What happened?
Amid a bribery scandal involving officials at the highest levels of the Jakarta government and uncertainty over whether the state should seize the massive Grasberg copper and gold mine, Maroef Sjamsuddin, the CEO of Freeport McMoRan's (FCX -1.96%) Indonesian unit has abruptly resigned his position for "personal reasons."
Does it matter?
Copper and gold miner Freeport McMoRan has been involved in a tussle with the Indonesian government for several years as Jakarta tries to extract more lucrative terms and a piece of the action at the Grasberg mine. Newmont Mining (NEM 0.67%), which has its own profitable operations in the country, has also run into conflict with the government.
It's a drama being played in many Third World and emerging nations, where indigenous populations believe First World miners have taken advantage of them and are now attempting to change the rules mid-game.
As metals markets boomed and commodity prices soared, countries rich in natural resources sought to grab a bigger piece of the pie. All across South America, for example, gold miners such as Barrick Gold, Kinross Gold, Yamana Gold, and even Newmont suddenly ran into roadblocks as permits to operate were held up until the new demands were met.
Both Freeport and Newmont have been operating under long-standing contracts of work in Indonesia that laid the ground rules for their operations while also protecting them from attempts at extracting higher taxes from them. That is, until Jakarta wanted to boost the domestic ore processing industry and held miners hostage to its demands they process ore in-country before shipping it elsewhere. The problem was that Indonesia's infrastructure was unable to support the output of the miners.
While Freeport and Newmont clashed with the government, state officials were recorded by Freeport Indonesia CEO Maroef Sjamsuddin trying to extort bribes in exchange for getting permits to operate. The scandal broke open late last year when he testified and had the tapes played in court. Indonesia's parliament speaker subsequently resigned his post in the aftermath.
Sjamsuddin's presence might have been a source of contention as Freeport continues to work out its differences with the government, coming so soon after the miner's U.S. boss resigned his post, suggesting that Freeport McMoRan may still be roiled in turmoil for some time to come.
