According to Thursday’s press release:
In consideration of [Freeport’s] major investments and prior and ongoing commitments to increase benefits to Indonesia, including previously agreed higher royalties, domestic processing, divestment and local content, the Government has assured [Freeport] that the Government will approve the extension of operations beyond 2021, including the same rights and the same level of legal and fiscal certainty provided under its Contract of Work.
The contract of work was concluded in July of 2014 after the Indonesian government banned mineral exports in January and, at the same time, increased taxes on shipments of metal concentrates in an effort to get mining companies to process the minerals in Indonesia, adding value to the exports. Freeport and fellow miner Newmont stopped exporting copper, claiming their contracts had been breached.
When the dispute was finally settled in July, Freeport agreed to make a $115 million down payment on a new smelter, pay higher royalties to the government, and divest more of its Indonesian assets. In exchange, the government cut the tax on concentrates.
The most contentious issue, however, was the extension of Freeport’s right to continue mining in Indonesia past the 2021 expiration of its contract of work. The government refused to negotiate that until 2019, but Freeport, which had planned to invest some $15 billion to build the world’s largest underground mine, wanted legal assurances that the company would be able to continue its operations long past the 2021 date.
Those assurances were announced Thursday morning, and according to the press release, Indonesia’s government “is currently developing economic stimulus measures which include revisions to mining regulations to promote economic and employment growth.”
Investors tacked on about a 1.5% gain on Freeport stock Thursday morning. Shares traded at $13.21 in the premarket session, after closing at $13.01 Wednesday. The stock’s 52-week range is $7.76 to $32.35.
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