Freeport Says Poised to Overcome Indonesia Export Hurdle

  • Discussions continue ahead of Thursday's expiration, says CEO
  • Minister asks `where's the commitment?' if no deposit

Freeport-McMoRan Inc. said it’s confident of securing a new license to ship copper from Indonesia as the deadline for talks with the government approaches.

Discussions continue on extending the current export permit, which expires on Thursday, Chief Executive Officer Richard Adkerson told analysts on a conference call Tuesday.

To prevent a possible halt in exports from its Grasberg mine in Papua province, the Indonesian government said it asked Freeport for a $530 million deposit toward building a new smelter. In Tuesday’s call, Adkerson confirmed that a “substantial” deposit had been requested in exchange for extending the export permit.

“We have responded that our view is that’s inconsistent with the understanding we had with the government,” Adkerson told analysts. The timing for future capital expenditures in Indonesia continues to be reviewed, he said.

Indonesia’s Energy and Mineral Resources Minister Sudirman Said told reporters in Jakarta on Wednesday that the government’s priority is to ensure operations continue so that the local economy is unaffected. He said the $530 million would be proof of Freeport’s commitment to the smelter. “If that can’t be fulfilled, then we have to ask: where’s the commitment?” he said.

‘Very Confident’

“We are presently very confident that we are going to get this export permit arranged for us,” Adkerson said on Tuesday’s call. “But if there was any aspect of our work with the government of Indonesia that would change that, then, unfortunately, we’d be forced to curtail development activities, curtail employment, take actions to preserve our company.”

Meanwhile, the Phoenix-based company is committed to building the smelter and is also confident its contract of work, which expires in 2021, will be renewed. Freeport recently received a “reaffirmation” of the Indonesian government’s commitment to moving forward to extend the contract, he said.

Handing over $530 million would undermine the CEO’s efforts to shore up the company’s balance sheet amid the worst commodities rout in a generation, which has led to five straight quarters of losses and a 78 percent share price plunge in the past year. For Indonesia, a halt at the giant Grasberg mine would costs jobs and tax revenue.

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