Metals News
Copper Miner Freeport Concerned about Indonesia
industry news
May 16,2012

May 15 (Reuters) - The head of Freeport-McMoRan Copper & Gold said he was concerned about violence around its vast mine in Indonesia but was confident the company could resolve issues with the Jakarta government over moves to limit foreign miners' operations and profits.

Richard Adkerson, president and chief executive of the world's largest publicly-traded copper company, said he just returned from talks with the government in Indonesia, where the U.S. company operates the huge Grasberg mine.

"We are concerned about what is going on in Indonesia," Adkerson told analysts and investors at a Bank of America Merrill Lynch metals and mining conference in Miami on Tuesday.

"Number one is the security element. There have been acts of violence and that is my biggest concern," he said in comments monitored via webcast by Reuters in New York.

"Also, we had a new situation with our workforce last year," he said, referring to a three-month strike that affected Grasberg production, denting 2011 and first-quarter 2012 earnings and prompting the company to declare "force majeure," under which it cannot be held to contractual obligations.

"As companies become more profitable, demands from workers increase," Adkerson said.

During the strike, the mine on Papua island was blockaded, a major pipeline to a port was sabotaged, and violent clashes erupted between police, protesters and militants seeking Papuan independence from Indonesia.

Adkerson's comments came after the Indonesian Trade Ministry announced plans on Friday to set a new quota for mineral exports, limiting mining companies to their 2009 or 2010 export volumes. A week earlier, Indonesia said it would impose a 20 percent export duty on all metal ores.

The Jakarta government is also seeking to renegotiate foreign mining contracts, increase royalties, and give Indonesian interests a bigger stake in foreign miners' operations.

Adkerson said Freeport, which has operated Grasberg since the 1970s, was confident about its contract. It has the right to work there until 2021, with the option for two 10-year extensions, he said.

Although "voices in Indonesia" are calling for more royalties, taxes and divestiture, among other things, "we are dealing with those issues in discussions with the government," Adkerson said.

"I am confident we can work it out," he said, noting Indonesia benefits by getting about 50 percent of the profits from Grasberg.

He said the Grasberg open pit was nearing the end of its life and would likely be depleted in 2016, but Freeport was replacing it with underground operations.

Although Grasberg operations were returning to normal, he did not say when the company might lift the force majeure. Last month he said it would not be until operations returned to normal, perhaps in the second quarter.

Freeport shares slipped 2 percent to $33.61 in morning trading on the New York Stock Exchange as the copper price hovered above a four-month low of $3.50 per pound.


Freeport; Indonesian copper mine
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