Freeport says Indonesian unit may need to declare force majeure

Freeport McMoRan Copper & Gold has said its Indonesian operation may need to declare force majeure on concentrate sales if ongoing issues with the government related to new export taxes continue for an extended period.

Freeport McMoRan Copper & Gold has said its Indonesian operation may need to declare force majeure on concentrate sales if ongoing issues with the government related to new export taxes continue for an extended period.

“[PT Freeport Indonesia] is engaging with the government of Indonesia to reach a resolution that would enable PT-FI to resume normal operations as soon as possible,” Freeport said in its annual report filed with the US Securities and Exchange Commission on Thursday February 27.

“In the event that PT-FI is unable to resume normal operations for an extended period, we plan to consider further actions, including constraining operating costs, deferring capital expenditures and implementing workforce reductions,” the miner said. “PT-FI may also be required to declare force majeure under its concentrate sales agreements.”

The spread on copper treatment and refining charges (TC/RCs) agreed in spot concentrate sales had widened in early February as traders bid aggressively for clean material on possible concentrates supply squeeze, among other reasons, in the wake of the Indonesian exports restrictions, Metal Bulletin had reported earlier.

Chinese smelters are buying spot material at TC/RCs between $100 per tonne/10 cents per lb and $105/10.5 cents.

Freeport and Newmont Mining have said that the progressive export tariff introduced by the Indonesian government this year is against their right under the respective contracts of work (COW).

Separately, Newmont has said it may have to cut back operations at its Batu Hijau copper mine in Indonesia if it is unable to resolve these issues.

The new export tax regulation calls for an increase in tariff for the copper miners from 25% now, to 60% by the second half of 2016.

“PT-FI’s COW authorises it to export concentrates and specifies the taxes and other fiscal terms available to its operations,” Freeport said adding, “the COW states that PT-FI shall not be subject to taxes, duties or fees subsequently imposed or approved by the Indonesian government except as expressly provided in the COW.”

“Additionally, PT-FI complied with the requirements of its COW for local processing by arranging for the construction and commissioning of Indonesia’s only copper smelter and refinery, which is owned and operated by PT Smelting,” it added.

The miner said PT-FI is also seeking to obtain the required administrative permits for 2014 exports, which have been delayed as a result of the new regulations.

“As of February 21, 2014, PT-FI has not obtained administrative approval for 2014 exports,” the company said, adding that it has made some near-term changes to its operations to coordinate its concentrate production with PT Smelting’s operating plans.

Since mid-January 2014, PT-FI’s milling rate has averaged about 112,000 metric tons of ore per day, which is about half of normal rates, the miner said.

State-owned miner PT Antam has held several informal discussions with Freeport McMoRan Copper & Gold and Newmont Mining about building a copper smelter in Indonesia.

PT-FI’s production, including joint venture partner’s share, totalled 420,900 tonnes of copper and 1.14 million oz of gold in 2013, compared with 315,200 tonnes of copper and 862,000 oz of gold in 2012.

Freeport directly owns 81.28% of the outstanding common stock of PT-FI and indirectly owns 9.36% through wholly-owned subsidiary, PT Indocopper Investama. The Indonesian government owns the remaining 9.36%.

Shivani Singh
Twitter: @ShivaniSingh_MB

What to read next
Following a six-week consultation period, Fastmarkets can confirm it will amend the calculation method for all the average functions on the Fastmarkets platform from Wednesday March 1, 2023.
Consolidation, the recycling of electric vehicle batteries, US steel exports and the benefits of sustainable steelmaking were key talking points at Fastmarkets’ Scrap & Steel 2023 conference in Dallas in January
Green shoots of increased demand will emerge in US ferrous markets courtesy of the Biden administration’s trillion-dollar infrastructure package in 2023, Schnitzer’s executive vice president and chief strategy officer Richard Peach said at Fastmarkets’ Steel and Scrap Conference 2023 in Dallas, Texas
US special bar quality steel prices rose in January in line with rising scrap and alloy costs, according to market participants
European metal industry association Eurometaux has called on the European Commission to follow the lead shown by the Inflation Reduction Act and deliver a “powerful” policy to support the industry in the EU while it tries to keep up with the move to a new generation of energy markets
The fallout from Russia’s invasion of Ukraine is changing global trade flows for bauxite, with Brazilian material once again flowing into China and with the introduction of export restrictions elsewhere likely to influence availability through 2023
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.