Has mining giant Freeport had enough with Indonesia?

After years of skirmishing with the Indonesian government, American mining giant Freeport McMoRan Copper & Gold has finally issued a 120-day ultimatum, saying it will go to arbitration over violations to the Contract of Work (CoW) it signed with President Suharto’s New Order regime 26 years ago.

Drawing a line in the sand, Freeport McMoRan CEO Richard Adkerson told Mines and Energy Minister Ignasius Jonan during a torrid February 12 meeting that the firm would not budge from the sanctity of its contract, which doesn’t expire until 2021.

Five days later, Freeport sent a formal letter of intent to Jonan, which was passed on to President Joko Widodo. “This is the end game,” said one Freeport insider. “The ‘A’ [arbitration] word has been tabled and it’s now a countdown.”

Riding an unprecedented wave of economic nationalism, officials say there will be no going back from a value-added mining policy that, for all its good intentions, has decimated exploration and will make it uneconomic for even small Indonesian players to develop new mineral deposits.

Freeport, the country’s largest taxpayer and biggest employer, was always going to be the test case, but how it came down to this has mining executives shaking their heads, unable to understand why the two sides can’t come to a win-win solution.

Under the 2009 Mining Law and subsequent regulations, the government requires Freeport to convert its Contract of Work (CoW) to a Special Business Licence (IUPK), construct a US$2.7 billion smelter and divest the majority shares of its Indonesian subsidiary.