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American Mining Company Suspends Work in Dispute with Indonesia

Richard C. Adkerson (R) Director President and Chief Executive Officer (CEO) of Freeport-McMoran Inc and former CEO of PT. Freeport Indonesia Chappy Hakim (L) pose for photographers after a press conference in Jakarta, Feb. 20, 2017.
American Mining Company Suspends Work in Dispute with Indonesia
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An American mining company has suspended work at the world’s largest gold mine in West Papua, New Guinea in a dispute with the Indonesian government.

Indonesia wants changes to the mining company Freeport-McMoRan’s business. It also wants a majority ownership share to go to Indonesians.

The company chief says Indonesia is breaking its contract in seeking the changes. And the company may seek arbitration in the case and bring a legal case against the government.

Freeport-MacMoRan is based in Phoenix, Arizona. Besides operating the world’s largest gold mine, it also mines copper and other minerals in the Indonesian territory.

The Grasberg mining operation is operated by Freeport-McMoRan, in Indonesia's Papua province. July 2005 file photo.
The Grasberg mining operation is operated by Freeport-McMoRan, in Indonesia's Papua province. July 2005 file photo.

The company employs about 32,000 people in Indonesia. It has laid off 10 percent of its foreign workforce. Observers in Indonesia are concerned that the dispute will severely harm the local economy, which is dependent on mining.

Concerns about the local situation are rising

West Papua has long been a troubled territory in Indonesia. It has an independence movement that has been forcibly suppressed by military action.

Mining is the main economic activity of the area.

One local newspaper editor notes that Freeport-McMoRan also provides social services to the area. Octovianus Danunan of the Radar Timika says, “Freeport runs two hospitals here, gives hundreds of scholarships to local students, and of course, provides jobs to thousands of Papuans.”

John Gobai is a member of the Papua parliament. He said, “These layoffs have eliminated the livelihoods of a lot of people.” He says people native to the area are suffering.

Reports from the company say 36 percent of the full-time employees in the area are native Papuans.

Andreas Harsono is a researcher with the activist group Human Rights Watch. He says Timika, where the mining facility is, is a wild area. He says violence is a possibility.

Contract of work disputed

The Indonesian government wants changes to a 30-year contract signed in 1991. The contract was signed when Suharto, a military ruler, was the president. However, relations between the government and Freeport-McMoRan have cooled under democratically elected presidents.

In 2009, the government passed a mining law requiring the company to build a $2.9 billion smelter. The facility would melt down metal ore to increase the value of exported materials. The country also wants a majority of the shares in the company to go to Indonesian ownership within 10 years.

Indonesian officials have increased pressure on the company to change its contract to a “Special Business License” under the 2009 law. Mines and Energy Minister Ignasius Jonan has led the effort.

The contract is set to end in 2021. However, the government has passed rules in January and February increasing pressure on the company, according to a company press release.

The Indonesian Ministry of Energy and Mineral Resources could not be reached for comment on the issue.

The chief executive officer of the company, Richard Adkerson, has told Reuters news service that Freeport-McMoRan is committed to remaining in Indonesia. He notes that one third of West Papua’s economy comes from the Grasberg mine.

Both sides face large financial losses because of the dispute. Indonesia appears committed to the changes it is seeking.

During the dispute, Papua parliament member John Gobai says the government must do something for the local people.

“What the government really needs to think about is what compensation they can give the layoff victims in the present. These people are employees, but they are also citizens,” Gobai said.

I’m Mario Ritter.

Krithika Varagur reported this story for VOA News. Mario Ritter adapted it for VOA Learning English. Hai Do was the editor.


Words in This Story

arbitration –n. the process of seeking judgement from a third party in a dispute between two sides

smelter –n. a facility used to melt down and remove impurities from metal ores

ore –n. rock that contains high concentrations of metal

license –n. a document that gives official permission to do some activity

compensation –n. something provided to make up for damage or trouble

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