PHOENIX (Yosefardi) – Freeport-McMoRan Copper & Gold Inc. (FCX) and Freeport Indonesia are seeking to obtain the administrative permits for 2014 exports, which are currently pending and have been delayed as a result of the new regulations.
In January 2014, the Indonesian government published regulations regarding exports of minerals, including copper concentrates. The regulations provide that holders of contracts of work with existing processing facilities in Indonesia may continue to export product through January 12, 2017, but establish new requirements for the continued export of copper concentrates, including the imposition of a new progressive export duty on copper concentrates in the amount of 25 percent in 2014, rising to 60 percent by mid-2016.
Freeport’s COW, which has a primary term through 2021 and allows for two 10-year extensions through 2041 (subject to approval by the Indonesian government, which cannot be withheld or delayed unreasonably), authorizes it to export concentrates and sets forth the taxes and other fiscal terms applicable to its operations. The COW states that Freeport Indonesia shall not be subject to taxes, duties or fees subsequently imposed or approved by the Indonesian government except as expressly provided in the COW.
The January 2014 regulations conflict with Freeport Indonesia’s contractual rights, and FCX and Freeport Indonesia are working with the Indonesian government to clarify the situation and to defend PT-FI’s rights under the COW.
Freeport Indonesia has complied with the Indonesian government’s requirements on local processing in its COW, which enabled the construction and commissioning in 1998 of the first copper smelter in Indonesia, PT Smelting, an affiliate of Freeport Indonesia. During 2014, approximately 40 percent of Freeport Indonesia’s production is expected to be shipped to PT Smelting, with the balance of its concentrates expected to be sold pursuant to long-term contracts with other international smelters.