Mass Layoffs Face World’s Largest Gold Mine Due To Government Export Restrictions

December 11th, 2013 by

Grasberg_mine

Grasberg Mine (wikipedia)

In a move similar to Zimbabwe’s recent approach to platinum, the parliament of Indonesia has passed a law banning the export of all raw ore from the country, starting January 12th. This is an attempt to add value to Indonesian exports, to combat an out-of control current accounts deficit and plummeting currency.

Indonesia is the world’s leading exporter of nickel, tin, and thermal coal (used in power generating stations.) Due to a shortage of refiners and smelters (there is only one copper smelter in all of Indonesia), this law promises to cause mine production to drastically drop, and cost the country billions of dollars in lost revenue and thousands of jobs, according to a mining trade group.

Freeport, owner of the Grasberg open-pit mine, has advised the government that the new law will result in production at the mine to drop to 30-40% of capacity, and result in approximately 30,000 Indonesians losing their jobs. Grasberg is the world’s largest gold mine, and the world’s third-largest copper mine. Ore from Grasberg consists of intermixed copper, gold, and silver. After crushing and treatment, the ore is processed into a slurry containing 27% to 30% copper and notable amounts of gold. This slurry moves by pipeline to the seaport, where the water is evaporated out and the concentrate is loaded onto ships for transport to refineries. Freeport puts 2013 production at Grasberg at 1.1 billion pounds of copper and and 1.2 million ounces of gold.

In the worst case scenario, this could mean 840,000 fewer ounces of gold and 770 million fewer pounds of copper being produced in 2014.

 

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News