Shareholders tell miner Freeport to get tough with Indonesia

(Adds CEO comments, details of dispute, shareholder information)

By Nicole Mordant

HOLLYWOOD, Fla., Feb 27 (Reuters) - Shareholders are pressuring miner Freeport-McMoRan Inc to stand up to the Indonesian government over changes the Southeast Asian country wants to make in the U.S. miner's contract, Freeport's chief executive officer said on Monday.

Rio Tinto Plc (LSE: RIO.L - news) , which is a partner in Freeport's massive Grasberg copper and gold mine in Indonesia, is also supportive of Freeport's tougher approach toward Jakarta, CEO Richard Adkerson said.

In some of his strongest language yet on the issue, Adkerson said the new regulations sought by Indonesia were "in effect a form of expropriation of our assets and we are resisting it aggressively."

"Many of our shareholders feel that we have been too nice. Now (Frankfurt: 11N.F - news) we are in the position of standing up for our rights under the contract," Adkerson told a mining conference of institutional investors in Hollywood, Florida.

He said Freeport had held talks with large shareholders but did not name them. Freeport's third-biggest shareholder is activist investor Carl Icahn, who holds around 7 percent of its shares. Icahn has been appointed a special adviser to U.S. President Donald Trump.

Freeport, the world's biggest publicly listed copper producer, warned last week it could take the Indonesian government to arbitration and seek damages over a contractual dispute that has halted operations and exports at Grasberg, the world's second-biggest copper mine.

The dispute, which centers around the sanctity of Freeport's 30-year mining contract, comes as the Indonesian government seeks to squeeze more revenue out of the mining industry by shaking up regulations over foreign ownership and ore processing.

The two sides have 120 days to settle their differences before heading to arbitration. "The polite approach that we have had in the past, if we go to arbitration, is going to be replaced with tough lawyers," Adkerson said.

He added that he hoped the dispute could be resolved cooperatively although the Indonesian government has so far "responded aggressively through ministers."

Freeport's inability to export copper since mid-January, coupled with a strike at BHP Billiton (NYSE: BBL - news) 's Escondida in Chile (Stuttgart: 704599.SG - news) , the world's biggest copper mine, has pushed copper prices to 20-month highs of $6,204 a tonne on the London Metal Exchange this month.

In the face of the export halt, Freeport last week said it was proceeding with its plan to reduce production at Grasberg by about 60 percent, make significant cuts to its workforce and suspend investments in the province of Papua.

(Editing by Jeffrey Benkoe and Matthew Lewis)