Freeport’s controversial copper mine in Papua, Indonesia. Source: Wikimedia
Chappy Hakim, the chief executive of mining giant Freeport-McMoran in Indonesia, has stepped down after the parent firm declared force majeure on copper concentrate shipments from its Grasberg mine in the eastern province of Papua.
Grasberg was expected to produce 800,000 tonnes of copper this year, making up about 3.5 per cent of global supply, Jefferies analyst Chris LaFemina said.
Freeport, which has been in talks with Jakarta after halting exports due to new mining rules, said it could not meet contractual obligations for copper concentrate shipments following a five-week export stoppage.
All work had stopped at the site, the world’s second largest copper mine, a union leader announced.
Copper prices, which have surged to 20-month highs after supply worries, fell to US$5,960 a tonne on Friday on profit taking. But strong demand from China and supply disruptions are expected to boost prices in the weeks to come.
Hakim had only been in the job for a few months and was appointed because it was hoped he could use his political connections to help resolve the firm’s challenges.
“I have decided it is in the best interests of [Freeport] and my family to step down from my duties as president director while continuing to support the company in an advisory role,” the former air force chief announced.
Under last month’s changes to the mining rules, Freeport had to switch from a contract of work to a special mining permit before applying for an export permit.
It required Freeport to pay taxes and royalties and divest up to 51 per cent of its Indonesian operations, an increase from a previously set 30 per cent. It has currently divested just 9.4 per cent.
Freeport has repeatedly said it would not agree to the contract conversion unless the authorities provided assurance of long-term investment stability, consisting of fiscal and legal certainty, in accordance with its contracts of works signed in 1991.
Freeport-McMoRan CEO Richard Adkerson said: “We understand that this was a difficult decision for Pak Chappy to make. We appreciate his service to our company and his support. We look forward to his continued advice and counsel.”
Chappy, appointed in November, replaced retired air vice marshall Maroef Sjamsoeddin as president director.