Indonesia said it has issued a temporary license to Freeport-McMoRan Inc.’s local unit that which will allow the company to resume concentrate exports from the world’s second-largest copper mine at Grasberg after a gap of almost three months. Prices fell in London.
The permit is valid for eight months from the time that the producer was first offered a special mining license or IUPK in February, Teguh Pamudji, secretary-general at Indonesia’s Energy and Mineral Resources Ministry, told reporters in Jakarta on Tuesday. The government will continue talks with Freeport on a longer-term financial stability pact, he said.
Freeport expects to resume exports soon and will continue discussions with the government on other issues, spokesman Riza Pratama, said in a text message before the announcement. The government has granted Freeport a temporary mining license to resume shipments, and the company will be able to return to its Contract of Work if a longer-term deal is not reached by Oct. 10, but its right to export would be rescinded, Pamudji said.
“We have agreed with Freeport to sit down and discuss the short-term and long-term approach,” Pamudji said. “For the short-term, the continuity is important as Freeport Indonesia has a large impact on Papua, so last week we agreed to release a temporary license. With that, Freeport can export concentrates and pay duties. There’s also an agreement to start talks next week on the long-term approach.”
The two sides have been entangled in a dispute over the company’s contract, including a requirement to divest a majority stake to domestic shareholders and the ability to export. While copper was buoyed by the halt in shipments and a strike at the world’s biggest mine at Escondida in Chile, they’ve dropped more than 7 percent from February highs as disruptions eased.
The interim deal could allow Freeport to restore operations at the Grasberg mine in Papua to full capacity. The company has vowed to hold out for investment safeguards and guarantees before agreeing to a conversion of its Contract of Work into a long-term IUPK. The miner currently operates the mine at about 40 percent to feed a smelter in Gresik on Java island.
Under new rules announced in January, Indonesia said companies that want to export semi-processed metals including copper concentrate must convert their Contract of Work to a special mining license, build smelters and add local investors. Freeport, which has mined in Indonesia for decades, has insisted on investment guarantees before committing long-term to the new license and its exports stopped in the middle of January.
The rules stipulate foreign miners must begin selling shares to local entities five years after starting production and must reach 51 percent local ownership by the 10th year. Freeport must immediately divest its stake after converting its contract, because the firm has been mining in the country for more than a decade, Deputy Energy and Mineral Resources Minister Arcandra Tahar said in January. At present, Indonesia holds 9.36 percent of the Freeport unit.
Copper dropped as much as 0.4 percent to $5,730 a metric ton on the London Metal Exchange Tuesday, before trading at $5,739.50 by 4:20 p.m. Singapore time.