Freeport McMoRan Copper & Gold Mine Inc. will renegotiate its contract w
ith the Indonesian government to run Grasberg, the world’s biggest gold mine and second-largest copper mine, the energy ministry said on Thursday (16/02).
After steep rises in commodity prices over the last decade, Indonesian politicians have for years wanted to improve deals with mining companies, many of which were made in the era of Suharto, but this is the first renegotiation since Jero Wacik became energy minister last year and announced it was a policy priority.
‘The renegotiation will be done for fairer contracts and agreements for the Indonesian national interest,’ Indonesia’s energy ministry said in a statement.
Freeport was not immediately available for comment.
Other global miners with significant operations in Indonesia include Newmont Mining Corp.
The move to renegotiate a 20-year-old contract that already accounts for 1.6 percent of Indonesia’s GDP comes in the wake of a crippling three-month workers strike late last year at Grasberg, in the remote highlands of eastern province Papua.
The mine’s production is only now recovering. The government, which owns 9 percent in the firm’s local unit Freeport Indonesia, was losing $8 million a day in taxes, revenues and dividends during the strike.
Freeport Indonesia began mining operations at the Grasberg site in 1972 and in 1988 discovered the Grasberg mine. A new contract was signed to tap its riches in 1991, with some of Indonesia’s top officials on hand at the celebration.
The Papua region’s resources have for decades partly fuelled a simmering separatist movement that wants greater local control over revenues.
For its part the national government is looking to boost investment in mining and metals processing.