Freeport’s Indonesia Issues: Plot Thickens amid Layoffs

Issues in Indonesia 

Freeport-McMoRan (FCX) owns the large Grasberg copper mine in Indonesia along with its minority partner Rio Tinto (RIO). The Grasberg mine is a key driver of Freeport’s copper shipments and the company’s consolidated profitability. The mine has low-cost operations. Under normal circumstances, the mine should have been a strategic asset for the company.

Freeport’s Indonesia Issues: Plot Thickens amid Layoffs

Long impasse

However, the mine has been in the news for the last few quarters. Generally, the news hasn’t been good for Freeport. While Freeport has faced issues in Indonesia in the past, we’ll look at some of the recent issues. Earlier this year, Freeport’s Indonesia export permit expired. The permit wasn’t immediately renewed like in previous instances because the Indonesian government was revising its mining rules (BHP) (GLNCY).

After more than three months of a copper concentrate ban, Freeport got a reprieve when the Indonesian government granted the company a six-month export permit. While the export permit meant that Freeport was officially allowed to export copper concentrates from Indonesia (EIDO), the company’s operations were hit by a labor action. Notably, labor issues at the Grasberg mine aren’t new for Freeport. Last year, the company faced labor issues, which had a negative impact on its production profile.

Series overview

According to a Bloomberg report, Freeport has fired 3,000 workers from its Grasberg mine. In this series, we’ll discuss the various strategic paths that Freeport could pursue in Indonesia. We’ll also see how the strategic paths could impact the company.

Meanwhile, supply-side issues from mines including Grasberg seem to have impacted Chinese copper imports. We’ll discuss this more in the next part.