Indonesia issues new mining permit to Freeport

[JAKARTA] Indonesia has issued a new mining permit for the local unit of Freeport McMoRan Inc , government officials said on Friday, signalling the possible end to a month-long suspension of exports from the world's second-biggest copper mine.

Indonesia halted Freeport's exports of copper concentrate on Jan 12, a suspension Freeport said would reduce output from its Grasberg mine by around 70 million pounds of copper per month.

On the same day the government issued rules requiring Freeport to obtain new mining rights before being allowed to resume exports, as part of a broader push to add value to the country's minerals and develop domestic industries.

The suspension had supported recent gains in copper prices , which initially pulled back from session highs in London on Friday on news that Grasberg shipments may resume. Freeport's shares jumped 4 per cent.

Freeport warned last week that it could be forced to slash Grasberg production and reduce its workforce of more than 30,000 if it did not get a new export permit by mid-February.

Rio Tinto , in a joint venture with Freeport in Indonesia since 1995, said on Thursday it was considering exiting its interest in the mine as a result of the uncertainties.

The new permit signed by Energy and Mineral Resources Minister Ignasius Jonan on Friday would be valid until 2021, with an option to extend, Coal and Minerals Director General Bambang Gatot told reporters.

A similar permit was issued to fellow Indonesian copper miner Amman Mineral Nusa Tenggara, a unit of Medco Energi Internasional, Gatot said.

The two companies could now apply to resume exports, he added.

The new mining permit was expected to require Freeport to pay taxes and royalties that it has been exempt from, and divest up to 51 per cent of its Indonesian unit, up from 30 per cent under current rules. To date, it has divested only 9.36 per cent.

It was not immediately clear if Freeport had agreed to adopt the new provisions or end its 1991 contract of work with the Indonesian government under which fixed tax rates and other guarantees apply. "Whether they agree or not, we'll see," Gatot said. "Whether there are incentives, we can work on this." A spokesman for Freeport in Indonesia did not immediately respond to a written request for comment on the matter.

Phoenix, Arizona-based Freeport said last month that it was seeking "a stability agreement providing the same rights and the same level of legal and fiscal certainty provided under its contract of work." It also said the Indonesian government had given"indications" that it would allow Freeport to resume copper concentrate exports while it negotiates converting its contract to the new mining permit.

A spokesman for Amman said the company was waiting for official information from the government regarding the permit.

REUTERS