Friday, May 19, 2006

Indonesia Supreme Audit Board calls for review of Freeport-McMoRan (FCX) contract

The risks...

JAKARTA (XFN-ASIA) - The Supreme Audit Board (BPK) is recommending a government review of its contract with US-based PT Freeport Indonesia as the current one does not maximize the revenue potential from its Papua copper and gold mine, Koran Tempo reported, quoting a BPK official.

'Review Freeport's royalty payment and fixed payments,' BPK member Baharuddin Aritonang was quoted as saying what the recommendation was.
Tempo said a BPK study covering 2004 and the first half of 2005 found that Freeport paid its royalty based on quarterly average prices, against accounting principles which require the use of prices per transaction.

This practice caused the state a potential revenue loss of 2.23 mln usd and a further 369,490 usd in unpaid royalty for 2003 and 2004, the report said.
BPK also found that Freeport's contract does not include sulphur as a by-product, causing a potential revenue loss of 14.4 mln usd.

Additionally, the audit agency found that Freeport has sold its copper concentrate to Glencore AG at below-market prices. This led to a potential tax revenue loss of 5.9 mln usd, Tempo said.
BPK's report comes as the government is studying Freeport's operation amid calls for the mine to be shut down as it does not benefit the local community.

Freeport has also been accused of pollution and human rights abuses, which the company has denied. - source

Freeport-McMoRan Copper & Gold Inc.(NYSE:FCX) daily chart

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