Rather than simply extend its old contract, Indonesia bought a majority stake, moved the mine to a licence regime, and tied the extension to processing at home.
Key facts
| Chapter | What Indonesia did |
|---|---|
| 3. State stake | 21 December 2018: state-owned Inalum paid Freeport-McMoRan and Rio Tinto US$3.85 billion, raising its stake in PT Freeport Indonesia from 9.36% to 51.23% (ESDM) |
| 7. Regional share | 10% of the 51.23% goes to Papua; Inalum lent the regional company US$819 million to buy it, repaid from dividends (ESDM) |
| 1, 4. Contract → licence | The Contract of Work dating from 1967 was replaced by an IUPK special licence, extended by 2 × 10 years to 2041 (ESDM) |
| 8. In-country processing | An obligation to build a smelter within five years (ESDM); the Manyar smelter in Gresik was substantially complete in June 2024 and began commissioning (Freeport) |
| 3. Further stake | The government plans to raise its stake to 61% if the licence is extended beyond 2041 (Indonesia Business Post) |
| Results | US$4.3 billion paid to the state in 2025; expected to fall to US$2.6 billion in 2026 after the Grasberg landslide, then reach US$4.7 billion in 2027 (including US$1.9 billion in dividends) (Investortrust) |
What Mongolia can copy
- Tie extensions and new licences to time-bound obligations for in-country processing (smelting, refining).
- Give the host region (aimag, soum) its own stake, financed from dividends.
What doesn't transfer directly
- Indonesia paid US$3.85 billion in cash for its 51%; without that money, Mongolia buying a stake on credit would repeat Oyu Tolgoi's mistake.
- Smelters are expensive; Mongolia would need to plan for power, water and transport first.
This profile is part of the report Fair Contracts, Fair Returns and focuses on chapters 3–5 of the 12-chapter template. Research on the other chapters is in progress.