By Fergus Jensen
JAKARTA, Feb 14 (Reuters) - Freeport-McMoRan Inc FCX.N has halted production of copper concentrate in Indonesia and has begun to send home workers at Grasberg, the world's second-largest copper mine, a spokesman for the company's local unit said.
Indonesia introduced rules on Jan 12 that restrict copper concentrate exports from the country in an effort to promote the domestic smelting industry. Freeport previously said the suspension of concentrate exports would require that Grasberg reduce output by around 70 million pounds of copper per month. processing plant has not been producing concentrate since last Friday," Freeport Indonesia spokesman Riza Pratama told Reuters on Tuesday. The world's biggest publicly-traded copper miner has also started sending workers home from Grasberg, Pratama said.
The company previously said it had warned the government that it would need to slash production to about 40 percent of capacity if it did not get an export permit by mid-February, due to limited storage. a strike at Freeport's sole domestic offtaker of copper concentrate, PT Smelting, expected to last at least until March, has limited Freeport's output options, and Grasberg's storage sites are now full. Grasberg halt come after BHP Billiton BLT.L BHP.AX said last week that its Escondida mine in Chile, the world's largest, could not meet contractual obligations on shipments after a workers' strike brought production to a standstill. The Escondida strike entered its fifth day on Monday. supply jitters sent copper prices CMCU3 to their highest in more than 20 months at $6,204 a tonne on the London Metal Exchange on Monday. The prices have dropped to around $6,137.50 a tonne on Tuesday. MET/L
Under Indonesia's new mining rules, Freeport must switch from its contract of work to a special mining permit before it can apply for a new export permit.
A special mining permit was issued to Freeport on Friday, and includes taxes and royalties from which the miner was previously exempt. The new permit also includes a larger divestment requirement, with up to 51 percent of the Indonesian operation to go to the government, from a previous requirement of 30 percent stake. Freeport has to date divested a 9.36 percent stake.
The Phoenix, Arizona-based company argues that the export restrictions contravene its legally-binding contract with the government and said it would only agree to a new permit with the same fiscal and legal protection.