14 Apr 2017

Freeport and Jakarta compromise over Papua mining

12:12 pm on 14 April 2017

The multi-national mining company, Freeport McMoRan, says it's lost about $US1 billion in a row with Indonesia which has crippled its operation in Papua.

Tthis photograph taken on August 16, 2013 shows a general view of the Freeport McMoRan's Grasberg mining complex, one of the world's biggest gold and copper mines located in Indonesia's remote eastern Papua province.

This photograph taken on August 16, 2013 shows a general view of the Freeport McMoRan's Grasberg mining complex, one of the world's biggest gold and copper mines in Indonesia's remote eastern Papua province. 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 Photo: AFP/Olivia Rondonuwu

Reuters reports that the losses appear to be pushing the Indonesian government and Freeport to resolve the row.

In January, Jakarta forced Freeport to stop the export of copper concentrate from its Grasberg mine in Papua.

The shut down has also denied millions in royalties to the Indonesian government, which is worried about layoffs and a slowing economy in Papua.

Indonesia wanted Freeport's local subsidiary to adopt a special licence, pay new taxes and royalties, divest a 51 percent stake in its operations and to relinquish arbitration rights.

Reuters said that 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 will continue over the next six months on contentious issues, including on divestment, economic and legal protection and Jakarta's push for Freeport to build a smelter.

The compromise comes ahead of a visit to Indonesia by United States vice president Mike Spence next week.

Pressure to resolve the row could also come from Freeport's third-biggest shareholder, activist investor Carl Icahn, who was appointed a special adviser to US President Donald Trump and has been critical of Jakarta's actions of over the mining company's licence.