Indonesia to review compliance in move that could affect mine output
Indonesia said it will check miners' compliance with environmental rules and "re-examine" production quotas for those found to be in breach.
Freeport McMoRan (NYSE:FCX) may start exporting copper concentrate from Indonesia as soon as this Wednesday after a six-month hiatus following an agreement with the government of the Asian nation.
Nasdaq reports Freeport Indonesia CEO Rozik Soetjipto says it the first overseas shipment will likely be 10,000 tonnes of copper destined for China.
The Indonesian government foresees total copper concentrate exports from Freeport’s local unit reaching 756,000 tonnes by year-end, with an estimated value of more than $1.5 billion.
The deal is expected to pave the way for other miners, such as fellow US-based Newmont Mining (NYSE:NEM) to reach an agreement that solves the row over restrictions on mineral exports imposed by Indonesia in January.
Under the deal, Freeport Indonesia will pay higher royalties, build a smelter and pay tax on copper concentrate exports. Meanwhile, its parent Freeport Mc-MoRan said in a statement it will sell around 20% of its stake in the Indonesian unit to a local investors in coming years.
As part of today’s deal, the government reduced Freeport’s copper concentrate export tax to 7.5% from 25%, which will be completely phased out when a planned smelter is one-third completed.
Indonesia introduced restrictions on export of unprocessed minerals in a bid to increase local processing in Southeast Asia’s largest economy.
In July the country allowed two miners to resume exporting iron ore, lead and zinc concentrates.
Soetjipto recently revealed the company plans to invest $7.1 billion in Grasberg if the government extends its contract by 20 years. This is on top of $9.8 billion it plans to spend between 2012 and 2021.
Comments
Tired Australian
So the moral of the story is when a government forces stands up to a multinational miner to invest or be taxed out of existence, the miner does not leave as what is in the ground is still valuable.
Travel across the Timor sea to Australia, and we see governments both state and federal kowtowing to foreign miners and letting the miners write their own tax laws.