JAKARTA/TORONTO (Reuters) - Freeport-McMoRan Inc said on Friday that an export ban remains in place at its copper mine in Indonesia, the world’s second-biggest, because it has not yet reached agreement with the government on a new mining permit.
Indonesian government officials had earlier told reporters they issued a new mining permit to Freeport and that it could apply for an export permit.
The government banned copper concentrate exports Jan. 12 to try and boost Indonesia’s smelter industry. Freeport said the suspension would reduce output from its Grasberg mine by around 70 million pounds of copper per month.
Concerns grew for global supply on Friday when BHP Billiton declared force majeure after a two-day-old strike at Escondida in Chile, the world’s biggest copper mine, brought production to a standstill. Benchmark copper CMCU3 surged 4.6 percent to close at $6,090 a tonne, the highest since May 29, 2015.
Freeport shares were up 3.6 percent Friday, after the company told Reuters there was no agreement, easing off an earlier 7.5 percent gain, as the Indonesian government announcement signaled a possible end to the export suspension.
Phoenix, Arizona-based Freeport will continue to work with the government, but only agree to a new mining permit with the same fiscal and legal protection in its current contract, said spokesman Eric Kinneberg.
“These conditions are necessary and critical for (Freeport Indonesia‘s) long-term investment plans,” he said in an email. He said that export restrictions contravene a legally-binding contract.
It is expected the new permit will require Freeport to pay taxes and royalties it was previously exempt from and divest up to 51 percent of its Indonesian unit, from 30 percent previously. To date, it has divested 9.36 percent.
Freeport has warned it will have to slash Grasberg production and reduce its 30,000-plus workforce if it does not get a new export permit by mid-February.
Rio Tinto said Thursday it might exit its Indonesia joint venture with Freeport due to the uncertainties.
Grasberg exports were banned for six months in 2014 during a tax dispute. The company agreed to pay higher royalties, divest more of its Indonesian unit, and pay $115 million toward a new smelter in exchange for reduced concentrate export taxes.
Freeport’s new mining permit would be valid until 2021, with an extension option, said Coal and Minerals Director General Bambang Gatot.
“Whether they agree or not, we’ll see,” he said. “Whether there are incentives, we can work on this.”
Reporting by Wilda Asmarini in Jakarta and Susan Taylor in Toronto; Writing by Fergus Jensen and Susan Taylor; Editing by Tom Brown and Grant McCool