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Freeport-McMoRan Inc.’s (NYSE: FCX) PT Freeport-Indonesia (PT-FI) subsidiary has failed to reach an agreement with the government of Indonesia regarding the termination of Freeport’s contract and conversion of the contract to a special license that would allow the company to export its copper concentrate from its giant Grasberg mine.

According to the company’s press announcement, PT-FI has told the government that enforcing this regulation on PT-FI violates its contract and that it is unwilling to terminate its contract unless replaced by a mutually acceptable form of agreement providing fiscal and legal assurances to support its long-term investment plans in Papua, Indonesia.

Because the company is unable to export its concentrates it is implementing its plan to suspend investment in Papua, reducing its production by about 60% and preparing to introduce cost savings plans that will include “significant reductions in its work force and spending levels with local suppliers.”

Freeport estimates that the Grasberg mine holds 25.8 million ounces of gold and 26.9 billion pounds of copper. Measured by reserves, the mine has the largest gold reserves in the world and the third-largest copper reserves.

Freeport CEO Richard Adkerson said:

Despite extensive efforts to reach an agreement with the Government, we have been unsuccessful in achieving a resolution that would avoid the negative impacts for all stakeholders, especially for our workforce and the local economy. We are simply asking the Government to honor our legally binding Contract. We urge the Government to honor the Contract and demonstrate that the Country remains open for foreign investment. This would be in the best interests of all stakeholders, including the Government of Indonesia, our large work force, the local community, local suppliers and Freeport’s shareholders.

The company’s first-quarter sales will drop by 170 million pounds of copper and 270,000 ounces of gold, a reduction of 17% in copper sales and 59% in gold sales. For each month of delay in receiving export approval, PT-FI share of production is expected to fall by 70 million pounds of copper and 70,000 ounces of gold.

Freeport owns a stake of about 91% in PT-FI and the Indonesian government owns the rest. Another mining giant, Rio Tinto PLC (NYSE: RIO) owns a minority stake of 40% in Grasberg’s production and Freeport owns 60%. Rio’s portion does not kick in until production reaches a certain level, but that level has not been reached in either 2015 or 2016. Rio was supposed to begin receiving 40% of production in 2021, but that has been delayed until at least 2023 due to the interruption to operations.

Freeport’s stock traded down about 5.6% Tuesday morning, at $14.08 in a 52-week range of $6.55 to $14.60. The 12-month consensus price target on the stock is $14.63.