Both Freeport-McMoRan (NYSE:FCX) and Newmont Mining (NYSE:NEM) face the problem of exporting copper concentrate from Indonesia after the country imposed a controversial 25% tax on exports back in January. While the problem is the same, the companies' approaches to a solution differ dramatically. Newmont Mining has chosen the hard approach by suspending copper concentrate production at Batu Hijau and declaring force majeure. Freeport-McMoRan, on the other hand, has been very gentle in rhetoric about the crisis and stated multiple times that it hopes the solution will be found soon. Why do the tactics of the two companies differ that much?

There's more risk for Freeport-McMoRan than for Newmont Mining
According to the latest Freeport-McMoRan annual report, Indonesia holds 27% of the company's proven and probable copper reserves. What's more, 95% of Freeport-McMoRan's gold reserves and 37% of the company's silver reserves are there as well. The company predicts that Indonesia will account for 20% of its total EBITDA this year. Freeport-McMoRan's key asset in the country is the huge Grasberg mine. Rio Tinto (NYSE:RIO) holds interest in the mine as well.

Obviously, Indonesian assets are extremely valuable for Freeport-McMoRan. For Newmont Mining, the country is less important. Newmont Mining gets the majority of its revenue from Australia and the U.S.  Indonesia's share of Newmont's revenue mix declined from 15% in 2011 to just 6% in 2013. That's why Newmont Mining could afford a harder approach in the Indonesian crisis – the company has less to lose than Freeport-McMoRan.

Freeport-McMoRan has big plans for Grasberg mine
After 2016, Freeport-McMoRan will transition the mine to underground operations. This transition will require additional investment. Prior to this transition, Freeport-McMoRan expects to grow copper sales from 4.3 billion pounds in 2014 to as much as 5.7 billion pounds in 2016. Rio Tinto is also interested in the solution to this problem, as the company has rights for 40% of total production from the mine starting after 2021. With all that in mind, Freeport-McMoRan is trying to be delicate and does not make rough moves like Newmont Mining. The undertaking of big projects needs good relations with local authorities.

The stance that Indonesian government has taken has not been very constructive, however. The country wants to force miners to build smelters within Indonesia, but as yet it does not provide positive incentives to do that. The copper concentrate export tax, together with proposed submissions of cash deposits for the smelters, does not paint a good picture for investment in the country.

Interestingly, Newmont Mining's move clearly benefits Freeport-McMoRan. With the help of Newmont Mining, Freeport-McMoRan could see whether the government can be pushed to find an amicable solution through the use of rougher methods. How rough are Newmont Mining's methods? The company placed 3,200 workers on leave with reduced pay on June 6. That's a good number of people to be reckoned with, keeping in mind that Indonesian presidential elections will take place in July.

Bottom line
Newmont Mining's decision to suspend copper production in Indonesia is likely to put pressure on government officials to reach an acceptable solution as soon as possible. Until then, it's clear that both Freeport-McMoRan's and Newmont Mining's full-year sales targets are in question. Most likely, both companies will issue revised estimates when they report their second quarter earnings.