JAKARTA, May 4 (Reuters) - Indonesian authorities on Thursday kicked off negotiations with Freeport McMoran Inc. over a contract dispute that has prompted the U.S. mining giant to scale down operations in the eastern province of Papua.
CEO Richard Adkerson met with mining ministry officials in Jakarta to start talks over a range of disagreements including legal assurances over investments beyond 2021, tax rates, and a government requirement for Freeport to divest a 51 percent stake in its local operations.
“We have work to do, issues to discuss, but we’re all going in this with goodwill and optimism about reaching a win-win situation,” Adkerson told reporters after meeting with mining minister Ignasius Jonan and other officials from the central and Papua provincial government.
“For Freeport, the key issue is having assurance about our ability to operate,” he added.
Teguh Pamuji, secretary general at the mining ministry, said the negotiations would focus on fiscal certainty, taxes and royalties, divestments, and the development of smelters.
The dispute arose after Indonesia revised its mining rules in January, which brought Freeport’s copper concentrate exports to a halt and led to the company scaling back operations and temporarily laying off thousands of workers in the impoverished Papua province.
To comply with the new rules, Freeport and other miners are required to convert their original contracts of work to a special contract. Freeport, which argues this requirement and others violate its existing contract, has threatened arbitration.
But both sides have recently softened their tone, saying instead that arbitration is a last resort.
“So long as we’re progressing to (a) ... mutually acceptable resolution, there would be no arbitration,” Adkerson said.
Freeport was last month granted an export permit valid until February 2018, allowing it to resume export shipments until at least October 2017, pending further negotiations. The move came after U.S. Vice President Mike Pence visited the Southeast Asian nation.
A Freeport workers’ union started a month-long strike on May 1 aimed at ending the company’s layoffs and furlough policy. (Reporting by Wilda Asmarini; Editing by Mark Potter)