Copper miners’ paths diverge over Indonesia export tax – by Michael Taylor and Allison Martell (Reuters India – July 8, 2014)

JAKARTA/TORONTO – (Reuters) – Six months into a dispute with Indonesia’s government that has halted copper exports, two U.S. mining giants are using very different tactics in a bid to resume shipments – behind the scenes talks or raising the stakes with an arbitration claim.

Freeport-McMoRan Copper & Gold Inc and Newmont Mining Corp account for 97 percent of Indonesia’s copper production, exporting tens of thousands of tonnes of concentrate a month before a row over a new export tax halted shipments.

As the latest bid to broker a deal runs up against Indonesia’s presidential election, Freeport is pushing on with government-led talks, with chief executive Richard Adkerson in Jakarta again last week.

Newmont, however, has filed for international arbitration, pushing to uphold the letter of the law on its contract but drawing a rebuke from the government which has questioned its “good will” in talks.

“Freeport is using the carrot and I guess Newmont is using the stick,” said Chris Mancini, analyst at Gabelli Gold Fund. Gabelli Funds holds stakes in both companies.

In an effort to push miners to build domestic smelters and processing plants, Indonesia introduced new mining export rules in January. These include an escalating export tax, which will hit 60 percent in the second half of 2016, before a total concentrate export ban in 2017.

Freeport and Newmont, which export about two-thirds of their output as concentrate, insist the new tax violates their contracts, and have questioned the economic viability of building a smelter to ready concentrate for refining.

Despite a revived effort in recent weeks to secure a deal, industry officials say Wednesday’s presidential election means the dispute is now unlikely to resolved until after a new president takes office in October.

“A resumption in concentrate exports will not happen until the end of the year,” said Syahrir Abubakar, executive director of Indonesian Mining Association.

Copper prices have risen seven percent over the past three weeks, in part due to shrinking supply of refined metal as LME stocks have dropped to near-six year lows.


Sitting atop one of the world’s biggest and lowest cost copper and gold deposits and with a plan to mine until 2041, Freeport has a lot to lose if its relationship with the Indonesian government suffers irreparable damage.

Indonesian copper production provides about 19 percent of the Arizona-based company’s global revenue, and analysts say enormous exploration potential remains.

Freeport has slashed output, but CEO Adkerson has spend a great deal of time in Indonesia and the miner has agreed to at least study the feasibility of a copper smelter project.

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