Indonesia, Freeport make progress in copper export talks

JAKARTA, June 17 Tue Jun 17, 2014 3:08am EDT

JAKARTA, June 17 (Reuters) - Indonesia and U.S. miner Freeport-McMoRan Copper & Gold Inc have agreed on the basic framework for contract renegotiations for the world's fifth-largest copper mine, a further step in efforts to resume copper exports.

Indonesia's biggest copper producer and fellow miner Newmont Mining Corp halted copper concentrate shipments in January when the government introduced new mining rules, including an escalating export tax that the two firms say violates their mining contracts.

The CEOs of both firms met with chief economic minister Chairul Tanjung in Jakarta last week in a bid to resolve the five-month-old dispute.

"There was a lot of progress and we have moved forward in the renegotiation process, but there are still some processes left," Rozik Soetjipto, Freeport Indonesia CEO, told Reuters on Tuesday.

The export tax is part of a government drive to force miners to build smelters and processing plants in Indonesia, but a lack of progress in ending the dispute has led Newmont to declare force majeure and Freeport to slash output.

President Susilo Bambang Yudhoyono's administration has said it will ease the tax for miners that build smelters, but Freeport is reluctant to commit to the billion-dollar plus price tax without assurances it will get a contract extension for its Grasberg complex after 2021.

The government can only renew Freeport's contract in 2019 at the earliest, but hopes to resolve the issue by instead drawing up a Memorandum of Understanding (MoU) with Freeport.

"In the meeting with Chairul Tanjung, we agreed to the principal points (of the MoU)," Soetjipto said. "The MoU will contain details of the basic points that will become the agreement for (the new contract)."

The government said it was finalizing the MoU agreement, but has yet to receive a recommendation on the legal working of the document from the attorney general's office. It was also waiting for further information on the export tax from the finance ministry, said Coal and Minerals Director General Sukhyar.

Tanjung said last week he hoped for a conclusion on the contract talks by the end of the month. (Additional reporting by Wilda Asmarini; Writing by Randy Fabi; Editing by Richard Pullin)

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