Freeport-McMoRan (FCX) owns the Grasberg copper and gold mine in Indonesia (EIDO). Rio Tinto (RIO) (TRQ) is Freeport-McMoRan’s partner. The Grasberg mine has been in the headlines for the last few years—mostly for negative reasons. So far, 2017 has been turbulent for Freeport’s Indonesia operations. Earlier this year, Freeport was barred from exporting copper concentrates from Indonesia for almost three months. Along with its impasse with the Indonesian government, Freeport has also been facing workforce-related issues at the plant. The issues have a negative impact on its production profile.
At the end of August, Freeport announced a framework with the Indonesian government. It raised hopes that the two sides were close to finding a middle path for their long-standing impasse. However, the framework left several key questions unanswered especially on the valuation of Grasberg operations. Read Why Freeport Investors Will Likely Postpone the Celebration for a detailed analysis of Freeport’s framework with Indonesia (EIDO).
If ongoing troubles weren’t enough, Freeport’s Indonesia operations are facing another issue. According to Reuters, “Armed separatists have occupied five villages in Indonesia’s Papua province, threatening to disrupt Freeport-McMoRan Inc’s giant Grasberg copper mine.” However, citing Riza Pratama, Freeport Indonesia spokesman, the report also adds that “so far there had been no impact on production and shipments from Grasberg, the world’s second-biggest copper mine.”
Copper markets will closely follow the developments at Grasberg in the coming weeks. The developments could impact global copper markets (GLEN-L) due to its scale of production. In the next part, we’ll look at the other key developments that copper miners should watch this week.