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Freeport's Indonesian unit to challenge US$469M water tax case

Freeport-McMoRan Inc. said its PT Freeport Indonesia unit will challenge the court decision that imposed US$469 million in surface water taxes and penalties on the company, Reuters reported Jan. 26, citing documents issued with the company's Jan. 25 earnings disclosure.

Indonesia's Tax Court rejected the Freeport unit's lawsuit over the 2.51 trillion Indonesian rupiah tax claim, equivalent to about US$188 million, over water the company used from the Aghawagon and Otomona rivers between 2011 and mid-2015.

Freeport Indonesia argued for a lower tax rate, in accordance with its 1991 work contract, but the local government of Papua province refused the objections, noting that its tax assessment for surface water tax was "valid and enforceable."

According to Freeport, the court also issued a ruling for additional surface water taxes and penalties from January 2011 to July 2015 amounting to US$376 million, including US$227 million in penalties, and a further US$93 million for similar charges for the period between August 2015 and December 2016.

The parent company is evaluating its options and expects to take the matter to the country's Supreme Court. Indonesia's Tax Court, meanwhile, could not be reached for comment, according to Reuters.

Freeport earlier flagged possible cost cuts at its Grasberg copper-gold mine by mid-February if the company fails to secure a copper export permit. The company's Indonesian unit remains in talks with the government over changing the terms of its mining rights, which could lead to higher taxes for the company.