Indonesia's Tax Breaks Help Bridge Deal with Freeport-McMoRan

Freeport-McMoRan Copper & Gold Inc. is set to resume mining operations in Indonesia after the country offered a tax concession to end the six-month dispute over copper exports.

The new tax incentives will cut the levy on mineral concentrate exports to less than 10 percent for miners that guarantee to build a smelter. As construction of the smelter progresses, the export tax falls to zero.

Freeport-McMoRan said on Wednesday the signing of a memorandum of understanding (MOU) to resume exports was imminent.

"It is a compromise to create a bridge for us so that we can return to normal operations," Freeport Chief Executive Richard Adkerson said. The US mine is expected to become the first company to take the deal.

As Freeport enjoys the success of overcoming Indonesia’s tax obstacles, Newmont Mining hasn’t been so lucky.

After suspending operations at its Batu Hijau mine in June, the company filed for international arbitration earlier this month. In response, Indonesia threatened to terminate their mining contract if the company didn’t withdraw its lawsuit.

"There have been no MOU discussions with Newmont. None at all," Coal and Minerals director general Sukhyar said on Thursday.

"The government's position is we will face them in court."

Since winning Indonesia’s presidential elections, Joko Widodo has vowed to resolve the six-month dispute, which has exhausted government mining revenue. The ban on exports has halted roughly $500 million of monthly mineral ore and concentrate exports.

Freeport and Newmont are Indonesia's top copper miners, and account for 97 percent of the nation's copper output.