Hedge funds slash bullish wagers on gold before war jitters
Speculators have reduced net-long positions by 3.6%.
Shares in Freeport McMoRan Inc (NYSE:FCX) took a hit Friday following news that the President of Indonesia has pressed the world’s second largest copper miner to wrap-up a deal in which the company gives a majority stake in its Grasberg mine to the country.
The deal, drafted in August, grants Indonesia a 51% ownership in the massive copper and gold mine and makes Freeport build smelters in the country. In return, the US miner would be allowed to keep Grasberg open until 2041.
The tentative agreement was meant to put an end to mounting public rage over foreign ownership of Indonesia’s biggest copper asset. It was also supposed to bring closure to years of disagreements between the Phoenix, Arizona-based company and the country’s government, which curbed output at the mine, impacting metals prices worldwide.
Freeport agreed in August to divest a 51% stake in Grasberg to local interests in return for full operational control until 2041 plus fiscal and legal guarantees.
The parties, however, haven’t been able to agree on how the mine should be valued, or on what the timing and structure of the required divestment needs to be.
Indonesian President Joko Widodo stepped up pressure Thursday, calling Freeport to end talks as soon as possible. The public statement prompted chief executive Richard Adkerson to meet with Mining Minister Ignasius Jonan Friday morning, Reuters reports.
“It’s already been three years of heated arguing, but this is almost finalized,” Widodo said according to an official transcript of remarks he made to reporters in Banten province west of the capital Jakarta.
Earlier this week, a government audit agency claimed Freeport had failed to pay almost $450 million of royalties between 2009 and 2015, in what could be just another way for Widodo’s administration to push the firm into signing away rights to Grasberg.
If an agreement can’t be reached, future supplies from the mine are likely to be impacted, which in turn would tighten the copper market even more, as most of the world’s top mines are aging and facing grade declines, analysts agree.
But if it goes through, the deal would be a political victory for Widodo, who faces re-election in 2019 and who has insisted that mining companies must divest majority stakes in order to continue operating in the country.
Last year, Grasberg — the world’s second-largest copper mine and fourth largest gold operation — generated more than 500,000 tonnes of copper and over 1 million ounces of gold.
The iconic mine is responsible for more than a quarter of Freeport’s total output.
Freeport’s stock was down roughly 2.1% to $14.43 in New York at 11:06AM local time.
Freeport agreed to divest a 51% stake in Grasberg to local interests in return for full operational control until 2041 plus fiscal and legal guarantees. (Screenshot of Bando Tamayo’s video | YouTube.)
5 Comments
Mike Failla
Larceny and greed take many forms. Especially when government is involved. Freeport? Should be thinking domestic. Me? I would say fine than lets bail and i am not building a smelter and developing the underground further. You want it, you got it. We are outta here. Lets call it a wash. Was nothing learned from bouganville?
Timothy Koehler
Yes, and the Rhodesian Copper Belt, and the whole of the South African mining industry. Will Iran be next?
Chris Dupont
Let the Indonesian government buy the mine at a fair market value and run it as efficiently as most 3rd world governments around the world have run mines. They can also build a smelter. We need a boost to the copper price and this will help us immensely.
Randy
Indonesia changes the rules regularly. Whatever agreement is reached, gov officials will be wanting to renegotiate in a few years or sooner. What they really want is bribes, and Freeport can’t bribe because of US law.
j
Blow up the mine and plant…….then wait for the phone call to come save their socialist asses!