Freeport Indonesia: Copper Export Ceased & another Fatal Accident

The severe fall is understandable as over 14 percent of Freeport McMoRan’s total revenue originates from Freeport Indonesia’s production and export-related mining activities at its Grasberg mine, the world's largest gold mine and third-largest copper mine, on Papua. In the first half of 2015 Freeport Indonesia contributed USD $1.4 billion to its parent company’s income. Besides the discontinuation of exports, Freeport is also negatively affected by the low gold price, which is touching a five-year low at USD $1,086 per troy ounce.

Starting from 25 July 2015, Freeport Indonesia’s exports were suspended as the company failed to obtain an extension from Indonesia’s Ministry of Energy and Mineral Resources. The ministry refused to grant the extension as Freeport Indonesia is yet to submit a smelter project work plan and so far only transferred USD $115 million for the establishment of the processing plant while the government had requested 60 percent (approx. USD $170 million) of the total expected required funding as a sign of commitment to construct the smelter.

The construction of smelting facilities is part of Indonesia’s 2009 New Mining law. This new law includes the ban on exports of unprocessed minerals (which came into effect in January 2014), instead requiring Indonesian mining companies to process and refine their mining output domestically (before export is allowed). However, certain miners (including Freeport Indonesia and Newmont Nusa Tenggara) were allowed to resume mineral ore exports after a series of renegotiations with the government. In exchange for a six-month permit to resume copper concentrate exports, Freeport Indonesia has had to pay higher taxes and royalties as well as to start construction of domestic smelting facilities. Each six months, Freeport Indonesia needs to show progress it made with the construction of the smelter before a new export license is issued.

Bambang Gatot Ariyono, Coal & Mineral Director General at the Energy and Mineral Resources Ministry, stated that a new permit will be given to Freeport Indonesia provided that the miner complies with the government’s demands.

Another Fatal Accident at the Grasberg Mine

Unrelated to the above story, Indonesian news agency Tempo reported that a Freeport Indonesia worker died after falling off a conveyor belt on Saturday (25/07) at the Grasberg mine. There have been a number of fatal accidents at the Grasberg mine which indicate a lack of sufficient safety standards. In September 2014 four workers died due to a truck collision. In May 2013, 28 workers died after a tunnel collapsed.

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