JAKARTA – Losses amounting to hundreds of millions of dollars appear to be pushing the Indonesian government and mining giant Freeport McMoRan to resolve a row that has crippled operations at Grasberg, the world’s richest copper mine, for three months.
Freeport says it has lost revenue of about $1 billion since the export of copper concentrate from Grasberg was halted on Jan. 12 under new rules issued by the government. The government has lost millions of dollars in royalties and is worried about layoffs and a slowing economy in the restive Papua region, where the giant mine is located.
“There’s a lot of grandstanding in public – that, with our economy being close to a $1 trillion a year now, Freeport is a small matter,” said a senior Indonesian government official, who estimated the lost royalties and taxes from the mine at about $1 billion a year.
“But truth be told, a $1 billion a year reduction in fiscal revenue is a lot,” said the official, who spoke on condition of anonymity. Indonesia halted Freeport’s copper concentrate exports under new rules that require the Phoenix, Arizona-based company to adopt a special license, pay new taxes and royalties, divest a 51 percent stake in its operations and relinquish arbitration rights.
Freeport threatened in February to take the dispute to arbitration, saying the rules were “in effect a form of expropriation”. But now, Indonesia has promised to allow Freeport to export its copper concentrate once again, while negotiations continue over the next six months on contentious issues, including on divestment, economic and legal protection and smelting investment.
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