(Adds quotes, recasts)
By Wilda Asmarini
JAKARTA, April 5 Indonesia is trying a new
approach to ease a deadlock over mining rights, promising to
allow Freeport McMoRan Inc to resume concentrate exports
from its Grasberg mine, the world's second-biggest copper mine.
Indonesia and Freeport have sparred over rights to mine
Grasberg, new taxes, royalties and divestment rules, as well as
stipulations that the U.S. miner build a second smelter, moves
Indonesia hopes will increase its returns from the sector.
The impasse has halted Grasberg's concentrate exports for 12
weeks, since Indonesia first announced the new rules.
But after both sides initially dug in, the tone has shifted
markedly in recent weeks. Indonesia's Secretary General for the
Energy Ministry, Teguh Pamuji, announced on Tuesday that
Freeport would receive a temporary "special mining permit" in a
plan to allow Freeport's operations to continue and exports to
resume while discussions on longer-term issues continued.
The change has boosted Freeport's shares on Wall Street, but
some analysts have questioned the legal basis of the temporary
permit and said the two sides may be kicking the can down the
With the temporary permit, and provided it commits to
building a second smelter, "Freeport can export concentrate and
pay an export duty," Pamuji told reporters. The permit will be
valid for the next six months, during which the two sides will
aim to finalise agreements on investment stability, divestment
and domestic smelting, among other issues, Pamuji said.
Freeport's shares rose 2 percent to $13.54 in New York.
"A resumption of exports would be a significant positive for
Freeport in the near-term and would make us more optimistic
about an eventual agreement over the more difficult longer-term
issues," Jefferies analyst Chris LaFemina said in a client note.
Indonesia stopped miners from exporting mineral concentrates
on Jan. 12 under the rules that required Freeport to adopt a new
mining permit before resuming shipments.
Freeport has insisted that any new permit must have the same
fiscal and legal guarantees as those in its 30-year mining
contract, and warned if the matter was not resolved by June 17
it could go to arbitration.
"SMOKE AND MIRRORS"
The dispute has fanned nationalist fervour in Indonesia with
newspaper headlines calling for Freeport to be "kicked out of
Papua," where Grasberg is located. In January, Mining Minister
Ignasius Jonan said "we do not negotiate" and that Freeport
should follow regulations.
As tensions escalated, Freeport Chief Executive Richard
Adkerson said Indonesian ministers had been "aggressive" and
that the new regulations were "in effect a form of
U.S. Vice President Mike Pence is due to visit Jakarta this
month and the Grasberg dispute is expected to be raised.
Indonesian Vice President Jusuf Kalla said last week in an
interview there was no political pressure and that this was
"normal" in business, but warned Washington against politicising
the Freeport issues.
"The important thing is that Freeport's immediate operations
will be extended," he said.
Jakarta-based foreign legal counsel Bill Sullivan described
the government approach as a "smoke and mirrors strategy", on
the one hand appearing to retain a tough stance on miners for a
domestic audience, while being careful to allow them enough room
to continue commercial operations.
An earlier recommendation for Freeport to export up to 1.1
million tonnes of concentrate until February 2018 would still
apply, but the company still needs an export permit from the
Trade Ministry, said Director General of Coal and Minerals
Bambang Gatot at the briefing with Pamuji.
A spokesman for Freeport Indonesia said on Tuesday the
company was in the process of finalising its application for an
export permit "so that exports can resume immediately".
(Additional reporting by Fergus Jensen and Kanupriya Kapoor in
Jakarta and Nicole Mordant in Vancouver; Writing by Fergus
Jensen and Ed Davies; Editing by Dan Grebler and Christian