Freeport agrees contract MoU, Indonesia govt officials say

JAKARTA, July 7 Mon Jul 7, 2014 8:41am EDT

JAKARTA, July 7 (Reuters) - Freeport-McMoRan Copper & Gold Inc have agreed a Memorandum of Understanding (MoU) with the Indonesian government on contract renegotiations, ministry officials said on Monday, as both sides look to end a six-month dispute that has halted concentrate exports.

Indonesia's biggest copper producer has been involved in lengthy government-led talks aimed at resolving a spat over an escalating export tax and contract renegotiations, after the country introduced new export rules on Jan. 12.

The export tax is part of a government drive to force miners to build smelters and processing plants in Indonesia, while Freeport is seeking assurances it will get a contract extension for its huge Grasberg copper and gold complex beyond 2021.

"We are happy and expect it will be finalised with an MoU signing," said chief economic minister Chairul Tanjung, referring to the contract renegotiations.

Billionaire businessman Tanjung has spearheaded a new government drive to resolve both the export and contract issues.

The draft MoU still needed to be approved by both the cabinet and outgoing President Susilo Bambang Yudhoyono, said Deputy Energy and Mineral Resources Minister Susilo Siswoutomo.

If the draft MoU is approved by the president, although it will be a further step towards resuming copper concentrate exports, there is no indication that it will satisfy the Arizona-based miner.

Freeport Indonesia could not be reached for comment on Monday, and government officials were unable to give a date for when the cabinet would next meet.

Government officials have previously said Freeport can only renew their 2021 deal in 2019 at the earliest, but it now seems likely that the miner will be offered a different type of contract when its current deal ends.

There was renewed hope that the export spat would be resolved last month after the government finalised a new export tax draft regulation, but with a presidential election this week, progress appears to have stalled.

In addition to a contract extension, the renegotiations, which began more than a year ago, include changes to Freeport's mining and exploration area, divestment, royalty payments and plans to build a domestic smelter.

Freeport, along with fellow copper miner Newmont Mining Corp , halted copper concentrate exports in January when the government introduced the surprise tax, which the two U.S. firms say violates their mining contracts. (Additional reporting by Michael Taylor; Reporting by Wilda Asmarini; writing by Michael Taylor; Editing by Jason Neely)