Freeport says Indonesian unit may need to declare force majeure

JAKARTA (REUTERS) - Freeport-McMoRan Copper & Gold said its Indonesian unit may need to declare force majeure on copper concentrate sales if a dispute with the government over export taxes drags on for a prolonged period.

Freeport and fellow US miner Newmont Mining Corp have refused to pay a progressive export tax introduced last month as part of package of new mining rules aimed at forcing miners to build smelters and process raw materials in Indonesia.

Freeport has reduced copper production at the world's fifth-biggest copper mine in Papua, and its nearby mill was operating at half its normal capacity.

"In the event that PT-FI (PT Freeport Indonesia) is unable to resume normal operations for an extended period, we plan to consider further actions, including constraining operating costs, deferring capital expenditures and implementing workforce reductions," the firm said in a filing dated Feb 27.

"PT-FI may also be required to declare force majeure under its concentrate sales agreements."

Executives from Freeport and Newmont, which together produce virtually all of Indonesia's copper, have been in talks with the government for weeks over the tax and the building of smelters.

The first major breakthrough between the two sides seemed to have been reached on Monday, with Indonesia's industry minister saying that Freeport had agreed to obey all the new regulations and concentrate exports would soon resume.

The energy and mines ministry said the government would ease or even eliminate the export tax for companies that prove they are serious in building smelters in Indonesia.

Freeport Indonesia CEO Rozik Sutjipto has said the company would build a copper smelter. But company officials have declined to elaborate.