Indonesia and Freeport agree on copper ore exports and contract extension

7 July 2014 (Last Updated July 7th, 2014 18:30)

Indonesia has agreed to renegotiate mining contracts with Freeport-McMoRan Copper & Gold, in an effort to end the six-month impasse over copper ore export restrictions in the country.

FMCG

Indonesia has agreed to renegotiate mining contracts with Freeport-McMoRan Copper & Gold, in an effort to end the six-month impasse over copper ore export restrictions in the country.

The dispute began in January when Indonesia imposed a copper ore export ban and introduced a progressive tax on concentrates, to make the mining companies build smelters and processing plants in the country.

As per the new law, the mining companies are required to pay export tax of up to 60% by the second half of 2016, while the concentrate exports will be totally banned in 2017.

Freeport has been negotiating with the government to resolve the export tax issues and seeking a contract extension for its Grasberg copper and gold complex.

"The company can only apply for an extension in 2019. However, the latest agreement is likely to offer an alternative contract."

The Grasberg contract expires in 2021 but, according to government officials, the company can only apply for an extension in 2019. However, the latest agreement is likely to offer an alternative contract to Freeport, reported Reuters.

The memorandum of understanding agreed by the two parties needs to be approved by the cabinet and subsequently by Indonesia President Susilo Bambang Yudhoyono.

Indonesia trade minister Muhammad Lutfi told Nasdaq that his ministry will issue the permit for Freeport Indonesia to resume exports of copper concentrate.

Earlier this month, another mining major, Newmont Mining, filed an international arbitration seeking exemption from the export ban.

Freeport and Newmont represent more than 90% of copper production in Indonesia.


Image: Freeport-McMoRan's Grasberg Mine in the province of Papua in Indonesia. Photo: courtesy of Alfindra Primaldhi.

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