[REPORT] Freeport-McMoRan and Indonesia Reach Agreement on MoU Contract
US miner Freeport-McMoRan Copper & Gold Inc. has agreed on a Memorandum of Understanding (MoU) with the Indonesian government over its contract renegotiations, a major step in resuming copper exports from the country.
The dispute between Freeport and Indonesia began when the country introduced a new export tax on Jan.12. The new tax is part of the government’s strategy to force miners to build smelters and processing plants in Indonesia.
"We received the report from the negotiating team who conveyed good news that Freeport have agreed," said chief economic minister Chairul Tanjung.
The draft MoU still needs to be approved by both the cabinent and outgoing President Susilo Bambang Yudhoyono.
"We are happy and expect it will be finalized with an MoU signing,” Tanjung said.
Freeport, which owns the Grasberg complex - the largest gold and copper mine in the world, has been seeking to secure a contract extension with Indonesia for the site beyond 2021.
Government officials for Indonesia have previously stated Freeport can only renew their 2021 deal in 2019 at the earliest, but it seems likely that the miner will be offered a different type of contract when its current deal ends.
Freeport isn’t the only one battling Indonesia over its new mining rule. The country’s top copper producer, Newmont Mining, has also been working on a resolution to the escalating export tax. The company claims the new law conflicts with the mining contract it originally signed.
Both companies have halted copper concentrate exports since January when the government introduced the surprise tax.
Freeport and Newmont Mining, which account for 97 percent of Indonesia’s copper output, have argued in the past they should be exempt from the tax.
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.”