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Indonesia, Freeport agree 6-month export permit extension

[JAKARTA] Indonesia and Freeport-McMoRan reached a deal on Monday that will allow the US mining giant to export up to 775,000 tonnes of copper over the next six months.

The agreement is a relief for the Phoenix, Arizona-based company, which saw its stock sink last week due to uncertainty over its mining contract at the Indonesian mine in West Papua.

"Freeport principally has fulfilled the requirements, so tomorrow the government can issue export approval for the next six months," Coal and Minerals Director General Bambang Gatot told reporters.

As part of the deal, the company agreed to deposit the last US$20 million installment into an escrow account for the building of a second copper smelting facility.

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A Freeport official said the company expected copper shipments from one of the world's largest copper mines to take place this weekend.

The government may also lower Freeport's export tax to 5 per cent from 7.5 per cent, as it progresses in building smelters in the Southeast Asian nation.

The two sides also continue to negotiate terms of a contract or license that could extend to 2041.

A current contract of work expires in 2021, but by law in Indonesia they cannot extend this contract until 2019 at the soonest.

Contract certainty is crucial, Freeport has said, because it will spend US$15 billion on an underground expansion at its Grasberg copper and gold mine, and must commit to a new smelter, estimated at US$2 billion-US$2.5 billion.