Indonesia: Grasberg Copper Production Set to Plunge in 2019

Indonesia has flagged significantly reduced copper concentrate exports as well output from its recently nationalized Grasberg mine in Papua province.

Yunus Saefulhak, director of minerals at the Indonesian Energy and Mineral Resources Ministry, said Wednesday (January 9) that the government expects exports of copper concentrate from Indonesia to fall by 300,000 to 800,000 tonnes in 2019, as Grasberg’s output declines from 2.1 million tonnes of concentrate in 2018 to 1.2 million tonnes in 2019.

Grasberg is the fourth-largest copper mine in the world (at 2017 production levels), and recently became majority owned by the Indonesian government after a deal was struck between former owner-operator Freeport-McMoRan (NYSE:FCX) and its joint venture partners Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) and the Indonesian government.

A fall in production over the next few years had been flagged by Freeport in the lead up to the agreement, which saw Freeport relinquish majority ownership to Indonesian state-run companies but remain the operator.

In its July 2018 quarterly report, Freeport had said that guidances for copper would fall as the massive operation transitioned from open pit to underground over 2019 and 2020.

Though it envisaged a full ramp up of underground operations in 2021 and a return to form, the transition is expected to be completed by 2022.

Karen Norton, base metals analyst at GFMS Thomson Reuters, told the Investing News Network that Grasberg’s precipitous fall in production is already factored into copper outlooks.

“[It will] be one of the factors contributing to forecast minimal growth in global copper mine output this year,” she said. “There is not much room for manoeuver though and that growth could easily turn negative if major mines fall short of expectations.”

Norton added that for the time being, “consumption prospects are probably a greater preoccupation” for markets.

Demand for copper has remained firmly in the sights of analysts as market sentiment remains depressed with the trade war grinding on.

Freeport, which retains a 48.77-percent share of Grasberg, was trading up 2.68 percent on the New York Stock Exchange on Wednesday, at US$11.48.

2018 did not treat the Phoenix-based company kindly — it has lost 40 percent of its value since January 2018, when it was trading at almost US$20.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.