Indonesia probing allegations of extortion to Freeport-McMoRan by senior officials

Indonesia probing allegations of extortion to Freeport-McMoRan by senior officials

Freeport McMoRan Copper and Gold's Grasberg mine is the world's largest gold mine and third largest copper mine.

Indonesia has began investigating claims that senior officials demanded to be granted a 20% stake in Freeport-McMoRan Indonesia in return for an extension of the parent company’s rights to operate in the country.

According to Jakarta Globe, the minister of energy and mineral resources, Sudirman Said, filed a complaint with the House of Representatives ethics committee Tuesday. In the document he alleges that the Speaker, Setya Novanto, demanded Freeport divest shares to President Joko Widodo and his vice-president, Jusuf Kalla.

Arizona-based Freeport-McMoRan (NYSE:FCX), is currently negotiating a requirement by the Indonesian government to divest 10.6% of its local unit. This, as part of a process of extending the mining contract for its giant copper and gold Grasberg mine beyond 2021.

The miner had until Oct. 14 to submit a proposal on how much the 10.6% stake in the company was worth. The government would then have 90 days to respond.

A Freeport spokesman last month said the company, the largest listed copper producer, had no issues relating to the divestment as long as it had a "legal basis and a clear mechanism". He said the company would prefer to make the divestment through an initial public offering.

This week’s scandal further complicates Freeport’s situation in Indonesia, as the company is already battling with weak commodity prices and the country’s ban on the export of unprocessed minerals.

Its Grasberg operation has long been the subject of inquiries as the company has a history of deaths and strikes involving its workers and has been accused of polluting the environment.