UPDATE 1-Freeport says to contest Indonesia export tax

Wednesday, 22 Jan 2014 | 9:09 AM ET

Jan 22 (Reuters) - Freeport McMoRan Copper & Gold Inc said on Wednesday it was working to "defend its rights" in Indonesia in the face of a new export tax it said contravenes its agreement with the government, as it reported a drop in fourth-quarter earnings.

The world's biggest publicly traded copper producer said it planned to defer production of some 40 million pounds of copper and 80,000 ounces of gold per month until the Indonesian matter was resolved.

The company said the new regulations conflict with its contract of work with the government, which says it is not subject to new taxes, duties or fees.

Freeport's Grasberg gold and copper complex, one of the world's largest copper and gold deposits, is located in Papua, Indonesia, and the company's Indonesian operations contributed 23 percent of its consolidated pre-tax income in 2012.

The Indonesian government on Jan. 11 gave Freeport and fellow miner Newmont Mining Corp a reprieve from a controversial mineral ore export ban, but then surprised the U.S.-based majors by imposing an export tax.

As a result, Freeport could pay around $5 billion more in taxes over the next three years, according to Reuters calculations.

Freeport reported a drop in fourth-quarter earnings following a decline in copper and gold prices. Net income fell to $707 million, or 68 cents a share, from $743 million, or 78 cents a share, a year earlier.

Revenue rose to $5.89 billion from $4.51 billion, boosted by the company's recent oil and gas acquisitions.

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