Freeport says draft MoU agreed but not signed, no export timeframe set

|By:, SA News Editor

Freeport McMoRan (FCX -0.4%) confirms its agreement to a draft memorandum with the Indonesian government on a contract renegotiation, but cautions that the memorandum has not yet been signed and there is no timeframe for any resumption of copper exports.

Under the draft MoU, government officials say FCX has agreed to divest 30% of its Indonesian unit, pay a royalty of 4% for copper sales and 3.75% for gold sales - up from 1% previously - and will build a smelter and pay the government a repayable bond.

The deal is due to be discussed at a cabinet meeting this week and finalized within two weeks, according to Indonesia's industry minister, but any contract agreement could still fail when a new government takes office in October.

While FCX uses the carrot approach, Newmont Mining (NEM -0.3%) uses the stick, idling its Indonesian operations as part of a potential exit strategy to reflect its smaller operations, which analysts say can't justify a stand-alone smelter.