4 Min Read
JAKARTA, July 24 (Reuters) - Indonesia's top two copper miners signalled they are nearing a breakthrough to allow a restart of concentrate exports, which have been halted for more than six months due to a dispute with the Southeast Asian country over new mining rules.
The comments come as Indonesian president-elect Joko Widodo prepares to assume power in October, and will take pressure off the new government to resolve the dispute, which has halted about $200 million a month in copper exports.
Freeport-McMoRan Inc said on Wednesday it expects to "imminently" sign an agreement with Indonesia that would enable it to immediately resume copper concentrate exports.
In a further sign that the deadlock could be nearing an end, Newmont Mining Corp also said it was negotiating a memorandum of understanding that could restart stalled shipments.
Arizona-based Freeport said on July 8 it had agreed on a draft memorandum of understanding with the Indonesian government but had not signed it. At the time, it gave no time frame on when it would resume exports. Indonesia introduced a mineral ore export ban and a steep export tax in January.
"It is a compromise to create a bridge for us so that we can return to normal operations," Freeport Chief Executive Richard Adkerson said of the MoU on an earnings call with analysts and investors.
Under the agreement, Freeport would pay a "significantly reduced" export duty in 2014, 2015 and 2016 but higher royalties on copper and gold sales. It would also pay a $115 million "assurance bond" against development of a smelter, Adkerson said.
Freeport, which owns and operates the massive Grasberg mine, wants financial incentives from the government to build a new smelter. Indonesia imposed the new rules partly to spur construction of smelters in the country, but miners have said building new capacity does not make economic sense.
Adkerson said the negotiations also involve agreeing on terms to extend Freeport's operations beyond 2021, when its current contract with the government expires.
An Indonesian cabinet meeting with outgoing President Susilo Bambang Yudhoyono was due to discuss the issue later on Thursday.
News of a potential breakthrough caused little immediate market reaction. Copper on the London Metal Exchange (LME) was trading flat at $7,043.75 a tonne in early Asian trade.
A North America-based concentrates trader said any resumption in exports from Indonesia would not be enough to dramatically increase supply, but would renew expectations of an oversupply in the market.
"A lot of pepole expected the market to be oversupplied," he said, adding that recent delays to mine output expansions had led to tighter conditions.
The two U.S. mining giants account for 97 percent of Indonesia's copper production. While Freeport had engaged in behind-the-scenes talks, Newmont suspended operation at its Batu Hijau mine and filed for international arbitration, drawing a rebuke from the Indonesian government.
"We hope to reach an agreement with the government of Indonesia on an MoU or memorandum of understanding, which we would expect would lead to issuance of an export permit," Newmont spokesman Omar Jabara said on Wednesday.
He did not give details on terms or when exports could resume. Officials from Newmont's Indonesian unit have been in ongoing meetings with the government, he added.
Indonesia's president-elect Widodo said on Tuesday he planned to sit down with Freeport and other miners to resolve a minerals row, which has halted $500 million of exports a month in Southeast Asia's biggest economy.
Reporting by Allison Martell in Toronto and Nicole Mordant in Vancouver; Editing by Amran Abocar, Richard Chang and Richard Pullin