Jan. 29 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc., owner of the world’s second-largest copper mine, has yet to begin concentrate shipments from Indonesia as it awaits permits more than two weeks after the government set new export rules.
Freeport is in discussions with the Indonesian government to resume sales from its Grasberg mine and resolve issues related to export duties, Chief Executive Officer Richard Adkerson said after meeting Industry Minister M.S. Hidayat.
Indonesia banned exports of all raw mineral ores including nickel and bauxite from Jan. 12 while allowing shipments of some processed minerals such as copper concentrate as part of a wider policy to boost revenue by turning the country into a manufacturer of higher-value products. The curbs halted shipments by Freeport and Newmont Mining Corp.
“We are committed to be a positive partner with the government of Indonesia,” Adkerson told reporters today in Jakarta. “The export duty was announced just over two weeks ago, and so the purpose of my trip here is to have discussions with the minister, with other ministers, as it creates an issue that needs to be resolved.”
Copper advanced as much as 0.7 percent to $7,187.25 a metric ton on the London Metal Exchange, snapping a five-day losing streak, and was at $7,166.75 at 8:03 p.m. in Singapore.
Indonesia imposed a progressive tax on exports of copper concentrates, ranging from 25 percent to 60 percent in the second half of 2016, according to the Finance Ministry. Freeport supplies 40 percent of its output from Grasberg to PT Smelting in Gresik, said Adkerson. PT Freeport Indonesia owns 25 percent of PT Smelting, the country’s only copper smelter. The remaining concentrate is shipped to Spain and Asian buyers.
Freeport, based in Phoenix, runs the Grasberg mine under a Contract of Work and the company said Jan. 23 the export duties infringed on the agreement with the government. The company plans to defer production of some copper concentrates and gold until approvals are received, it said the same day.
Freeport needs “to be permitted to continue its operations in a normal fashion with no export restriction or duties so that we can continue to provide employment for the 30,000 workers that we have in our operations in Papua,” said Adkerson. “We’re going to do this in the right way, there are issues between regulation and our contracts.”
Freeport is committed to expanding downstream processing capacity in Indonesia and has yet to make a decision, Adkerson said. Building a smelter would cost about $2 billion, he said.
--Editors: Thomas Kutty Abraham, James Poole