Indonesia and free port agree on mining licenses, ending years of conflict
Aug 31, 2017

Indonesia and free port agree on mining licenses, ending years of conflict

According to foreign news August 29th, Indonesia and free port Mike ink roentgen copper & Gold (Freeport-McMoRan Inc) agreed Tuesday, free port will continue to operate its Grasberg copper and gold, but the ownership of the transfer of the mine 51%, which means that the mining giant with the Indonesian government between the years of strife ended. Since the late 2009, Freeport and the Indonesian government have ordered a new mining permit for the Grasberg mine, when the government approved the revised mining law. Grasberg is the second largest copper mine in the world.

The free port has agreed, the free port company said on Tuesday, "the president requires 51% of the share of ownership.". "

Freeport, the world's largest listed copper producer, says it will continue to operate the Grasberg mine.

Shares fell 5.6% on Tuesday.

Indonesia's energy and mining resources minister Ignasius Jonan, Freeport can apply immediately, the validity of the license is extended for ten years until 2021. Richard Adkerson, chief executive of Freeport, participated in the conference. "There's only time left to discuss," says Jonan. The question of price will be discussed later." "The two sides are committed to the completion of the contract documents as soon as possible, as far as possible in 2017 to complete." Indonesia's revised regulations require the miners to sell 51% of their shares, abandon the right to arbitration and pay new taxes. Before free port, it insisted on the same funds and legal protection as those stipulated in the current contract.

Freeport will also build second smelters in Indonesia and plan to invest $170-200 in the Grasberg mine by 2031.

Clarksons Platou bond analyst Jeremy Sussman, "this is a positive news in the short term, the two sides reached an agreement to enable free port in a period of time to achieve the export of copper concentrate.". "But the company's further investment of about $20 billion at the Grasberg mine is still beyond market expectations. "Grasberg copper production accounts for 1/4 of the company's total output, and the huge untapped resources of the mine and an agreement with Indonesia are very important to the free port. It also means a return to the tough position of the mine's local government during the boom in commodity prices.

Ignasius Jonan, Minister of energy and mining resources of Indonesia, Freeport can immediately apply for a 10 year extension of mining permission and apply for a second mining permit extension by 2031. If the two sides fail to reach an agreement before the current temporary license expires in October, the free port's copper concentrate export business in Indonesia is at risk of further disruption. Free port Grasberg copper mine produced 2/3 of the copper concentrate used for export, and the remaining 1/3 processing in indonesia. Before the free port, there was long consultation with the Indonesian government in terms of the quantity and price to be sold, and the construction of a new smelter to extend the mining contract for 30 years. At present, the validity of the mining contract is only four years.

Adkerson said that all issues will be resolved before the current contract will work, but he stressed that the free port has made concessions.

"We want to stress that the 51% stake and the establishment of second smelters are the biggest concessions we make," Adkerson said."

Adkerson was also involved in talks with the Indonesian government, which he said on January that the government's selling request was "a disguised form of confiscation."".

According to Indonesian law requirements, Freeport companies need to hold 41.64% of the Indonesian company's stake to the local entities, after 9.36% of its Indonesian shares have been resold to the Indonesian government.

In 2016, Freeport had planned to sell 10.64% of Grasberg ore, valued at $1 billion 700 million, while the Indonesian government offered only $630 million for the shares. The Indonesian government has the legal profession, "how to mine the 51% stake in the valuation and when the transfer of shares will definitely become a problem, this problem must be resolved in both sides, will eventually end the dispute." Argonaut Stockbroking mining analyst James Wilson, if the mine is not copper, it is estimated that the matter will be another outcome. "Given the long term outlook for copper prices, and the free port company has invested tens of billions of dollars in the mine, the free port has a 49% stake in the mine, better than empty handed. "We want the management to agree with the government and bring the workers to an end," the miners leader said on Tuesday. "

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