Indonesia Extends Freeport’s Operating Permit for Grasberg

Operations at Freeport McMoRan’s (NYSE:FCX) Grasberg copper project in Indonesia have been allowed to continue while the Indonesian government negotiates a controlling stake in the mine.

As reported by Reuters, the operational permit for the mine has been extended until the end of July after it expired at the end of June.

Operations have been under a cloud this year, following changes to environmental standards expected of the mine, which is the second-largest in the world.

Freeport is the second-largest copper producing company after Chilean state miner Codelco.

The new regulations stipulate that the majority of tailings from the mine remain on land, a change from the 50-percent requirement previously in place. In April, the company said that this would complicate negotiations regarding its divestment in the mine to the Indonesian government.

The divestment negotiations are the result of new Indonesian regulations designed to increase control over the state’s resources.

Under the new rules, Indonesian interests must have a controlling stake in operations, which means Freeport will need to give up its controlling interest to Indonesia’s PT Inalum, which currently has a 9.36-percent stake in Grasberg.

For the divestment, Freeport is negotiating to remain operator and keep the mine going to 2041—something the Indonesian government says will happen, though details are yet to be released.

According to an Indonesian government spokesperson, negotiations for the takeover could be concluded by the end of this month.

Deputy State-Owned Enterprises Minister Fajar Harry Sampurno told reporters at an event that contracts are being prepared. “You could say it’s already completed—all that’s left is the finalization of documents that need to be signed.”

To secure a 51-percent stake, Inalum will buy out Freeport’s JV partner Rio Tinto (ASX:RIO, NYSE:RIO, LSE:RIO) and will take on a further 9.36 percent-stake from Freeport.

On the New York Stock Exchange, Freeport McMoRan closed at US$17.07, down 0.52 percent.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.