of 4.1 billion pounds.

But despite being one of the largest tax payers in Indonesia, Freeport’s relations with the government have become strained, particularly as Southeast Asia’s biggest economy has sought greater control over its natural resources.

Freeport and the government have been in talks on converting its 1991 mining contract to a new permit and have made some progress in recent years. Freeport has agreed to pay export taxes, higher royalties on copper, gold and silver sales, and to triple its smelter capacity and cut its concession size by more than half.

In January, however, Indonesia introduced rules that prevent Freeport from exporting copper concentrate until it adopts a new permit that would terminate its current contract and impose new terms, including some different than those already agreed.

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