Freeport McMoRan chief executive officer Richard Adkerson speaks to reporter when visiting Indonesia in February. (GA Photo/Uthan Rachim)
Freeport Awaits Permit to End Costly Indonesia Export Ban: Execs
BY :MITRA TAJ & FELIPE ITURRIET
APRIL 06, 2017
Santiago. Freeport McMoRan is awaiting final details on a temporary export permit in Indonesia, which would end a 12-week ban that has cost the world's biggest publicly traded copper company nearly $1 billion in lost revenues, its top executives told Reuters in an interview on Wednesday (05/04).
"With the short-term arrangement, we'll start ramping production back up to feed our mill 100 percent," said chief financial officer Kathleen Quirk referring to Freeport's Grasberg mine.
"It shouldn't take very long, we're talking weeks," she said, alongside chief executive officer Richard Adkerson, at the CRU World Copper Conference in Santiago.
Indonesia banned miners from exporting copper concentrate on Jan. 12 under new rules aimed at boosting the Southeast Asian nation's domestic smelting industry.
For each month exports are banned, Grasberg output is reduced by 70 million pounds of copper, Freeport says.
Freeport is required to adopt a special license, that includes new taxes and royalties, divesting a 51 percent stake in its operations and relinquishing arbitration rights.
The Phoenix-based company has lost revenues "approaching $1 billion," under the export stoppage, said Quirk, mitigated by cost and capital spending cuts. It is unlikely deferred capital spending will resume until a long-term mining agreement is reached, said Adkerson.
Under a temporary permit, extending to October, Freeport could resume copper concentrate exports from Grasberg, the world's second-biggest copper mine, while negotiating contentious issues that have prevented a longer-term agreement, including divestment, economic and legal protection and domestic smelting investment.
Freeport plans to boost Grasberg production from 40 percent currently to full capacity in a matter of weeks after receiving the short-term permit, Quirk said.
Freeport insists any new permit must have the same fiscal and legal guarantees as under its 30-year mining contract. The company has warned that if the matter is unresolved by June 17, it could go to arbitration and seek damages. A temporary permit does not affect that timeline, but Adkerson said there is no reason for arbitration if negotiations progress.
Shareholder pressure is mounting on Freeport to stand up to the government. The issue could emerge during a visit to Indonesia by US Vice President Mike Pence this month, part of a larger Asian tour reported by the media.
Freeport's ban, coupled with a strike at BHP Billiton's Escondida mine in Chile, the world's biggest copper mine, pushed copper prices to 20-month highs of $6,204 a ton on the London Metal Exchange in February.