Freeport to resume exports from Indonesia, but investors don't like terms

Freeport McMoRan (FCX -2.1%) is set to restart concentrate shipments from its Grasberg mine in Indonesia, but shares are lower as the verdict on the deal with the government isn't favorable.

Indonesia reportedly will cut the tax levied on mineral concentrate exports to less than 10% for miners that pay a bond as a guarantee they will build a smelter later.

As part of its deal, FCX would pay higher royalties of 4% on copper sales, after paying between 1.5% and 3.5% under an old deal, and the higher rate will bring it into line with royalties paid by other companies.

In response to the deal and FCX's mixed Q2 earnings, BofA/Merrill downgrades shares to Neutral from Buy and cuts its price target to $40 from $43.

Indonesian officials say no talks have taken place with the second-largest copper miner in the country, Newmont Mining (NEM -2%).

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Comments (9)
  • BSmith8592
    , contributor
    Comments (42) | Send Message
    I'm not sure I really understand the why this comes those such a shock to the shareholders after it basically reflects exactly what was said yesterday.


    The main thing is that Freeport will be able to almost immediately begin shipping the huge stockpile of concentrate and resume normal operations at Grasberg where they were keeping things running but at a much higher operational cost.


    A few percent more in taxes and royalties would quickly be offset by any increase in copper prices. Other mines can't begin to produce copper at the prices Freeport can at Grasberg.
    24 Jul 2014, 12:00 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (1402) | Send Message
    I always have to laugh how these things are written. There seems to be a solid tilt toward the negative in almost all of these summaries. For instance, there was no mention that the analyst at Jefferies UPGRADED Freeport to a BUY with a $50 price target today. Only the mention of the Merrill downgrade.


    If you are going to mention one then you should mention the other, right?


    I'm long FCX and adding more this morning.
    24 Jul 2014, 12:26 PM Reply Like
  • clack
    , contributor
    Comments (71) | Send Message
    some people just don't like blackmail no matter how you color it.
    24 Jul 2014, 02:07 PM Reply Like
  • Aire Thomas
    , contributor
    Comments (3) | Send Message
    WisPokerGuy made a good point; yet, the news that so negatively affected some stockholders doesn't take into consideration the other upside from the energy portfolio FCX has. Who has the edge? The shorts selling today, or the longs buying today?
    24 Jul 2014, 02:49 PM Reply Like
    , contributor
    Comments (5167) | Send Message
    Ahh, the importance of U.S. oil & gas !


    Long FCX
    24 Jul 2014, 03:38 PM Reply Like
  • notsosmart
    , contributor
    Comments (3426) | Send Message
    no matter what-you have to think for yourself.agendas all over the place.
    24 Jul 2014, 03:44 PM Reply Like
  • argand
    , contributor
    Comments (2) | Send Message
    Every upgrade/downgrade by any entity has a slant for themselves or their clients.
    24 Jul 2014, 09:09 PM Reply Like
  • Joshua Heller
    , contributor
    Comments (553) | Send Message
    The reason why the upgrade isn't mentioned is because the headline is trying to explain why FCX is down.
    25 Jul 2014, 02:04 AM Reply Like
  • james.
    , contributor
    Comments (1377) | Send Message
    The above article on NEM Mine Operations in Indonesia completely ignores all-important facts as follows : (1) NEM declared a Force Majeure on its Copper production in early June 2014, a brilliant decision as per its 1986 CoW (Contract of Work), that allows NEM to ship Copper Concentrate from its now full storage bin to the nearby Copper Refinery while paying its Indonesian workers only 20% of their normal pay, thus bringing approximately $0.10 EPS to the NEM Bottom Line for 3Q and 4Q 2014 !! , (2) NEM filed for Arbitration based on the violation of its 1986 CoW by the harsh recent Indonesian Law which is anti-business, and will easily win that Arbitration based on the facts ! , (3) the recent election results of July 22, 2014 which changes the Indonesian Presidency over to Mr. Joko Widodo, elected on a Platform of pro-business and promising abundant and productive jobs to the working class people as he himself was a business owner prior to becoming Governor of Jakarta in 2012, makes it highly likely that he will roll back the harsh Indonesian Law soon after becoming Indonesian President in October 2014 so as to allow NEM to continue to operate their business under their 1986 CoW, perhaps even incentivizing an expansion of jobs there at that NEM Copper & Gold mine so as to make good on his election promises to create an abundance of good paying and productive jobs ! ! I estimate NEM 2Q 2014 EPS to be $0.39, which is far above the Mean Analysts' Estimate of $0.20 EPS, based on additive factors compared to 1Q results of $0.23, due to ongoing cost-cutting amounting to $0.10 EPS, its Force Majeure on Indonesian Copper Mine of $0.04 EPS , and $0.02 EPS due to its clever win-win-sale of its Midas Mine and Mill to Klondyke for $86 Million plus 5 Million Warrants in Klondyke at a Strike Price of $2.15 which could amount to a worth of $40 Million in 2014 as Gold climbs to $1760 per oz in 2014. Look to it ! July 25, 2014 at 10:54 a.m. PDT.
    25 Jul 2014, 01:54 PM Reply Like
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