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Freeport gets nod to renew export permit, pays lower duty
Jakarta Post - July 28, 2015
The ministry's director general for minerals and coal, Bambang Gatot Ariyono, said on Monday evening that his office would soon issue a recommendation that the Trade Ministry renew Freeport's export permit.
The mining giant will also be allowed to pay lower export duty thanks to encouraging progress in the construction of the its smelting plant.
"Principally, the company has fulfilled its obligation, its commitment. Therefore, tomorrow, the government can issue a [export permit] recommendation for the next six months," Bambang said.
Under the recommendation, Freeport Indonesia will be allowed to export up to 775,000 tons of copper concentrate in the next six months.
Freeport Indonesia, a subsidiary of US-based Freeport-McMoRan Inc., saw its export permit expire last Saturday. The company currently produces approximately 2.5 million tons of copper concentrate per year.
The export permit is necessary for the company to continue shipping its partly processed copper concentrate despite the government's implementation of a ban on raw mineral exports in January 2014. Due to a loosening of the export ban, export permit's for raw minerals is now possible as long as the company in question shows commitment to making progress on smelter developments and they pay export tax.
The export tax is set at between 0 and 7.5 percent, depending on the progress of smelter development, which is calculated based on the amount of money spent. An export tax of 7.5 percent is imposed on companies whose disbursement is at 0 to 7.5 percent of their total investment in downstream facilities. A 5 percent export duty is applied to a company whose spending is at between 7.5 and 30 percent.
When smelter development spending has progressed past 30 percent, a company is then exempt from export duty.
Bambang said that Freeport Indonesia's smelter plant had reached about 11 percent, so it would only pay 5 percent in export tax on its copper concentrate for the next six months. Under its previous two export permits, the company paid 7.5 percent in export duty.
The 11 percent progress consists of spending on basic engineering, land rent and a deposit of US$20 million into an escrow account to be paid by Tuesday, according to Bambang.
To comply with the government downstream policy requirements, Freeport Indonesia is currently working to develop a new smelter in Gresik, East Java, with an estimated investment of $2.3 billion.
Freeport Indonesia executive vice president for public affairs Clementino Lamury said his company expected to be able to ship its copper concentrate under the new permit soon. "We hope to export it by the end of the week," he said.
While the export permit will be extended, Freeport Indonesia is currently under the spotlight following its attempt to seek certainty over its operation after the termination of its contract in 2021. Critics have argued that its poor progress in smelter development was also driven by uncertainty regarding its operation after 2021.
It has also drawn criticism following a series of deadly incidents at its mining site in Papua. On Saturday, an employee of theirs died while working with conveyor facilities. Investigation by the ministry's mineral and coal office is currently taking place to reveal the details and causes of the incident.
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