Standoff between Indonesia and US mining giant Freeport McMoRan
On 10 February, Freeport-McMoRan discontinued its mining activities, leaving thousands of Indonesians out of work. The reason is a dispute over fees and contract to be renegotiated by the company and the authorities.
Jakarta (AsiaNews) – On 10 February 10, Freeport McMoRan, the US-based copper and goal mining giant, temporarily halted its operations after the Indonesian government banned the company from exporting mineral concentrates.
Thousands of Freeport workers at the Grasberg mine near Timika, Papua province, were told to stay home until production resumes after a new deal with the government.
For the past few months, the mining company and the authorities have been in tug-of-war over fees for copper concentrate exports.
The government wants a fairer deal from Freeport. Recently, it asked the company to build a smelter in Indonesia to stop the export of raw materials.
The crucial point is that the government wants greater control over the mining giant. On 10 February, the Ministry of Energy and Mineral Resources proposed a new final "framework" that would replace the current ‘contract of work” with a special mining permit to guarantee government rights over mineral resources whilst giving Freeport the right to operate the mine.
In case of refusal, the company would no longer be authorised to export copper concentrate and engage in any other business activity. Meanwhile, thousands of Freeport’s Indonesian employees remain out of work.
The US company has always refused to sign the dial, arguing that fees will not be fixed but be adjusted according to the prevailing taxation. Under the “contract to work”, fees are fixed for a certain period of time and agreed by both parties.
To reduce the gap between the two parties, the government has proposed three options. Freeport can accept a special mining permit to export copper concentrate whilst a long-term agreement is negotiated; it can renegotiate a deal under the Mineral and Coal Regulations (of 4 November 2009), or, failing either option, the case can be brought to the attention of the International Court of Arbitration.
Indonesia’s Minister of Energy and Mineral Resources Ignasius Jonan, a Catholic, said that in the past few years, Freeport has failed to live up to its fiscal obligation to Indonesia. According to the minister, Freeport was slated to pay only US$ 450 million in taxes, much less than the US$ 15 billion the tobacco industry pays.
Freeport CEO Richard C. Adkerson said that Indonesia earned at least 60 per cent of its revenue from the project. What is more, “we have paid more than 214 trillion rupiahs (US$ 16 billion) in taxes."
Still, as Minister Jonan noted, there are still six months to renegotiate the agreement.
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