Freeport inches closer to a deal with Indonesia
Shares of Freeport-McMoRan climbed to a 16-month high on the news from Indonesia that the government is closer to finalizing a deal with the company about the long-term future of the Grasberg Mine.
Some issues are yet to be resolved, but there are positive signs for Freeport-McMoRan, the world’s largest publicly traded copper mining company, that the a new operating permit will be put in place.
Reuters reported that Indonesia has agreed to a special mining permit with Freeport that will grant the miner operating rights for its Grasberg Mine in Papua province through 2021, Energy and Mineral Resources Ministry Secretary-General Teguh Pamuji said.
“(But) the special mining permit hasn’t been signed yet,” Pamuji told reporters.
Once the permit is finalized, Freeport-McMoRan would be allowed to apply for two 10-year extensions to the mining permit for Grasberg beyond 2021, he said.
The company’s current permit expires in October.
In addition to the permit, there are still four areas the two sides hoped to resolve by October.
Freeport and the finance ministry must come to terms on the requirement for the company to divest a 51 percent stake in its Indonesian unit. The two sides must also discuss a fiscal stability agreement guaranteeing tax and royalty payments that Freeport wants before agreeing to give up its current contract.
The two parties also need to hash out how the operations will be extended past the 2021 expiry of the special permit and the construction of a smelter at the Grasberg site, the world's second-biggest copper mine.
Freeport Chief Executive Officer Richard Adkerson warned that the company is prepared to take the dispute to arbitration if negotiations fail, but said neither party wanted that outcome.
“There is a mutual sense of optimism,” Adkerson told analysts on a conference call.