AFTER a prolonged period of negotiations and open conflict with the Indonesian government, American mining giant PT Freeport Indonesia has agreed to meet the requirements of new legislation.
Legislation introduced in January requires Freeport to convert its business contract into a special mining licence, dictating the company must divest 51 percent of shares in its local subsidiary within a decade and build a new US$2 billion smelter.
Indonesian Energy and Mineral Resources Minister Ignasius Jonan told a parliamentary committee on Thursday that Freeport has finally agreed to allow its contract to be converted into a newly-regulated special mining permit.
The company, which owns world’s largest gold and second-largest copper mine, had previously said it would refuse to meet the Indonesian government’s demands. This would have seen Indonesia’s longest-running international investor pull out after more than four decades.
“The company and Indonesian government have reached the negotiations final stage,” said Jonan.
The news saw Freeport’s share price increase by more than 6 percent, after a marked shift in tone from Indonesia.
Responding to concerns about the company’s staff who had been laid off during the prolonged negotiation period because of a shutdown at the mine, the minister said Freeport had only 4 percent of its 12,000 workers.
“Similar to other companies, Freeport hires and fires its employees,” he said.
The decision means Freeport will be allowed, at least temporarily, to resume copper concentrate exports.
Indonesia banned foreign mining companies from shipping copper concentrate in January as part of a push to develop its local smelter industry and nationalise income from the country’s rich national resources.
“Ultimately, both sides have a tremendous incentive to find a resolution, but it seems like there are still significant hurdles,” said Jefferies analyst Chris LaFemina.
“It’s not clear to me that those long-term issues are any closer to being resolved.”