PHOENIX--(BUSINESS WIRE)--
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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170203005387/en/
Source: Freeport-McMoRan Inc.