Freeport cuts Grasberg copper output

Production of concentrate by Freeport McMoRan at the Grasberg Copper Project in Papua province of Indonesia has been halted and the company has started sending workers home. The halt comes as a dispute with the government over concentrate has led to storage sites at the project becoming full.

On January 12 Indonesia introduced rules restricting copper concentrate exports in a bid to boost its domestic smelting industry. Freeport has not yet reached agreement with the government on a new mining permit.

Freeport previously stated that the suspension of concentrate exports would require Grasberg, the world’s second largest copper mine, to cut output by around 70 million pounds of copper per month.

The halt at Grasberg has helped push up prices for copper and comes at the same time as a stoppage at the world’s biggest copper mine, Escondida, in Chile.

“The processing plant has not been producing concentrate since last Friday,” Freeport Indonesia spokesman Riza Pratama told Reuters on Tuesday.

The company previously said it would need to cut production to about 40% of capacity if it did not get an export permit by mid-February, due to limited storage. However, a strike at Freeport’s sole domestic offtaker of copper concentrate, PT Smelting, has limited output options, and Grasberg’s storage sites are full. The strike is expected to last at least until March.

Under new regulations announced in mid-January, Freeport and some other miners could be allowed to keep exporting semi-processed ores and concentrates if they meet conditions including shifting from their current ‘contracts of work’ to so-called ‘special mining permits’, a move that could leave them liable to paying more in taxes.

Although the government said last Friday it had issued the new mining permit, Freeport said no agreement had been reached on the terms that were “necessary and critical” for its long-term investment plans, and that an export ban remained in place.

An official at the ministry said this week that Freeport’s exports could resume as soon as next week once it applied for an export permit.

“We have provided a way for them,” Coal and Minerals Director General Bambang Gatot told reporters, referring to the new mining permit. “Their operations can continue,” he said, stopping short of providing details.