Freeport Indonesia to Seek Arbitration If Dispute Unresolved in Next Four Months


FEBRUARY 20, 2017

Jakarta. Freeport Indonesia, the local unit of US mining giant Freeport-McMoRan, will take the Indonesian government to the arbitration court unless their contract dispute is resolved in the next four months, its top executive said on Monday (20/02).

"Right now, we're at an impasse with the [Indonesian] government," Richard Adkerson, Freeport-McMoRan president and chief executive, said in Jakarta.

According to Adkerson, Freeport had sent a letter to the Energy and Resources Minister Ignasius Jonan last Friday, which also began a period of 120 days that Freeport and the Indonesian government have to resolve the dispute.

"At the end of that period, if the dispute is still not resolved, Freeport reserves the right to commence arbitration," he said.

Problems began when the Indonesian government sought to boost the country's smelter industry by changing its mining law, which in turn affected the terms of Freeport's 30-year mining contract signed in 1991.

The Indonesian government had banned copper concentrate export since Jan. 12, a move that will greatly impact Freeport Indonesia's operation. The company will be allowed to export again if they forfeit the 1991 contract of work, known as KK.

"We've had to shut down significant parts of our operations because there's no place to store or ship the concentrate," Adkerson said.

Minister Jonan said separately that companies with a contract of work can continue operating as long as they agree to build smelters, otherwise they need to give up their KK and apply for a special mining permit (IUPK), which needs to be renewed every five years.

"If [Freeport Indonesia] doesn't accept these terms, please, take it to arbitration [court]," he added.

Topman resigned

On top of the tough negotiation with the government, Freeport Indonesia also lost its president director Chappy Hakim, who unexpectedly resigned last Friday.

Adkerson played down rumors surrounding Chappy's resignation, saying that a job in the mining industry is indeed "a tough job."

"It's tremendously time-consuming and there's going to be — always — issues to deal with and we certainly have our issues but I strongly said that nothing went wrong," he added.

Adkerson said the company is now assessing its next steps, which include finding an immediate replacement for Chappy. Freeport Indonesia will announce the new top man as soon as the decision has been made.