JAKARTA: Copper mining giant PT Freeport Indonesia will see its exports halted starting Friday after failing to realize its commitment to smelter development.
The Energy and Mineral Resources Ministry’s mineral and coal director general, Bambang Gatot Ariyono, said his office had yet to issue a recommendation for the extension of Freeport’s export license as the company had yet to meet the government’s prerequisites for smelter development to process its products locally, as required by the 2009 Mining Law.
“We haven’t issued the recommendation. They said that they would be cooperative [meeting the government’s prerequisites]. However, they have yet to give details,” Bambang said. The recommendation is necessary for the company to apply for an export permit with the Trade Ministry.
Freeport Indonesia, a subsidiary of the US-based Freeport-McMoRan Inc., had a six-month permit to export its semifinished copper concentrate that expired on Thursday. The permit is needed as the export of unprocessed minerals was banned at the start of 2014.
The government has asked Freeport to show progress on its planned smelter in Gresik, East Java, before it gives another recommendation for exports.
The Energy and Mineral Resources Ministry proposed two conditions that would allow the firm to extend the permit for another six months: pay 5 percent in export tax and deposit US$530 million as a guarantee that the company will continue to make progress on the smelter.
“The company declines to pay US$530 million as a guarantee and has yet to propose options to replace the requirement,” Bambang said.
Under a contract of work (CoW) signed in 1991 between the company and the government, Freeport Indonesia has the rights to export its product.
“If the company turns again to the contract of work, all points under the renegotiation will be canceled,” Bambang added, referring to the government’s attempt to adjust several matters in the previous contract to align with the 2009 Mining Law.
He also played down concerns that the miner would challenge the country in international arbitration.
The current export permit is the third Freeport has held since 2014. Previously, similar back-and-forth negotiations with the government also took place. The firm eventually found ways to obtain the permits.
“These points [5 percent duty and $530 million guarantee] are inconsistent with the agreement that we worked with the government in the beginning, in mid-2014, and our discussion with the government would continue,” Freeport McMoRan CEO Richard Adkerson said earlier.
“We have full confidence that the government will come up with a favorable decision and issue the export license to ensure continuity of our mining operations, and in doing so will serve the interest of Indonesia’s mining industry in general,” he added.
Energy and Mineral Resources Minister Sudirman Said stated earlier, “I’ve received report that the company is asking for further consideration as it is currently affected by low commodity prices and poor finance. So, if it cannot meet the requirements, let’s find a solution regarding things that can be the warranty for its commitment to progress the smelter project.”
