By Ben Fox Rubin
Freeport-McMoRan Copper & Gold Inc. (FCX) said its PT
Freeport Indonesia unit may declare a force majeure under its sales
agreements if it is unable to resolve an export tax issue with the
Indonesian government.
Companies often invoke force majeure clauses in contracts when
circumstances they couldn't have foreseen, such as fires, natural
disasters and wars, prevent them from meeting delivery
deadlines.
Freeport, the world's largest publicly traded copper producer,
said in a recent regulatory filing that the Indonesian government
last month published regulations imposing new duties on
copper-concentrate exports. Copper concentrate is a form of crushed
copper ore that is typically smelted into shiny red sheets of pure
copper.
According to its contract, PT Freeport Indonesia won't be
subject to new taxes, duties or fees, Freeport said. The unit is
also seeking the required permits for 2014 exports, which have been
delayed due to the new regulations.
Since mid-January, the unit's milling rate has averaged about
112,000 metric tons of ore a day, which is about half of normal
rates.
Although discussions with the Indonesian government continue,
Freeport said that if normal operations don't resume, it plans to
consider actions including constraining operating costs, deferring
capital expenditures and implementing workforce reductions, in
addition to the force majeure.
The unit operates in the remote highlands of the Sudirman
Mountain Range in the province of Papua, Indonesia.
The Phoenix mining company's aggressive expansion plans, in
places as diverse as Arizona and Indonesia, are part of an increase
in supply that, along with lower Chinese demand, have deflated
copper prices in the past year.
Write to Ben Fox Rubin at ben.rubin@wsj.com
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