The Indonesian government signed an export ban on ore, which took effect at midnight on January 12, 2014. The ban prevents Indonesian mining companies from exporting unrefined ore to smelters outside the country. Unfortunately, there is only one large-scale copper smelter in the country, and it can only handle about half of PTFI’s normal production.
A last minute regulation saved PTFI from the sweeping ban, but it imposed an escalating export tax on the company. According to Reuters, the tax for exporting copper concentrate out of the country is 25%, and will gradually go up to a maximum of 60% by the end of 2016. Analysts are concerned that this ruling will have a devastating effect on PTFI (and many other mining companies).
PTFI released a statement on January 17, 2014, stating that ore production will temporarily cease at their Big Gossan underground mine, normal production will continue at the DOZ underground mine, and ore production will be decreased to 70,000 tons per day at Grasberg’s surface mine (a big drop).
In the meantime, the company continues to diligently and cooperatively work with the Indonesian government to resolve the issue. We’re hoping things are resolved soon, but this might be a very interesting year.
The information written in this post was extracted (and then summarized using my own words) from articles published in the Jakarta Post and on Reuters.com. Also, my personal opinions and views do not reflect the views of Freeport-McMoRan Copper & Gold Inc. or any of its subsidiaries, affiliates, business partners or related business entities.