Indonesia agrees new Grasberg mine deal with PT Freeport

Written by Chris Chancellor

Permit extension until 2041 in the pipeline for one of largest gold and copper reserves in the world.

The Indonesian government seems to have settled negotiations with PT Freeport Indonesia over the extension of permits for exploitation of the Grasberg mine site, located in the province of Papua. The company, a subsidiary of US mining giants Freeport-McMoRan, have conducted mining operations in the area since the 1960s, when they negotiated a highly controversial deal with the dictatorial government led by President Suharto. The current deal was set to end in 2021, although it seems that an extension until 2041 has now been hammered out.

Negotiations had faltered at various stages, with contrasting information emerging from the various entities involved. At one point it appeared that an agreement was not likely at all, with Indonesia demanding that PT Freeport divest 51% of its shares to Indonesian state-owned enterprises (SOEs). However, the company has agreed to compromise due to the value it sees in underground mining operations on the site.

The willingness of corporate giants Freeport, based in Arizona, to compromise on the divestment regulation might be seen as a victory for Indonesian resource sovereignty and national development. Indeed SOEs will now enjoy a significantly larger slice of the pie. But to what extent will local peoples see the benefits?


The agreement comes after a lengthy dispute between the Indonesian state and the corporation over revised mining rules in the country. Amongst other new criterion, the new rules stipulate that mining companies must divest 51% of their shares to Indonesian SOEs. PT Freeport contested the new terms and demanded that the rights of their previous agreement be upheld.

The argument led to a 4 month hiatus in PT Freeport’s copper concentrate exports from the site. It is estimated that up to 10% of the work force was laid off during this period, prompting mass strikes by mine labourers and other employees.

However, the new deal, once made official, will essentially mean that two more 10 year extensions are granted. This will hand PT Freeport extraction and export rights until 2041, when it is thought the mine will be fully depleted. It is not known what will become of the the ongoing labour issue on site as a result of this agreement.


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