Adds details throughout

By Fransiska Nangoy and Gibran Naiyyar Peshimam

JAKARTA, May 20 (Reuters) - The recovery of PT Freeport Indonesia's Grasberg gold and copper mine is taking longer than expected, but operations should approach full capacity by the end of 2027, its chief executive told Reuters on Wednesday.

The timeline for the complex - the world's second-largest copper mine and largest gold mine - has been closely watched since operations at the main site were halted last year after an accident that killed seven workers and flooded it with wet material.

"We found out that the ore at the GBC, now, because of the incident, has more water ... since the ore is going to be a lot wetter than what we thought, we have to modify the chute," Tony Wenas said in an interview at the company's Jakarta headquarters, referring to the complex's Grasberg Block Cave.

He said the modification was crucial for long-term safety. The company is also building new infrastructure to prevent a repeat of the September accident, he added.

RAMPING UP

The complex - majority-owned by Indonesia's state holding and operated by U.S.-based Freeport-McMoRan FCX.N - is now running at 50% of capacity and is expected to reach 65% later this year, Wenas said.

"In the second half next year, we are approaching full ramp up," he said, adding copper cathode output in 2027 is projected at about 1.2 billion pounds and gold at 1 million ounces.

That compares with a 2026 projection of 800 million pounds of copper cathode and 700,000 ounces of gold.

Wenas said around $20 billion has been earmarked for fresh investment in Grasberg after 2041, when Freeport Indonesia's current mining permit expires.

A memorandum of understanding to extend the permit beyond 2041 was signed this year in Washington during a trip by President Prabowo Subianto, when he met U.S. President Donald Trump.

The extension will coincide with the transfer of a further 12% stake in Freeport Indonesia to the Indonesian government, Wenas said.

AI-LED GROWTH

Wenas said copper demand was set to rise alongside global growth in artificial intelligence and related infrastructure.

"The (AI) cloud (infrastructure) will require lots of energy and energy means lots of new energy plants ... and they will require more copper," he said, adding that stable supply would support higher prices.

Grasberg is in Papua, a resource-rich region affected by an armed separatist movement since 1969.

Security has been a concern, Wenas said, citing nearly 100 attacks on Freeport personnel since 2002.

After six years without incidents, there has been a fresh flare-up, with two Freeport employees killed in separate incidents in February and March.

Wenas said the company was in close contact with the military and police to address the situation.