PHOENIX, AZ, July 25, 2014 – Freeport-McMoRan Inc. (NYSE: FCX) announced today that its Indonesian subsidiary PT Freeport Indonesia (PT-FI) received approval from the Government of Indonesia to resume exports of copper concentrates. PT-FI will resume full operations immediately and concentrate exports are expected to commence in August 2014.
PT-FI has entered into a Memorandum of Understanding (MOU) with the Government of Indonesia under which the Government and PT-FI have agreed to negotiate an amended Contract of Work (COW), to be completed over the next six months, to address provisions related to the size of concession area, royalties and taxes, domestic processing and refining, divestment, local content, and continuation of operations post-2021.
Effective with the signing of the MOU, PT-FI has agreed to pay export duties set forth in a new regulation issued in July 2014, to provide a $115 million assurance bond to support its commitment for smelter development and to increase royalties to 4.0% for copper and 3.75% for gold from the current rates of 3.5% for copper and 1% for gold.
On July 25, 2014, the Government revised its January 2014 regulations regarding export duties to incorporate reduced rates for copper concentrate exports for companies engaged in smelter development. The revised regulations provide for duties on copper concentrate exports during smelter development initially at 7.5%, declining to 5% when development progress exceeds 7.5% and 0% when development progress exceeds 30%.
Among other items, MOU provisions to be addressed in the negotiation of the Amended COW include provisions for the development of new copper smelting and refining capacity in Indonesia which will take into consideration an equitable sharing of costs between PT-FI (and any partners in the project) and the Government through fiscal incentives, provisions for FCX to divest to the Government and/or Indonesian Nationals up to a 30% interest (an additional 20.64% interest) in PT-FI at fair value, and continuation of operations from 2022-2041. Negotiations will take into consideration PT-FI's need for assurance of legal and fiscal terms post-2021 for PT-FI to continue with its large scale investment program for the development of its reserves.
PT-FI and the Government will commence immediate negotiations for an amended COW that is
expected to be completed within six months. No terms of the COW other than the duties, smelter bond and royalties described above will be changed until the completion of the amended COW.
James R. Moffett, Chairman of the Board, and Richard C. Adkerson, President and Chief
Executive Officer of FCX, said: "We are pleased to report the resumption of normal operations and the completion of an MOU to enable continuing benefits of the Grasberg operations for the
Government, the local communities in Papua, our large Indonesian workforce and our
shareholders. We value our long-term partnership with the Indonesian government and look
forward to continuing success of the Grasberg operation."