Freeport Sees Indonesia Deal ‘Imminently’ on Export Curbs – by Liezel Hill (Bloomberg News – July 23, 2014)

Freeport-McMoRan Inc. (FCX) expects to sign a deal with the Indonesian government “imminently” to resolve a dispute that has curbed production at the world’s third-biggest copper mine.

The largest publicly traded copper producer and the government have developed a memorandum of understanding under which the company would commit to help develop a smelter, Phoenix-based Freeport said today in a statement. The agreement includes reduced export taxes and higher royalties for copper and gold.

The agreement, which would enable the immediate resumption of exports, also states that Freeport and Indonesia would start negotiations immediately on changes to the company’s contract to operate in the country.

Freeport reduced operating levels this year at its Grasberg copper and gold mine after Indonesia introduced restrictions and duties on mineral exports in a bid to increase local processing. Exports of concentrates, a semi-processed raw material, have yet to resume after months of negotiations between the company and government officials.

Freeport has been able to run Grasberg at about half of normal rates because it sends some concentrate to a domestic smelter it helped build in the 1990s.

Forecasts Reduced

The memorandum of understanding is “a step in the right direction,” Paul A. Massoud, an analyst at Stifel Nicolaus & Co. in Washington, said in a note today.

Freeport fell 0.1 percent to $38.67 at 9:53 a.m. in New York. The shares have risen 2.3 percent this year.

The company reduced its forecast for copper sales by 4.7 percent to 4.1 billion pounds, and cut its prediction for gold sales by 19 percent to 1.3 million ounces. The forecasts assume that its Indonesian unit restarts exports in August.

Freeport today reported that second-quarter net income was unchanged from a year earlier at $482 million while it fell per-share to 46 cents from 49 cents. Excluding legal charges and other one-time items, profit was 58 cents a share, topping the 53-cent average of 18 analysts’ estimates compiled by Bloomberg. Sales rose 29 percent to $5.52 billion, beating the $5.35 billion average estimate.

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