Despite some issues concerning the Indonesian government’s divestment plans for the province of Papua’s Grasberg mine, there are growing signs that Indonesia will get its way. Nevertheless, Indonesia’s ruthless treatment of Freeport will alert future investors.
This year has been unforgiving to Freeport McMoRan Inc, an invaluable player in Indonesia’s mining sector. On August 29, after months of tense negotiations, Freeport agreed to relinquish a 51% share in Grasberg, the world’s second-largest gold and copper mine, to the Indonesian government.
Having acquired Grasberg early in the Suharto era, American corporation Freeport has since transformed it into a ‘super mine’. Grasberg produced 500,000 tonnes of copper and 1.1m ounces of gold in 2016 – over 25% of Freeport’s worldwide output.
Though Freeport’s mining activities have brought some economic development to Papua, Freeport’s operations have been accused of fuelling unrest in the region. Foreign ownership over natural resources has become an increasingly contentious issue in Indonesia, most noticeably reflected in this year’s Grasberg protests.
The government’s acquisition of a majority share of Grasberg suggests it is attempting to alleviate these populist concerns. Under the agreement, new mining rules that were introduced last January will be implemented, requiring Freeport’s 30-year contract to be replaced by a new mining permit, renewable every six months.
For the rest of this article: http://globalriskinsights.com/2017/10/grasberg-talks-signal-indonesian-states-strengthening-resolve/