Freeport delays output due to metal price slump
Freeport delays output due to metal price slump
JAKARTA (JP): Copper and gold mining company PT Freeport
Indonesia said on Tuesday it had delayed a plan to increase the
ore output at its Grasberg mine in Irian Jaya to 300,000 tons per
day (tpd) until metal prices improved.
Company president Adrianto Machribie said the company was
currently producing 210,000 tpd of ore, and planned to gradually
increase it to 240,000 tpd.
"Although the government has given us a license to produce up
to 300,000 tpd of ore, we consider the 240,000 tpd output level
is enough for now amid the slump in metal prices," he said.
Adrianto said copper prices had dropped to 62 U.S cents per
pound, its lowest level since 1930, from an average $1.2 per
pound in 1998.
Gold prices have slumped to $260 per ounce, from around $300
per ounce last year, he said.
Adrianto said depressed metal prices had affected the
company's performance in 1998. But he declined to divulge
details.
"Depressed prices, caused by sluggish demand amid the economic
crisis, have forced us to rationalize our business, which
includes improving efficiency.
"We are lucky that our production costs are still below cooper
prices. Many copper mines in other countries have had to be
closed because their production costs are higher than their
revenue.
"We can not predict when the prices will go up again. Right
now we are only focusing our efforts to survive."
Freeport, a subsidiary of U.S. mining company Freeport McMoRan
Copper & Gold, was given permits earlier this year to increase
its ore production to 300,000 tpd.
In return, the company agreed to double its copper royalties
to the government from between 1.5 percent and 3.5 percent to
between 3 percent and 7 percent of sales. It also agreed to
triple the gold and silver royalties payable to the government
from 1 percent to 3 percent of sales.
Under the agreement, the new royalty scheme will be backdated
to Jan. 1, 1999, but it is only effective if Freeport's ore
output exceeds 200,000 tpd.
Freeport Indonesia is 81.28 percent owned by Freeport McMoRan,
9.36 percent by the Indonesian government, with the remaining
9.36 percent of shares held by PT Indocopper Investama
Industries, which is partly owned by PT Nusamba Mineral
Industries.
Freeport operates a huge copper and gold mine in the Grasberg
area in the country's easternmost province Irian Jaya.
Aside from the Grasberg area, Freeport holds two other
contracts of work in the Block A and Block B areas in the
province. Activities are still in the exploration stage in both
contract areas.
Citing security problems, the company suspended exploration
activities in the Block B area in May, but Adrianto said the
company would resume explorations in mid-August.
Adrianto said the suspension was made on the advice of the
province's security officials and local authorities.
Tension has reportedly been on the rise in many parts of the
province over the past several months due to increased separatist
movement activities ahead of the general election, he said.
"Block B area is very far from the authorities and security
centers, making it hard for us to control any difficulties faced
by our employees.
"Since we do not want anything bad to happen to our employees,
we decided to suspend our activities in the area until the
situation returns to normal," he explained, adding the company's
performance was not affected by the delay.
He said the company was continuing its exploration activities
in Block A.(gis)