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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Will This Bureaucratic Battle See Prime Copper Assets Coming For Sale?

Very interesting drama unfolding in one of the world’s top mining nations the last few weeks.

That’s Indonesia — where a top copper miner is grappling with its future in the country.

The firm is Freeport McMoRan. Which late last week once again ran afoul of Indonesian authorities over exports of copper concentrate from the company’s mines.

Freeport had been exporting copper under a temporary license from the Indonesian government. A measure that became necessary after Indonesia imposed an export ban on unprocessed minerals in late 2013. Related: Russia Cries Dyadya (Uncle), Is Saudi Arabia Listening?

Since then, Freeport had been allowed a temporary export license after pledging to pursue the construction of a copper smelter in Indonesia.

But the company’s latest export permit expired last Thursday. And reports suggest the Indonesian government has refused to renew this key permission.

And a few things happened right before the permit expiry, which make this case extra complicated.

For one, Indonesian officials had demanded that Freeport deposit $530 million for construction of a smelter. An amount the company says was not part of its contract with the government. Related: Politics & Oil - What The President Failed To Mention In His Address To Congress

Another key event has been recent demands by Indonesia that Freeport sells a 10.64 percent stake in its Grasberg mega-mine to the government. Which Freeport said in mid-January it would be willing to vend for $1.7 billion.

The government subsequently said that offer was overpriced. Suggesting officials will play hardball on the amount for this purchase.

With both of those issues still in limbo, it’s not surprising the government has halted Freeport’s export permissions. Company officials said Monday that operations are still running as usual at the Grasberg mine — but it appears that copper ore may be headed for stockpile rather than sale here for the next while. Related: Banks On The Hook For Bad Energy Loans

At the same time, some interesting reports have emerged on Freeport in local newspapers in a completely different part of the world: Chile. Suggesting the firm may be looking at selling its 51 percent interest in the massive El Abra mine here.

Such a move could be aimed at raising some of the cash necessary to resolve the Indonesia situation. With local Chilean papers naming state copper miner Codelco as a possible buyer of El Abra.

Watch to see if this emergency mine sale does materialize — and who the potential bidders and buyers are. This could mean a high-quality asset coming available to the market.

Here’s to crisis and opportunity

By Dave Forest

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