Freeport-McMoRan Inc. (NYSE: FCX) reported today that its
subsidiary, PT Freeport Indonesia (PT-FI), continues to seek
approval from Indonesian authorities for the export of its copper
concentrates, consistent with its rights under its Contract of Work
(COW). To date, this approval has not been granted.
Richard C. Adkerson, FCX President and Chief Executive
Officer, and Chappy Hakim, PT-FI President Director, said: “We have
been actively engaged with Indonesian governmental authorities to
enable full operations at PT-FI to continue without disruption.
This would be in the best interests of all stakeholders, including
the Government of Indonesia, our large work force, the local
community, local suppliers and Freeport’s shareholders. We are
disappointed that this matter remains unresolved and are concerned
about the negative impacts for all stakeholders, especially for our
workforce and the local economy. We encourage the Government to
enable our full operations to continue without disruption and to
provide the required assurances to support our long-term investment
programs so these negative impacts can be avoided.”
As previously reported, the Indonesian government issued new
regulations in January 2017 to address exports of unrefined metals,
including copper concentrates and anode slimes, and other matters
related to the mining sector. The new regulations permit the
continuation of copper concentrate exports for a five year period
through January 2022, subject to various conditions, including
conversion from a contract of work to a special operating license
(an IUPK), commitment to completion of smelter construction in five
years and payment of export duties to be determined by the Ministry
of Finance. In addition, the new regulations enable application for
extension of operating rights five years before expiration of the
IUPK and require foreign IUPK holders to divest 51 percent to
Indonesian interests no later than the tenth year of production.
Export licenses would be valid for one-year periods, subject to
review every six months, depending on smelter construction
progress.
The January 2017 regulations permit the export of anode slimes,
which is necessary for PT Smelting (PT-FI’s 25 percent owned copper
smelter and refinery located in Gresik, Indonesia) to continue
operating. PT Smelting is seeking to renew its anode slimes export
license. Delays in obtaining this license could further impact
PT-FI’s operations in a significantly negative fashion.
Following the issuance of the January 2017 regulations and
discussions with the Government, PT-FI advised the Indonesian
Government that it was prepared to convert its COW to an IUPK,
subject to obtaining an investment stability agreement providing
equivalent rights with the same level of legal and fiscal certainty
enumerated under its COW. This is consistent with a letter to PT-FI
dated October 7, 2015, in which the Government warranted that,
following the issuances of new regulations, it would promptly grant
an extension of PT-FI’s contract with the same rights and same
level of legal and fiscal certainty contained in the COW.
In addition, PT-FI advised the Government that it is committed
to commence construction of a new smelter following approval of the
extension of its long-term operating rights. PT-FI requested that
concentrate exports be permitted without the imposition of a duty
while the new license and stability agreement are negotiated. The
COW would remain in effect until it is replaced by a mutually
satisfactory alternative.
To date, the Government has not granted continuation of exports.
The Government has indicated that in order to export its
concentrate production, PT-FI would be required to immediately
convert to an IUPK, forgo its current rights to fiscal and legal
certainty and commit to a new smelter prior to completing a
long-term investment stability agreement. PT-FI has advised the
Government that it cannot accept these conditions unless a mutually
satisfactory replacement agreement is completed.
A continuing delay in obtaining rights to export its copper
concentrates will require PT-FI to undertake near-term actions to
reduce production to match available domestic capacity at PT
Smelting, which processes approximately 40 percent of PT-FI’s
concentrate production. Under the reduced operating plans, PT-FI
will be required to significantly adjust its cost structure, reduce
its work force and spending with local suppliers, and suspend
investments on its underground development projects and new
smelter. For each month of delay in obtaining approval to export,
PT-FI’s share of production is projected to be reduced by
approximately 70 million pounds of copper and 70 thousand ounces of
gold.
Under its COW, PT-FI has specified rights to export copper
concentrate without restriction or payment of export duties. PT-FI
is considering alternatives to enforce its contractual rights while
it continues to work in good faith to reach a mutually satisfactory
agreement with the Indonesian Government.
FCX is a leading international mining company with headquarters
in Phoenix, Arizona. FCX operates large, long-lived, geographically
diverse assets with significant proven and probable reserves of
copper, gold and molybdenum. FCX is the world’s largest publicly
traded copper producer.
FCX’s portfolio of assets includes the Grasberg minerals
district in Indonesia, one of the world’s largest copper and gold
deposits; significant mining operations in the Americas, including
the large-scale Morenci minerals district in North America and the
Cerro Verde operation in South America. Additional information
about FCX is available on FCX’s website at “fcx.com.”
Cautionary Statement Regarding Forward-Looking
Statements: This press release contains forward-looking
statements, which are all statements other than statements of
historical facts. The words “anticipates,” “may,” “can,” “plans,”
“believes,” “estimates,” “expects,” “projects,” “targets,”
“intends,” “likely,” “will,” “should,” “to be,” “potential” and any
similar expressions are intended to identify those assertions as
forward-looking statements. FCX cautions readers that
forward-looking statements are not guarantees of future performance
and actual results may differ materially from those anticipated,
projected or assumed in the forward-looking statements. Important
factors that can cause FCX’s actual results to differ materially
from those anticipated in the forward-looking statements include
FCX’s ability to secure regulatory approvals, the outcome of
ongoing discussions with the Indonesian Government regarding
PT-FI’s COW, the potential effects of violence in Indonesia
generally and in the province of Papua, industry risks, regulatory
changes, political risks, labor relations and other factors
described in more detail under the heading “Risk Factors” in FCX’s
Annual Report on Form 10-K for the year ended December 31, 2015,
filed with the U.S. Securities and Exchange Commission (SEC) as
updated by FCX’s subsequent filings with the SEC.
Investors are cautioned that many of the assumptions upon which
FCX’s forward-looking statements are based are likely to change
after the forward-looking statements are made, including for
example commodity prices, which FCX cannot control, production
volumes and costs, some aspects of which FCX may not be able to
control. Further, FCX may make changes to its business plans that
could affect its results. FCX cautions investors that it does not
intend to update forward-looking statements more frequently than
quarterly notwithstanding any changes in its assumptions, changes
in business plans, actual experience or other changes, and FCX
undertakes no obligation to update any forward looking
statements.
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version on businesswire.com: http://www.businesswire.com/news/home/20170203005387/en/
Freeport-McMoRan Inc.Financial Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint, 504-582-4203orMedia Contact:Eric E.
Kinneberg, 602-366-7994
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