Indonesia Expat

Mining Giant Freeport Indonesia Strikes Deal With Government


Mining giant Freeport Indonesia will be allowed to continue operations at the Grasberg copper mine after striking a long-awaited deal with the government.

US-owned Freeport-McMoRan agreed to cede control of local unit Freeport Indonesia to the government after contract renegotiations, beginning in 2009, saw the government demand the mining company divest 51 percent of its shares.

On Tuesday, Aug. 29, news service Reuters reported the company had sold 51 percent of Freeport Indonesia, calling it a “major concession and compromise.”

Freeport was also required to construct a second smelter and make development investments in the Grasberg site of up to US$20 million.

The move reverses a decision to ban Freeport exports and, according to Reuters, highlights the importance of the Grasberg mine to Freeport, which produces a quarter of global copper from the Papua mine.

The resolution of the dispute means Freeport can now apply for a 10-year-permit extension past 2021, Energy and Mineral Resources Minister Ignasius Jonan said during a press conference alongside Freeport leadership.

“The mandate of the president, which has been agreed to by Freeport, is that the divestment should reach 51 percent. All that is left is to discuss the timing. The price will be negotiated later,” Jonan said, as reported by Reuters.

Freeport was initially required to divest a 9.36 percent stake to the government, but new local ownership rules in January meant the mining giant was required to divest a further 41.64 percent of the local unit, according to Reuters.

The two parties have butted heads over the policy, with Freeport demanding ‘fair market value’ for the and the government insisting on a lower cost.

See: A Tough Year For Freeport Indonesia

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