1) W Papua activist nominated for Nobel Peace prize

1) W Papua activist nominated for Nobel Peace prize

2) A Closer Look At Freeport's Indonesian Mining Operations

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http://www.radionz.co.nz/international/pacific-news/256312/w-papua-activist-nominated-for-nobel-peace-prize

1) W Papua activist nominated for Nobel Peace Prize

Updated at 7:05 am today

The founder of the Free West Papua Campaign, Benny Wenda, has been nominated for the Nobel Peace Prize for the second year in a row.

The annual award is given to the world's most prominent and well-known peace campaigners.

Mr Wenda was nominated by foreign dignitaries including Vanuatu's former Prime Minister, Moana Carcasses Kalosil, current Vanuatu MP, Ralph Regenvanu, New Zealand MP Catherine Delahunty and the Bishop of Oxford in the United Kingdom, Reverend John Pritchard.

West Papua has been the scene of a low-level independence war with Indonesia for close to 50 years.

The winner of the prize will be announced next Friday.

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http://www.forbes.com/sites/greatspeculations/2014/10/06/a-closer-look-at-freeports-indonesian-mining-operations/

2) A Closer Look At Freeport's Indonesian Mining Operations

Trefis Team , Contributor

Freeport McMoran Inc resumed exports of copper concentrate from its mining operations in Indonesia last month. This ended a near seven-month suspension of exports of copper concentrate from the country for Freeport as a result of negotiations over regulatory changes governing mineral exports from the country. The resumption of normal operations in Indonesia was a major boost to Freeport as the company’s operations in the Grasberg minerals district in Indonesia constitute a major component of the company’s plans to boost its copper production. In this article we take a closer look at Freeport’s mining operations in Indonesia.

See our complete analysis for Freeport McMoran

Freeport’s Indonesian Operations

Freeport’s copper and gold mining operations in Indonesia’s Grasberg minerals district are located in the remote highlands of the Sudirman Mountain Range in the province of Papua, which is on the western half of the island of New Guinea. It holds a 90.64% interest in these mining operations with the balance held by the Indonesian government. The Grasberg minerals district has three operating mines: the Grasberg open pit, the Deep Ore Zone underground mine and the Big Gossan underground mine. The open pit mining operations produce the bulk of the company’s output, with output from the underground mining operations gradually ramping up. However, the company will transition to underground mining from open pit mining in 2017, with the cessation of production from its open pit mines.

As on December 31, 2013, Freeport’s Indonesian operations accounted for around 27% and 95% of the company’s consolidated proven and probable copper and gold reserves, respectively. The company’s proven and probable reserves in Indonesia stood at 30 billion pounds of copper and 29.8 million ounces of gold.

Low-cost Mining

The Indonesian operations are extremely profitable for the company. These accounted for roughly 20.5% of Freeport’s mining revenues in 2013, but nearly 27% of the operating income generated from mining operations. The high-grade ore bodies at the Freeport’s mines in Indonesia translate into low-cost mining operations. The company measures operating cash costs associated with its copper mining operations through the unit net cash cost metric. This metric stood at $1.12 per pound of copper for the Indonesian operations in 2013, as compared to $1.49 per pound of copper for the company as a whole.

The Indonesian operations were expected to account for around 24% and 94% of the company’s consolidated copper and gold shipments in 2014, respectively, at the time of the release of its 2013 annual results. As a result of the suspension of exports from Freeport’s Indonesian operations for close to seven months, Indonesia is now expected to account for roughly 17% and 85% of Freeport’s consolidated copper and gold shipments in 2014, respectively. However, with the ramp-up of underground mining operations at Freeport’s Indonesian operations, Indonesia is expected to contribute around 28% and 97% to Freeport’s copper and gold sales by 2016. This share is expected to decline in 2017, as the transition from open pit to underground mining is completed. However, the importance of the company’s Indonesian operations to Freeport, particularly in the near term is evident. Thus, the resumption of normal operation in Indonesia was a major boost to Freeport.

Resumption of Exports from Indonesia

Freeport recently resumed exports from Indonesia after a near seven-month hiatus as negotiations with the government over regulatory changes governing exports culminated in the signing of an MoU. The whole situation arose as a result of a law enacted in Indonesia in 2009, which banned exports of unprocessed minerals from the country starting January 12, 2014. The intent behind this law was to provide a boost to the development of the Indonesian mineral processing industry and simultaneously increase the value of the country’s commodity exports. However, last minute changes to the law deferred the ban on exports to 2017. Exports of copper concentrate were permitted, but under new rules. The government introduced new regulations in order to get an export permit and also imposed an export duty of 25%, which would have risen progressively to 60% by 2016. Freeport was of the view that the export tax violated the terms of its investment agreement, or contract of work, with the Indonesian government. The company subsequently halted its exports from Indonesia in January pending negotiations with the government over these regulatory changes.

Freeport recently entered into a memorandum of understanding with the Indonesian government under which the two parties will negotiate an amended COW to address various dimensions of the company’s operations in Indonesia. The negotiations over the amended COW are expected to be completed over a period of six months. Along with the signing of the MOU, Freeport has agreed to provide a $115 million assurance bond to support its commitment for smelter development in Indonesia and to pay higher royalties of 4.0% for copper and 3.75% for gold, up from the current rates of 3.5% and 1% respectively. Freeport will now pay a revised duty of 7.5% on its copper concentrate exports, which will decline to 5% when smelter development progress exceeds 7.5%, and 0% when development progress exceeds 30%. The negotiations for the amended COW will also address the sharing of costs between Freeport, the government and any other partners involved in the project for smelter development, the terms for continuation of Freeport’s operations post-2021 including legal and fiscal guarantees, as well as the divestment of up to a 30% stake in its Indonesian subsidiary to Indonesian nationals or the government.

Though these terms are unfavorable compared to the pre-existing ones governing Freeport’s mineral exports, given the importance of the company’s Indonesian operations to its overall plans to boost copper production in the near term, the company management would have been relieved with the resumption of normal operations in Indonesia.

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