Engineering & Mining Journal

MAR 2017

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REGIONAL NEWS - ASIA 20 E&MJ • MARCH 2017 www.e-mj.com Freeport-McMoRan Updates Status of Indonesia Operations Following more than five years of discus- sions, PT Freeport Indonesia's (PT-FI) and the government have failed to reach an agreement on concentrate exports and other matters related to its contract of work (COW). Indonesian government regulations passed in January and February require that PT-FI terminate its COW and convert to a special license (IUPK) in order to ex- port its concentrate production. PT-FI ad- vised the government that attempts to en- force this regulation on PT-FI violates its COW and that it is unwilling to terminate its COW unless replaced by a mutually acceptable form of agreement providing fiscal and legal assurances to support its long-term investment plans in Indonesia. PT-FI's assets includes one of the world's largest copper and gold deposits at the Grasberg minerals district in Pap - ua, Indonesia. As a result, PT-FI has been unable to ex- port concentrates and is proceeding with its plan to suspend investments in Papua, re- duce its production by approximately 60% and implement cost savings plans involving significant reductions in its workforce and spending levels with local suppliers. "Despite extensive efforts to reach an agreement with the government, we have been unsuccessful in achieving a resolu- tion that would avoid the negative impacts for all stakeholders, especially for our work- force and the local economy," said Richard C. Adkerson, FCX president and CEO. "We are simply asking the government to honor our legally binding contract." PT-FI's first quarter production has been adversely impacted by the suspen - sion of concentrate exports and a tempo- rary outage since January 19 at PT Smelt- ing. PT Smelting has advised PT-FI that it expects to resume operations in March. Assuming resumption of PT Smelting's operations in March and a continuation of the ban on exports, FCX estimates its first quarter sales will be reduced, resulting in deferrals of approximately 170 million lb and 270,000 ounces (oz), representing a reduction of approximately 17% for cop- per and 59% for gold of its consolidated first quarter sales. For each month of delay in obtaining approval to export, PT-FI's share of pro- duction is projected to be reduced by ap- proximately 70 million lb of copper and 70,000 oz of gold. Permits Face Cancellation in the Philippines Philippines Environment and Natural Re- sources Secretary Gina Lopez announced on February 14 that 75 mineral produc- tion sharing agreements (MPSA) for min- ing sites that are within watershed areas face cancellation. Lopez said show cause orders have been issued to mining companies to allow them to explain why their MPSAs should not be canceled for threatening water- sheds. MPSA holders have seven days to reply, she added. On February 2, Lopez ordered the clo- sure of 23 mining operations found to have committed environmental violations during the industry-wide audit conducted by the Department of Environment and Natural Resources (DENR). Fifteen of these mines are operating within watershed areas. Of the 75 MPSAs issued show cause orders, 27 are in Luzon, 11 in Visayas and 37 in Mindanao. Lopez said her decision is backed by the provisions of the Philippine Mining Act of 1995, which gives the DENR the power to regulate and make decisions pertaining to watersheds. "This is to show you that whatever dic- tum I make on watersheds, this is in fact protected by the Mining Act of 1995, which says that we must enhance national growth in a way that effectively safeguards the environment and protects the right of the affected communities," Lopez explained. Citing studies by scientists, Lopez said that rehabilitating mined out areas in watersheds to near its original state is almost impossible, thus placing water- sheds in danger and the water in the area at risk. She insisted that there should be no mining in watershed areas. An MPSA is an agreement between the government and a contractor, which grants them an exclusive right to conduct mining operations within the contract area. In re- turn, the government is given a share in the production of the contractor. The MPSA has a term of 25 years and may be renewed for another term not exceeding 25 years. During the mining audit that was performed last year, entry and exit con- ferences were conducted to discuss the methodology, procedure and the result of the audit, Lopez said. Companies were also given seven days to respond to the results of the audit, providing a leeway for them to clear the issues that were raised. "From their responses, a further re- view was conducted by a technical review committee for five months before releas- ing the results, ensuring that we followed the process meticulously," Lopez said. Freeport-McMoRan had announced these plans for Grasberg prior to the latest developments.

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