Indonesia to Renew Mine Contract Extensions Earlier than Two Years

In a surprise move, Indonesia will begin allowing mining companies to renew mine contracts earlier than two years before expiration, a move that greatly favors US-based Freeport-McMoRan Copper & Gold Inc.

According to the mines minister, new regulations on contract extensions would be linked to a mining company’s smelter plans. Southeast Asia’s largest economy also indicated that it could ease a planned 2017 export ban on copper and other mineral concentrates.

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"The government regulation for extension proposals that regulates a minimum of two years before a contract expires will be revised," Sudirman Said, Indonesia's energy and mineral resources minister.

Under the country’s current rule, miners operating in Indonesia can only apply for a contract extension two years before the agreement is due to end.

Freeport currently operates the Grasberg mine, the world’s largest gold mine and world’s second-largest copper mine when at full production. The company has for years been seeking contract certainty before investing more than $15 billion after 2016.   

The firm’s current deal is set to expire in 2021 but a government decision on an extension would be reached before July 25 of this year. Government officials previously stated Freeport could only renew its 2021 deal in 2019 at the earliest.

The government’s willingness to work with mining companies comes only after Freeport-McMoRan moved ahead with expansion plans at its copper smelter at Gresik and gave its support to a government-backed industrial zone in Papua.

Last year, Freeport and Indonesia agreed on a Memorandum of Understanding (MoU) with the Indonesian government over its contract renegotiations.