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Commodities

Indonesia allows Freeport to resume copper exports for another six months

JAKARTA (Reuters) - Indonesia on Wednesday granted Freeport-McMoRan Inc a new six-month export permit for shipments from one of the world’s largest copper mines, ending a near two-week stoppage due to a dispute over payment for a new metal smelter.

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The deal is a relief for both sides as a lengthy halt in exports would have hit the U.S. mining giant’s profits and denied the Indonesian government desperately needed revenue from one of its biggest taxpayers.

In the global copper market, prices fell to near their lowest level in a fortnight on Wednesday, partly on oversupply concerns exacerbated by the decision on Freeport’s exports.[MET/L]

“The export permit has been issued,” Didi Sumedi, a mining director for the trade ministry, told Reuters, with Freeport allowed to ship up to 1,033,758 tonnes of copper over the next six months. The permit expires on Aug. 8.

Freeport was forced to halt overseas shipments last month after the government demanded the company first pay a $530 million deposit for a smelter before it renewed the permit.

Talks between the two sides over the $530 million bond were ongoing. Freeport won the government’s backing for a new permit only after agreeing to continue paying a 5 percent export tax.

“We appreciate the support from the government and continue our discussion to escalate the development of the smelter and the extension of our contract of work,” said Freeport spokesman Riza Pratama.

Indonesia wants the deposit as a guarantee that the Phoenix, Arizona-based company will complete construction of another local smelter. Freeport had set aside $80 million for the smelter in July 2015 to obtain its current export permit.

Freeport CEO Richard Adkerson last month said the government’s demand for a smelter deposit was “inconsistent” with an agreement reached between the two sides in mid-2014.

According to that agreement, Freeport must sell the government a greater share of the Grasberg mine, and invest in domestic processing to win an extension of its contract of work beyond 2021.

The U.S. mining giant wants to invest $18 billion to expand its operations at Grasberg, but is seeking government assurances first that it will get a contract extension.

President Joko Widodo told Reuters on Wednesday that talks on a contract extension could not legally start until 2019.

“I already told Freeport Indonesia last year that we must talk about royalties, local content, smelter and development in Papua but until now there is no answer from Freeport,” the president said.

Freeport’s long-held aim to continue mining in Indonesia beyond 2021 has been beset by controversy, resignations and a political scandal that led to the resignation of the parliamentary speaker.

Additional reporting by John Chalmers, Kanupriya Kapoor and Fergus Jensen; Writing by Randy Fabi; Editing by Michael Perry and Tom Hogue

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