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Freeport 'on path' to new Indonesia mine deal this year, CFO says
[TORONTO] Freeport-McMoRan Inc, the world's largest publicly traded copper miner, is "on a path"to get a new mining deal with Indonesia this year for its giant Grasberg mine, chief financial officer Kathleen Quirk said on Thursday.
The Arizona-based company resumed copper concentrate exports from Grasberg, the world's second-biggest copper mine, in April after a 15-week outage related to a government dispute over mining rights. Freeport had planned to ramp up production, which was cut by around two-thirds during the outage.
Freeport shares gained 2.9 per cent to US$12.06 on Thursday.
Jakarta halted Freeport's copper concentrate exports in January, under new rules that require miners to adopt a special license, pay new taxes and royalties, divest a 51 per cent stake in their operations and relinquish arbitration rights.
Freeport, whose current contract runs until 2021 with two 10-year extensions, will only agree to a license accompanied by an investment stability agreement that replicates current legal and fiscal certainty, Ms Quirk said.
"We think we're on a path to be able to get that resolved during this year and that's our top priority," Ms Quirk said via webcast from a Deutsche Bank conference.
Without the agreement, Freeport is unlikely to continue investing in the country, she said, noting the company has already spent US$3 billion on a project to transitions Grasberg to underground from open pit mining.
Production from the project, about half complete, is targeted for 2018 or 2019, she said.
The government will meet Freeport next Wednesday for further talks and negotiations could be concluded by October 2017, Teguh Pamuji, secretary general at Indonesia's energy and mining ministry told reporters on Friday.
"The important thing is the substance, which will cover regulations and documents that will make them comfortable and give security for them to operate in Indonesia," he said.
Meantime, Freeport is grappling with labour problems.
Its contractor-dominated workforce in Indonesia has been reduced to approximately 26,000 workers currently from about 33,000 at the start of 2017.
Following the export restrictions, Freeport furloughed some 3,000 workers in the first quarter, Ms Quirk said, sparking a strike and high levels of absenteeism. Freeport later deemed that approximately 3,000 full-time employees and 1,000 contractors had resigned, Ms Quirk said.
Ms Quirk said Freeport is training additional workers and "offering opportunities for those workers that are deemed to have resigned to be able to apply for open positions through contractor companies".
While the union said its strike would extend into June, Freeport has not seen additional absenteeism that would cause it to assume the workers had resigned, she added.
The union, which began a 30-day strike on May 1, said on May 20 that it would extend the strike for a second month.