Freeport says draft MoU agreed but not signed, no export timeframe

Tue Jul 8, 2014 3:52am EDT

* Govt official say Freeport exports could resume within weeks

* Arizona-based miner says yet to sign MoU

* Contract talks may still falter under new govt -legal expert

By Yayat Supriatna and Michael Taylor

JAKARTA, July 8 (Reuters) - Freeport-McMoRan Copper & Gold Inc said on Tuesday it has agreed on a draft memorandum with Indonesia on a contract renegotiation, but added it had yet to be signed and there was no timeframe for any resumption of copper exports.

Indonesia's industry minister said late Monday that Freeport could resume concentrate exports within weeks, but legal experts cautioned that any contract agreement could still fail when a new government takes office.

Freeport Indonesia CEO, Rozik Soetjipto, told Reuters he could not give details of the draft Memorandum of Understanding (MoU) because it had yet to be signed.

Freeport, which runs one of the world's biggest copper mines, has been in talks with the government to resolve a six-month dispute that has halted concentrate exports after Indonesia introduced new export rules on Jan. 12.

Industry Minister Mohamad Hidayat said that the MoU was due to be discussed at an Indonesian cabinet meeting this week, and finalized within two weeks.

After Freeport pays a smelter construction bond of $115 million, the finance ministry will then sign a lower export tax regulation to allow exports to resume within a month, he added.

Legal experts, however, said MoUs are normally not legally binding and although a step forward, hurdles still remained before exports could be resumed.

Progress on a deal could also be hindered by Wednesday's presidential election. Incumbent Susilo Bambang Yudhoyuno is unable to contest after serving two terms and the winner of an expected tight contest will not take office until October.

"The purpose of the MoU is simply to publicly record the progress made to date," said Jakarta-based mining law expert Bill Sullivan, foreign counsel at Christian Teo Purwono & Partners.

Under the draft MoU, government officials say Freeport has agreed to divest 30 percent of its Indonesian unit, pay a royalty of 4 percent for copper sales and 3.75 percent for gold sales - up from 1 percent previously - and agreed to build a smelter and pay the government a repayable bond.

The export rules introduced in January would have forced Freeport to pay an export tax of 25 percent, rising to 60 percent in the second half of 2016.

The rules are part of a government drive to force miners to build smelters and processing plants in Indonesia.

Energy and Mineral Resources Minister Jero Wacik said on Tuesday the government would also invite Newmont Mining Corp to discuss a negotiation process over the export rules.

Newmont, the other major copper miner in Indonesia, has taken a more aggressive stance in talks and earlier this month filed for international arbitration, drawing a rebuke from the government.

Newmont could not be reached for comment.

(Additional reporting by Wilda Asmarini; Writing by Michael Taylor; Editing by Richard Pullin)

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