Newmont Indonesia to make contingency plans ahead of 2014 export ban

Fri Sep 20, 2013 8:50am EDT

Related Topics

* Internal memo sent to Newmont staff due to 2014 export ban concerns

* Newmont has to start developing contingency plans, says memo

* Average 20-23 percent of copper concentrate shipped to domestic smelter

By Michael Taylor

JAKARTA, Sept 20 (Reuters) - Newmont Mining Corp, the world's second-largest gold producer, has warned employees at its giant Batu Hijau copper and gold mine in Indonesia it will start making contingency plans ahead of a possible export ban next year.

With a current account deficit at a near-record high, the Indonesian government is scrambling to ease nationalistic resource rules that were passed more than a year ago, including a ban on mineral ore exports from January 2014.

Southeast Asia's largest economy is the world's top exporter of nickel ore, thermal coal and refined tin, and home to the world second-biggest copper mine.

Newmont issued an internal memo to employees this week informing them that while talks continue with the government on the 2014 regulation, contingency plans will start to be developed, Rubi Purnomo, head of corporate communications for Newmont in Indonesia said in an emailed response to Reuters.

"We felt that our employees needed to be informed that we have to start developing contingency plans in the event that the export of copper concentrate is banned, including the worst case scenario of ceasing operations at Batu Hijau," Purnomo said.

The Indonesian Energy and Mineral Resources Ministry has initiated talks with lawmakers to revise the 2009 law that requires mineral ores to be processed domestically before export, starting from January 2014.

One option being discussed is to allow limited exports from companies that have already made investments or signed agreements to process ore domestically, such as PT Perusahaan Perseroan Aneka Tambang (Antam).

"We have had meetings with numerous ministries, and are working on arrangements to supply copper concentrate with three companies that plan to build copper smelters in Indonesia," Purnomo added.

"However, we have not yet received confirmation of our right to export copper concentrate as specified in our CoW (contract of work), after Jan. 12, 2014.

A second option being considered by the government, is to delay the ban and instead increase the ore export tax by as much as 50 percent from the current 20 percent, the Indonesian Mining Association says.

Attributable copper production at Batu Hijau was 76 million pounds last year, with attributable gold output at 33,000 ounces, according to Newmont's website.

Copper production in 2013 is forecast to be between 75-90 million pounds, with an average 20-23 percent of copper concentrate production from Batu Hijau shipped to Indonesia's only copper smelter, PT Smelting in East Java, Purnomo said.

Newmont has been caught in a lengthy legal battle between business-backed local government and central authorities for the right to buy a stake it is divesting in the Batu Hijau mine in West Nusatenggara province.

Newmont, which also has mines in Africa, Australia, Canada and the United States, operates the Indonesian mine in partnership with Japan's Sumitomo Corp.

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