JAKARTA - Freeport-McMoRan Inc and the Indonesian government on Friday reached a deal over a contract dispute that should pave the way for a resumption of the U.S. company's copper exports after a six-month halt.
Indonesia's top copper miner hopes next month to ramp up production and restart concentrate shipments from Grasberg, one of the world's largest copper mines, said Freeport Indonesia CEO Rozik Soetjipto.
If other miners follow suit, the deal will take some of the pressure off president elect Joko Widodo. Widodo was declared the winner of Indonesia's presidential elections this week and has said solving the dispute - which has sapped government mining revenues - would be one of his top priorities when he takes power in October.
"With this (MoU) we send a message to the next government that Freeport wants to build this and this and this," said Sukhyar, the coal and minerals director general. As part of Friday's deal, the government reduced Freeport's copper concentrate export tax to 7.5 per cent from 25 per cent after the company agreed to pay a bond as a guarantee they will build a smelter later.
The tax rate that Freeport is subject to is part of a new tax regime for mineral concentrate exporters approved on Friday by the finance ministry. "The 7.5 per cent rate is not automatic, and is connected to their spending on a (smelter) guarantee bond and a percentage from the cost of their investment," said Deputy Finance Minister Bambang Brodjonegoro.
The government forecasts Freeport, which is expected to soon receive an export permit by the trade ministry, to ship 756,000 tonnes of copper concentrate in the second half of the year, Sukhyar said. A dispute with mining companies triggered by the imposition in January of new regulations, which included the export tax and a ban on mineral ore exports, had cost $1.3 billion in lost shipments of copper concentrate.
The mining regulations were intended to force miners to develop smelters and mineral processing facilities and part of a government push to derive bigger returns from Indonesia's mineral resources. But rather than pay it, most miners stopped exporting from Southeast Asia's biggest economy and one of the world's top mineral producers. The ban on the export of unprocessed ore remains in place.