UPDATE: Freeport-McMoRan Finalizes Deal with Indonesia
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has put the finishing touches on a new contract with the Government of Indonesia to resume mineral concentrate exports. After six months of disparity, the US miner can recommence operations and exports within two week of the signing.
“We are pleased to report the resumption of normal operations and the completion of an MOU to enable continuing benefits of the Grasberg operations for the Government, the local communities in Papua, our large Indonesian workforce and our shareholders. We value our long-term partnership with the Indonesian government and look forward to continuing success of the Grasberg operation,” said Richard Adkerson, President and Chief Executive Officer of Freeport.
The deal calls for Freeport to increase royalties on gold and copper, commit to smelter development and pay export duties on concentrate exports.
According to Director General of Coal and Mineral Resources Sukhyar, Freeport will provide a $115 assurance bond in its commitment to building a smelter. The increase in royalty payments will go up half a percent for copper and almost three percent for gold.
The agreement also includes a mineral export tax on concentrates of copper, iron, zinc, and manganese. Linked to the progress of a smelter, the tax will begin at 20 percent and rise all the way to 60 percent until a complete ban on exports is imposed. The government said it would consider lowering the rates for companies that commit funds for new smelter
Freeport will pay a 7.5 percent tax on copper exports until one-third of its smelter plant is completed. The company is estimated to export more than 750,000 tons of concentrate, valued at $1.56 billion.
The company plans to make a $7.1 billion investment in the Grasberg Mine if the government of Indonesia extends its contract by 20 years. The mine is the world’s largest gold mine and third largest copper mine.
Gerald Group resolves iron ore dispute with Sierra Leone
Gerald Group, the US commodity trader, will pay Sierra Leone $20mn and cede a 10% stake in an iron ore project as part of the resolution to a nearly two-year dispute that led to the shutdown of production, the two sides revealed.
Gerald's wholly-owned subsidiary SL Mining filed for arbitration in August 2019 over a royalty payment dispute and suspended the Marampa mine the following month. Sierra Leone's government responded by cancelling its mining licence.
As part of the agreement signed on Friday, Sierra Leone will take a non-dilutable 10% stake in a new company that will replace SL Mining and resume operations at Marampa by June 1, Gerald said in a statement.
Gerald will make two $10mn payments this year and will have the immediate right to ship its current stockpile of about 707,000 tonnes of iron ore, it said.
Both sides will withdraw their legal claims before the International Chamber of Commerce (ICC) and International Centre for Settlement of Investment Disputes (ICSID), the statement added.
Gerald’s chairman and CEO Craig Dean commented: "I am delighted that we have been able to resolve our differences and have a fresh start and new beginning with the government of Sierra Leone."
Sierra Leone's Mines Minister Timothy Kabba told a news conference on Tuesday that the agreement was a milestone for the country.
"Whatever the pain we may have borne or dreaded throughout these two years ... this outcome justifies our action," he said.
Gerald estimates that Marampa holds about 1 billion tonnes of iron ore with a potential lifespan of 30 years.
Back in 2019, Dean spoke with Mining about the development of Marampa and commented: "SL Mining offers a substantial opportunity for Gerald Group as our Marampa mine in Sierra Leone is producing two million tonnes per annum of high grade iron ore in the first phase of development, with expansion possibilities of greater than six million tonnes per annum of high-grade iron ore during its operational life. If you analyse the iron ore market it has transformed, even from a couple of years ago when prices were very low. Now prices have stabilised we’re in a favourable position with our first shipments leaving for China.
"Our goal is to make ‘Marampa Blue’ an internationally recognised premium grade iron ore brand. We intend to expand the delivery of high-grade 65% iron ore concentrate to markets in Europe and Africa.”