Indonesia's Tax Break Helps Bridge Deal with Freeport-McMoRan
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is set to resume mining operations in Indonesia after the country offered a tax concession to end the six-month dispute over copper exports.
The new tax incentives will cut the levy on mineral concentrate exports to less than 10 percent for miners that guarantee to build a smelter. As construction of the smelter progresses, the export tax falls to zero.
Freeport-McMoRan said on Wednesday the signing of a memorandum of understanding (MOU) to resume exports was imminent.
"It is a compromise to create a bridge for us so that we can return to normal operations," Freeport Chief Executive Richard Adkerson said.
The US miner, which owns the largest copper mine in the country, will become the first company to take the deal.
While Freeport enjoys the success of overcoming Indonesia’s tax obstacles, Newmont Mining hasn’t been so lucky.
After suspending operations at its Batu Hijau mine in June, the company filed for international arbitration earlier this month. In response, Indonesia threatened to terminate their mining contract if the company didn’t withdraw its lawsuit.
"There have been no MOU discussions with Newmont. None at all," Coal and Minerals director general Sukhyar said on Thursday.
"The government's position is we will face them in court."
Since winning Indonesia’s presidential elections, Joko Widodo has vowed to resolve the six-month dispute, which has exhausted government mining revenue. The ban on exports has halted roughly $500 million of monthly mineral ore and concentrate exports.
Freeport and Newmont are Indonesia's top copper miners, and account for 97 percent of the nation's copper output.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”