Indonesia and Freeport reach an agreement on new mining permit

Freeport exports about two-thirds of its production of copper concentrate from Grasberg mine.

The Dollar Business Bureau

Indonesia and the American mining company Freeport-McMoRan Inc on Tuesday came to an agreement to allow the miner to operate its Grasberg gold and copper mine. However, the time period and divestment value of 51% in the mine are yet to be sorted out.

Freeport-McMoRan Inc, the largest publicly-traded copper company in the world, can apply for an instant permit extension for 10 years for mining at the Grasberg after 2021, said Ignasius Jonan, Indonesian Minister of Energy and Mineral Resources.

Grasberg is the second-largest copper mine in the world, situated in the Indonesian province of Papua.

“The mandate of the president, which has been agreed to by Freeport, is that the divestment should reach 51% in total,” Jonan said while addressing a joint press conference.

“All that is left is to discuss is the timing. The price will be negotiated later,” he added.

According to the revised rules, miners in Indonesia are now required to divest 51% stake, hand over arbitration rights and have to pay new taxes and royalties. On the other hand, Freeport has asserted on being given the same financial and legal protection to it as in its existing contract.

The Indonesian minister said that Freeport could apply immediately for first extension of permit for 10 years and second permit extension before 2031.

The US miner’s exports of copper concentrate from Indonesia were in danger of being stopped again if both the sides had failed to come on an agreement for a new permit of mining before the existing temporary contract expired in October.

Freeport exports about two-thirds of its production of copper concentrate at Grasberg mine and the remaining produce is processed locally.

The Arizona-based company has held lengthy discussions with Indonesian officials on issues related to the valuation and amount of the divestment and developing a new smelter for extending its mining contract of 30 years, which is going to expire in next four years.

Speaking to the media, Richard Adkerson, Freeport’s Chief Executive Officer, said that the current contract would continue in place until all the things were settled.

“We want to emphasise that to divest the 51% (stake) and to build a (second) smelter are a major concession,” said Adkerson.

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The Dollar Business Bureau - Aug 29, 2017 12:00 IST