FCX Freeport McMoRan Inc

By Sara Schonhardt

JAKARTA--Freeport-McMoRan Inc. (FCX) said it was considering commencing arbitration if it cannot resolve its contract dispute with the Indonesian government in the next 120 days.

The mining company has submitted to Jakarta descriptions of breaches and violations of its long-term contract of work with the government, Freeport said Monday.

The U.S. company said it was committed to complying with Indonesian law and to continuing negotiations with the government. Freeport's latest measure is part of a dispute-resolution process specified in the company's 1991 contract of work.

Chief Executive Richard Adkerson said Freeport wasn't trying to "dictate" to the government and was prepared to cooperate with whatever Jakarta decides to do.

"We have sought to compromise with the government and we will continue to work in good faith to reach a compromise," Mr. Adkerson told reporters at a briefing in Jakarta.

To make the needed investments in the company's mining operations and new smelting facilities required by the government, "we must have long-term certainty about our operating rights," he said.

Freeport is pursuing plans to invest an additional $15 billion in its Grasberg mine, the largest producer of copper in Indonesia.

The company stopped exports of copper concentrate from Indonesia after the government announced new mining rules on Jan. 12. Those rules allow for the continued export of some semiprocessed minerals until 2022 as long as companies agree to new operating rights, commit to building smelting facilities within five years and agree to pay export duties set by the government.

Freeport has said it would agree to new operating rights as long as they provided the same level of legal and fiscal certainty outlined in its long-term contract of work. However, the two sides have been locked in negotiations, preventing Freeport from obtaining a permit needed to restart exports.

The Ministry of Energy and Minerals said Friday it had issued a yearlong export permit to Freeport based on new operating rights it said it approved on Feb. 10. Mr. Adkerson said the company hasn't accepted the terms of either license since they are based on the condition that it forfeit its contract of work.

A strike at the sole smelting facility where Freeport processes around 40% of its output has added to production woes. Unable to move copper concentrate offsite to be processed for export, Freeport was forced to stopped production at Grasberg and declare force majeure earlier this month.

The company has warned of further severe cuts to investment and capital expenditures needed to keep the business financially viable.

Last week, Freeport cut 10% of its expatriate workforce and the company plans to begin cutting contract workers who account for around 20,000 of its 32,000 total employees in the Papua region, Mr. Adkerson said.

On Saturday, Chappy Hakim resigned as chief executive of Freeport Indonesia, citing the position's "extraordinary" time commitment. No immediate replacement has been named.

Write to Sara Schonhardt at sara.schonhardt@wsj.com

(END) Dow Jones Newswires

February 20, 2017 00:59 ET (05:59 GMT)

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