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Freeport Working With Indonesia to Clarify Ore Export Ban

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Dec. 13 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc., the owner of the Grasberg mine in Indonesia, said it’s working “cooperatively” with the government to clarify the situation surrounding a ban on unprocessed raw-material exports.

The company intends to abide by the terms of its contract of work, which allows it to operate the copper and gold mine, the Phoenix-based company said yesterday in an e-mail. It’s also committed to studying the viability of constructing additional smelting capacity in the country, it said.

Indonesia plans a blanket ban on shipments of raw mineral ores after Jan. 12 to increase the value of commodity exports and encourage development of the local processing industry. The prohibition, ordered by the 2009 Mining Law and backed by parliament last week, helped spur a rally in global metal prices, including copper and nickel.

“We intend to honor and abide by our contract of work which allows the company to export concentrates and to promote economically feasible downstream investments,” Freeport said in the statement. The company ships the material under long-term agreements to international smelters and “will continue to honor these contracts,” it said.

Copper advanced 1.2 percent this week and nickel climbed 1.7 percent, reaching the highest level in more than a month, amid concern over the ban. Freeport operates the world’s second-largest copper mine in Indonesia. The country is also the biggest mined nickel producer, the top shipper of tin and the leading supplier of bauxite to China.

Government Commitment

PT Freeport Indonesia will have to cut mine production to about 40 percent of maximum capacity and lay off workers if the ban is fully imposed, President Director Rozik B. Soetjipto, said Dec. 6. Part of the mine’s supply goes to PT Smelting, the country’s only copper smelter.

The government is committed to imposing the export ban as mandated by the mining law, Bachrul Chairi, director general of foreign trade at the Trade Ministry, said in a text message this week. Nine metal smelters are expected to start operations by the end of 2014, he said.

The prohibition applies to all mining companies, including contract of work holders such as Freeport and Newmont Mining Corp., Chairi said in his text message. Government regulations regarding the purity of metal content mean their concentrate products are not allowed for export, he said.

Supply Agreements

PT Newmont Nusa Tenggara is willing to discuss setting up a consortium with the government and other companies to study the possibility for additional smelting, President Director Martiono Hadianto said Dec. 10. Newmont runs the Batu Hijau copper and gold mine on Sumbawa island.

“While our contract of work guarantees our right to export copper concentrate, and even though PTNNT’s operation complies with the requirements of the Mining Law, we are prepared to take other reasonable steps to support the policy,” said Hadianto. Newmont has signed concentrate supply agreements with two Indonesian companies planning to build smelters, he said.

Copper for delivery in three months fell 0.3 percent to $7,204 a ton on the London Metal Exchange today. Nickel was little changed at $14,008 a ton.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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