JAKARTA (Reuters) - Indonesia has reached a deal over export taxes with U.S. mining company Freeport-McMoRan Copper & Gold Inc (FCX.N), 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 (NEM.N) 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 to build 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.
“We are continuing to work with government officials to seek a resolution to these matters as soon as practicable so that normal operations can resume without adverse impacts to our workforce, the local community and our customers,” Freeport spokesman Eric Kinneberg said in an email.
Shares of Freeport ended 2.3 percent higher at $32.41 on the New York Stock Exchange.
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.
Newmont, which owns the smaller Batu Hijau copper-gold mine in Indonesia, was continuing to work with the government to try to secure a six-month export permit, company spokesman Omar Jabara said.
Newmont was also in talks, along with Freeport, around supplying copper concentrate to a proposed smelter that Indonesian state-owned miner PT Aneka Tambang, or Antam, is considering building in the country, Jabara said.
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 in Jakarta and Nicole Mordant in Vancouver; Editing by Himani Sarkar, Jane Baird, Bernadette Baum and Meredith Mazzilli