The Indonesian mineral export ban is turning into a bit of a soap opera lately.
First we had worry that all Indonesian mining production would be affected. Including significant amounts of copper produced here by companies like Freeport-McMoRan.
Then we had relief. When it was announced that copper would be exempted from the ban through to 2017. Making it appear that producers were out of the woods.
But last week that rosier outlook became less certain. When Freeport said it may still cut its Indonesian copper production–despite the metal falling outside of the new export rules.
The company outlined such plans in an internal memo obtained by Reuters. Within which Freeport’s management notes that “uncertainty associated with new… regulations related to exports require that we adjust our near-term operating plans.”
The company stated it will therefore halt some of the mining activity at its massive Grasberg copper operation.
The hesitancy undoubtedly stems from new taxes imposed on copper production by the government. Under the new rules, exports of unprocessed copper will still be allowed–but will be subject to an escalating tax. Which reaches a rate of 60% over the next couple of years.
That’s a big bite of profits. Certainly enough to give copper miners like Freeport pause for thought.
Reports are that Freeport and fellow copper producer Newmont met with the government last week to discuss possible ways forward with their operations. We’ll see if those talks bear any fruit.
But until we get word, we should consider at least some of Indonesian copper output still in jeopardy. As are shipments of nickel, bauxite and tin that didn’t receive an exemption from the new export rules.