Peru’s small miners block highways, camp outside Congress demanding registry extension
Analyst says that there are strong competing interests between Congress and small-scale miners that could escalate.
The deposit was first discovered in the 1930s and Freeport McMoRan has been mining copper, silver and gold at Grasberg in remote Indonesia since the 1970s. In terms of reserves, Grasberg is still the richest deposit on the planet
Shares in copper and gold giant Freeport-McMoRan (NYSE:FCX) were trending lower on Thursday after reports that Indonesia is likely to delay a decision on extending the licence for its giant Grasberg mine beyond 2021.
Luhut Panjaitan, co-ordinating minister for political, legal and security affairs, and one of president Joko Widodo’s closest aides, told the Financial Times a decision would only be made in 2019 according to local regulations, seemingly contradicting promises made in October to extend “the same rights and the same level of legal and fiscal certainty provided under its contract of work.” Those assurances from Jakarta came in the run-up to a visit by Widodo to Washington.
The extension of the licence is also part of a requirement by Jakarta that Freeport sell more than 10% of its operating unit inside the country to the government of the South East Asian nation, which already owns 9.4%.
That offer had a deadline of October 14, but the matter was further complicated by reports Indonesia has began investigating claims that senior officials extorted payments from the Arizona-based company in return for safeguards about its right to mine. It’s alleged that the speaker of the parliament wanted a 20% stake in Freeport Indonesia to be sold to Widodo and the country’s vice president.
The company said in January it planned to invest $17 billion to build a smelter following new laws banning the export of unprocessed ore and steep concentrate export taxes. Last year Freeport and Denver-based Newmont Mining’s exports were halted for more than six months during negotiations over compliance with the new regulations. Indonesia, the region’s second largest economy after China, represents more than 8% of Freeport’s revenue, but the company expects lower production this year due to the effects of the El Nino weather phenomenon. Together the US mining companies account for more than 90% of the country’s copper exports.
Freeport, which vies with Chile’s state-owned Codelco as the world number copper miner in terms of output, announced in October that it’s trimming its board and is reviewing its oil and gas business in a return to its roots as a copper-focused miner. A month earlier the company became the first major copper miner to announce its slashing capex and production to cope with the depressed copper price.
Freeport was worth $9 billion on the New York Stock Exchange on Thursday, but for the year to date the stock has lost more than two-thirds of its value as it struggles to cope with a slide in the copper price to six-year lows, a weaker gold price and continued weakness in oil and gas prices.
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dude
Sovereign risk at its finest.