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Jakarta Post

Freeport, Newmont'€™s sales slump as export policy begins to bite

  • Raras Cahyafitri

    The Jakarta Post

  /   Sat, April 26, 2014   /  12:08 pm

Copper-mining giant PT Freeport Indonesia'€™s production dropped while another major copper miner PT Newmont Nusa Tenggara (NNT) was unable to sell its products in the first quarter of this year following the government'€™s ban on unprocessed-ore exports.

Freeport Indonesia, a subsidiary of US Freeport-McMoRan Copper & Gold Inc., reported that its copper production fell 36 percent in the first three months of the year to 140 million pounds, compared to 219 million pounds in the same period last year.

Gold production also fell but more slightly to 208,000 ounces during the January-to-March period of the year from 212,000 ounces year-on-year.

Low production has squeezed Freeport Indonesia'€™s sales, as it only sold 109 million pounds of copper and 162,000 ounces of gold during the first quarter of the year, down by almost 45 percent and 15 percent, respectively, from the same period a year earlier.

In a report released on Thursday evening, the company attributed the lower sales to lower milling rates as a result of the restrictions on concentrate exports from Indonesia, which resulted in the deferral of approximately 125 million pounds of copper and 140,000 ounces of gold in the first quarter of 2014.

Freeport Indonesia is expected to resume exports next month to meet its sales target of 0.9 billion pounds of copper and 1.5 million ounces of gold from its Indonesian mines by year-end.

'€œTo the extent Freeport Indonesia is unable to resume exports in May 2014, this will result in a deferral of approximately 50 million pounds of copper and 80,000 ounces of gold per month,'€ the company said.

As a result of the 2009 Mining Law, the government banned the export of raw ore as of January.

Semi-finished minerals such as concentrates can continue to be exported until 2017 if mining companies are committed to building smelters either on their own or in cooperation with others.

Freeport Indonesia is currently working on a feasibility study to build a copper smelter and has already signed several agreements to supply its concentrates to other smelters to be built by other firms.

NNT has also signed a deal to supply its concentrates to domestic smelters.

Apart from the commitment, concentrates sellers are also required to pay progressive export duties, starting at 20 percent rising to 60 percent by 2016, to resume their exports. The companies have criticized the duties and are seeking reductions.

Earlier this week, the government said that it would consider reducing the duties should companies show progress in smelter development.

The extent of the reductions is currently being formulated and is expected to be announced as early as next week.

NNT, which also released its performance figures on Thursday evening, said it had to stockpile its concentrates because it was unable to export despite increased production. The company said it was unable to export around 2,000 ounces of gold and 2,500 tons of copper as a consequence of the new regulation.

The company produced a total of 8,000 ounces of gold and 10,000 tons of copper at its Batu Hijau site in the January-March period this year, up 14 percent and 11 percent, respectively, from the same period a year ago.

'€œAt this time, operations continue at Batu Hijau. However, to the extent there are continued delays in obtaining approval for 2014 exports, NNT will implement contingency plans to scale back production taking into consideration copper-concentrate storage capacity and in-country smelter availability, which would impact the company'€™s ability to achieve its outlook,'€ Newmont said in the report.

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