Freeport-Cormorant Still Not Seeking Arbitration over Copper Export Halt
A freeze on copper exports out of Indonesia has prompted one company – Newmont Mining Corp – to seek official arbitration with the Indonesian government, but competitor Freeport-McMoRan has opted to continue direct negotiations with the Indonesian government and will not yet seek arbitration.
The dispute, now six months old, began when both companies – which account for 97% of the copper production in Indonesia – stopped copper concentrate exports in protest of new government rules introduced in January 2014. Most objectionable to the companies was a new export tax designed to effectively force the mining companies to construct local smelting and processing facilities instead of exporting the concentrate out of country. Both companies have argued that their existing contracts with the government should exempt them from the tax.
Newmont declared force majeure and officially filed for international arbitration. Freeport, which operates one of the largest copper concentrate mines in the world, the Grasberg complex, released a statement confirming they are still in talks with the government about the imposed tax and have not yet resorted to arbitration. The Indonesian government expressed dismay over Newmont’s decision and questioned the company’s ‘good will.’
The standoff has had an effect on the copper market, which was expected to see dropping prices due to oversupply this year. The export freeze has created the opposite situation and buoyed prices temporarily, with an estimated 400,000 tons of copper concentrate kept out of the market in 2014 as a result of the standoff.