Freeport warns of arbitration as Indonesia mining dispute escalates

Mon Feb 20, 2017 10:18am EST
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By Fergus Jensen and Wilda Asmarini

JAKARTA (Reuters) - U.S. mining giant Freeport-McMoRan Inc (FCX.N: Quote) warned on Monday it could take the Indonesian government to arbitration and seek damages over a contractual dispute that has halted operations at the world's second-biggest copper mine.

In an escalation of the dispute, Freeport Chief Executive Richard Adkerson also said the company's local unit had made its first layoffs since negotiations started in January over a new mining permit, and it may let go more workers this week.

The row, which centers around the sanctity of Freeport's 30-year mining contract, comes as Indonesia seeks to squeeze more revenue out of its mining industry through a shake-up of regulations over foreign ownership and ore processing.

"Right now we are at an impasse with the government," Adkerson told a news conference in Jakarta.

Freeport has been at loggerheads with Indonesia over the terms of a special mining permit to replace its contract of work, after halting its exports of copper concentrate due to the new mining rules.

On Friday, the miner said it could not meet contractual obligations for copper concentrate shipments from the mine following a five-week export stoppage. Last week, all work was stopped at Freeport's giant Grasberg mine in the eastern Indonesian province of Papua.

Assuming the export ban continues and operations resume at a local smelter in March, Freeport estimated its first-quarter sales would be reduced by around 170 million pounds of copper and 270,000 ounces of gold. That is equal to a reduction of some 17 percent in Freeport's total first-quarter copper sales and 59 percent in gold sales, the company said in a statement later on Monday.

The Gresik smelter was forced to halt operations on Jan. 19 because of a labor strike.   Continued...

Freeport Indonesia spokesman Riza Pratama speaks during a news conference in Jakarta, Indonesia, February 20, 2017. REUTERS/Beawiharta