REUTERS SUMMIT-Indonesia, Freeport reach tax deal; copper exports to resume

Thu Mar 27, 2014 9:30am EDT

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By Randy Fabi and Yayat Supriatna

JAKARTA, March 27 (Reuters) - Indonesia has reached a deal over export taxes with U.S. mining company Freeport-McMoRan Copper & Gold Inc, allowing nearly $4 billion worth of annual copper shipments to resume as early as next month.

Freeport and fellow U.S. miner Newmont Mining Corp have halted copper concentrate shipments since January, refusing to pay an escalating export tax that they say breaches their contracts.

The export tax was introduced as part of a series of mining rules, which include a mineral ore export ban, to force companies to build smelters and process raw materials in Indonesia.

"We have solved the problem," Deputy Finance Minister Bambang Brodjonegoro said at the Reuters ASEAN Summit. "We will link the export tax, which is more like an export fee, on to the progress of the smelter development."

To win a tax reprieve, Freeport agreed to pay the government a 5 percent security bond for the construction of a smelter and sign supply agreements with smelter-building companies, Brodjonegoro said.

The final government regulation is expected to be published in the next few weeks, allowing Freeport to resume exports by the end of next month, he said, from the world's fifth-largest copper mine in remote Papua.

Freeport officials could not immediately be reached to comment.

Any mining company that takes action similar to Freeport's will also be given a reprieve from the tax, which is set at 20 to 25 percent this year and rises to as much as 60 percent by the second half of 2016.

Earlier on Thursday, a trade ministry official said it had approved Freeport's export certification but that it would still need approvals from the mining and finance ministries.

Freeport has reduced copper production at the mine in Papua by 60 percent, and its nearby mill was operating at half its normal capacity, due to the tax dispute. (Additional reporting by Rieka Rahadiana and Wilda Asmarini; Editing by Himani Sarkar and Jane Baird)

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