Freeport asked to up Indonesian royalties to 10%

Indonesia, one of the world’s largest exporters of copper and coal, has asked mining companies including the local divisions of Freeport-McMoRan Copper & Gold (NYSE:FCX) and Vale SA (NYSE:VALE) to increase their royalties to 10%.

According to Bloomberg, the measure is part of recent negotiations to lengthen the firms’ mining contracts.

“Ten percent is the proper rate for royalties,” Deputy Energy and Mineral Resources Minister Rudi Rubiandini told Bloomberg. “We will sit with them again and discuss this. It’s part of the renegotiation.”

Freeport currently pays 3.5% for mining copper in Indonesia, Southeast Asia’s largest economy, and 1% for gold.

Early this year the country surprised the global mining community with a new rule, Government Regulation No. 24 of 2012, which compels all foreign mining companies to sell majority stakes in their mining operations to locals.

With a population of 240 million, Indonesia is the world’s premier thermal coal exporter and also a tin powerhouse.

Mining in the country accounted for 12% of the gross domestic product in 2011.


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