Freeport seeks to extend mining contract in Indonesia

A new contract of work being negotiated with the Indonesian government would allow Freeport Indonesia, a subsidiary of Freeport-McMoRan Copper & Gold (NYSE) of Louisiana, to mine and explore a large area in Irian Jaya province for the next 50 years.

Under the agreement, Freeport Indonesia would become an Indonesian corporation and sell equity to private Indonesian investors. Freeport’s developed Indonesian properties, including Grasberg, are expected to yield more than 600 million lb. copper and 600,000 oz. gold by the end of 1992.

Grasberg, in production since January, 1990, is currently undergoing a mill-expansion program. The property contains estimated reserves of 440 million tons grading 1.54% copper, 0.06 oz. gold and 0.1 oz. silver per ton, and remains open at depth.

The new agreement, superseding a 1967 contract of work, would be in force for 30 years and allow for two 10-year extensions. It covers an expanded exploration area of 6.5 million acres in addition to the existing contract-of-work area of 24,700 acres. Freeport would be committed to conducting a study on the feasibility of building a copper smelter in Indonesia. (Freeport currently ships concentrate offshore.)

Freeport’s first Irian Jaya project, the Ertsberg copper project, situated at 11-12,000 ft. above sea level, entered production in 1972. The original Ertsberg open pit mine ceased production in 1990. Grasberg, an open pit mine, sits at about 14,000 ft. above sea level.