JAKARTA Feb 28 Freeport-McMoRan Copper & Gold
said its Indonesian unit may need to declare force
majeure on copper concentrate sales if a dispute with the
government over export taxes drags on for a prolonged period.
Freeport and fellow U.S. miner Newmont Mining Corp
have refused to pay an escalating export tax introduced last
month as part of package of new mining rules aimed at forcing
miners to build smelters and process raw materials in Indonesia.
Freeport has reduced copper production at the world's
fifth-biggest copper mine in Papua, and its nearby mill was
operating at half its normal capacity. It has not exported
copper concentrate since mid-January.
"In the event that PT-FI (PT Freeport Indonesia) is unable
to resume normal operations for an extended period, we plan to
consider further actions, including constraining operating
costs, deferring capital expenditures and implementing workforce
reductions," the firm said in a filing dated Feb. 27.
"PT-FI may also be required to declare force majeure under
its concentrate sales agreements."
Executives from Freeport and Newmont, which together produce
virtually all of Indonesia's copper, have been in talks with the
government for weeks over the tax and the building of smelters.
A breakthrough appeared to have been reached on Monday, when
Indonesia signalled it was ready to ease the export tax on firms
that proved they were serious about building smelters in the
country, the first rollback of its new rules.
Freeport Indonesia CEO Rozik Sutjipto has said the company
would build a copper smelter, but company officials have
declined to elaborate.
In Asia, smelters have begun to accept lower processing fees
in order to secure material.
The latest tender for clean, standard grade copper
concentrate from Chile was won for treatment and refining
charges (TC/RCs) in the high $70s to low $80s per tonne, and
around 8 cents per pound, two traders said.
This compares with around $105-$110 per tonne and 10.5-11
cents per pound early this month.
Global miners or trading houses pay TC/RCs to smelters to
convert concentrate into refined metal, with the charges
deducted from the sale price, based on London Metal Exchange
copper prices. Charges typically fall when concentrate supply
The global market for refined copper is expected to be
steeped in surplus this year, fed by a huge expansion of mine
supply. But delays or curbs to mine shipments or could
exacerbate a shortage of refined metal that has stressed global
markets outside China, helping to underpin copper prices.
"When this talk started, before the ban, which was
implemented on Jan. 12, everybody knew that they (producers)
could hold off for a quarter or up to four months," one physical
"Smelters overbought to compensate. It's still the end of
February, there's still one more month. I don't think that
people should be panicking now."