) has signed a Memorandum of Understanding (MOU) with the
government of Indonesia which has granted it the approval to resume
operations at its Indonesian subsidiary PT Freeport Indonesia
(PT-FI). With its export permit, Freeport stated that it will
resume full operations immediately, with concentrate shipments
expected to start in Aug 2014 from the Grasberg mine in Papua.
Under the MOU, PT-FI has agreed to increase royalties to 4% for
copper and 3.75% for gold from the existing rates of 3.5% and 1%,
respectively. PT-FI will also have to provide a $115 million
assurance bond to support its commitment for smelter
In Jan 2014, the government introduced a regulation regarding
export duties to incorporate reduced rates for copper concentrate
exports for companies engaged in smelter development. Under a
revised regulation introduced in Jul 2014, Freeport will pay a 7.5%
duty on its copper concentrate exports, but the rate drops to 5%
when development progress exceeds 7.5%, and eventually becomes 0%
once investment in the project exceeds 30% of total cost.
Per the MOU, the government and PT-FI have agreed to negotiate
an amended Contract of Work (COW), to be completed over the next
six months, to address provisions related to the size of concession
area, royalties and taxes, domestic processing and refining,
divestment, local content and continuation of operations post-2021.
Freeport currently holds a Zacks Rank #3 (Hold).
Other mining companies with a favorable Zacks Rank include Atlatsa
Resources Corp. (
), Kazakhmys PLC (
) and Alcoa Inc. (
). All of them hold a Zacks Rank #2 (Buy).
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