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Freeport: CapEx cuts, layoffs in the cards amid Indonesian export ban


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Freeport: CapEx cuts, layoffs in the cards amid Indonesian export ban

Freeport-McMoRan Inc. may have to curtail costs by mid-February at its Grasberg copper-gold mine in Indonesia should the company fail to secure a copper export permit, with large layoffs and CapEx cutbacks on the cards, Richard Adkerson, the CEO of the U.S. mining giant, said on a Jan. 25 conference call.

"We would be allowed to ship domestically to the smelter at Gresik. And we would have to restructure our business to allow us to do that but it would be a major curtailment of our business. Unlike 2014 at this point we — company is not in a position to maintain the existing operations without being able to export," Adkerson noted.

The company's copper concentrate shipments from Indonesia have been halted since Jan. 12, when a ban on shipping semiprocessed ore out of the country came into effect.

Adkerson said Indonesia's Energy Ministry has indicated the permit will be granted during recent discussions with the company while it negotiates converting its contract of work into a special operating license as required under new legislation in the country.

The process may take as much as three months, the executive noted.

This comes shortly after the company said it swung to a fourth-quarter 2016 net profit of US$292 million, or 21 U.S. cents per share, compared to a net loss of US$4.08 billion, or US$3.47 per share, booked a year ago.

The company expects to sell about 4.1 billion pounds of copper, 2.2 million ounces of gold and 92 million pounds of molybdenum in 2017, assuming the resumption of concentrate exports.

Freeport, however, estimates losing approximately 70 million pounds of copper and 100,000 ounces of gold for each month that it is not allowed to export.

Separately, Indonesia's Tax Court dismissed a lawsuit filed by PT Freeport Indonesia against Papua province for about US$188 million in outstanding water taxes, Reuters reported the same day.