UPDATE: Freeport-McMoRan Finalizes Deal with Indonesia
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has put the finishing touches on a new contract with the Government of Indonesia to resume mineral concentrate exports. After six months of disparity, the US miner can recommence operations and exports within two week of the signing.
“We are pleased to report the resumption of normal operations and the completion of an MOU to enable continuing benefits of the Grasberg operations for the Government, the local communities in Papua, our large Indonesian workforce and our shareholders. We value our long-term partnership with the Indonesian government and look forward to continuing success of the Grasberg operation,” said Richard Adkerson, President and Chief Executive Officer of Freeport.
The deal calls for Freeport to increase royalties on gold and copper, commit to smelter development and pay export duties on concentrate exports.
According to Director General of Coal and Mineral Resources Sukhyar, Freeport will provide a $115 assurance bond in its commitment to building a smelter. The increase in royalty payments will go up half a percent for copper and almost three percent for gold.
The agreement also includes a mineral export tax on concentrates of copper, iron, zinc, and manganese. Linked to the progress of a smelter, the tax will begin at 20 percent and rise all the way to 60 percent until a complete ban on exports is imposed. The government said it would consider lowering the rates for companies that commit funds for new smelter
Freeport will pay a 7.5 percent tax on copper exports until one-third of its smelter plant is completed. The company is estimated to export more than 750,000 tons of concentrate, valued at $1.56 billion.
The company plans to make a $7.1 billion investment in the Grasberg Mine if the government of Indonesia extends its contract by 20 years. The mine is the world’s largest gold mine and third largest copper mine.
