Freeport-McMoRan’s Will-She-Won’t-She Moment with Indonesia

Freeport-McMoRan (FCX) owns the Grasberg copper and gold mine in Indonesia (EIDO). Rio Tinto (RIO) is Freeport’s partner in the mine. RIO also owns the Oyo Tolgoi mine in Mongolia through its subsidiary Turquoise Hill Resources (TRQ).

The Grasberg mine has been in the headlines for the past couple of years, mostly for negative reasons. As of February 12, 2017, Freeport-McMoRan is barred from exporting copper ore from the Grasberg mine. Although a Reuters report suggested that Freeport has received a new mining permit, it was soon followed by news that “an export ban remains in place.”

The Grasberg issue dominated management’s commentary during Freeport-McMoRan’s 4Q16 earnings call. To find out more about the company’s 4Q16 financial results, you can read Why the Market Gave a Thumbs Down to Freeport’s 4Q16 Earnings.

Indonesia is among the world’s major copper producers. According to the International Copper Study Group (or ICSG), Indonesia was the 13th largest mined copper producer in 2014. The ICSG lists the Grasberg mine as the world’s second-largest copper mine by capacity on the basis of 2015 data. BHP Billiton’s (BHP) Escondida is the largest copper mine globally. It’s important to note that the Escondida mine is facing a labor strike.

This is not the first time that Freeport-McMoRan’s Indonesia issues have been in the headlines. In this series, we’ll take a closer look at the issues it has faced there in the last three years. We’ll also see why the Grasberg mine is so crucial for Freeport.