NEW YORK (TheStreet) -- Mining company Freeport-McMoRan Copper & Gold (FCX) announced last week that it will resume exporting gold and copper from Indonesia in August after the government lifted a ban that had been in place since January.
Under an agreement with the government, Freeport will develop a smelter and increase royalties payments on copper and gold to Indonesia in exchange for a reduction in export duties on copper. The government had imposed a ban in exports to develop its own mining industry.
Shares of Freeport-McMoRan closed Wednesday at $37.88, down 3 cents. The stock is roughly flat year to date, compared with a 6.6% rise for the Standard & Poor's 500 Index.
With the lifting of the export ban in Indonesia, Freeport will ramp up its copper sales in the coming quarters. Based on this deal, Freeport projects to reach over 1,065 million pounds of copper sold in the third quarter, almost 10% higher than the amount sold in the second quarter.
Still, Freeport has already reduced its estimates of copper sales for this year by 200 million pounds to 4.1 billion pounds.
In Indonesia, Freeport still faces uncertainty with its operations in Grasberg, which is the world's largest gold mine and third largest copper mine. Still uncertain is what will happen after Freeport's license in Grasberg expires in 2021 as well as the level of royalties and taxes Freeport will have to pay to the Indonesian government for its mining in Grasberg.
Meanwhile, in the second quarter, Freeport's cash cost per pound of copper, which measures the direct cost of production and excludes depreciation and amortization, rose by 11% from the first quarter, mainly because of an increase in costs in its sites in Indonesia, South America and Africa. If production costs keep picking up, this trend could further depress Freeport's profit margin.