The price of copper moved higher on Tuesday on news of further tension between Indonesia and Freeport-McMoran, the US miner that operates the giant Grasberg mine in the province of Papua.
Reports in the Indonesian press said a government audit agency had found that Freeport had failed to pay almost $450m of royalties.
The claim came just days after a leaked letter highlighted ongoing divisions between Jakarta and Freeport over an agreement that was supposed to pave the way for a multi-billion dollar expansion of the mine.
In August, Freeport agreed to divest a 51 per cent stake in Grasberg to local interests in return for full operational control until 2041 plus fiscal and legal guarantees.
But the two sides have different views on how the mine should be valued. In a letter sent to government of Indonesia last week, Freeport said it strongly disagreed with the government proposed divestment plan.
If a deal cannot be reached it could threaten future supplies from Grasberg and tighten the copper market, where most of the world’s biggest mines are aging and facing grade declines, according to traders.
Copper for delivery in three months on the London Metal Exchange rose $10.50 to $6,503.50 a tonne on Tuesday.
Elsewhere, zinc, which is used to rust proof steel, climbed $33.50 to a 10-year high of $3,275 a tonne. China’s pollution crackdown has raised concerns that domestic zinc production will be hit and heavy industry will be forced to import more refined metal.
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