Indonesia questions Newmont's commitment in tax dispute

BATAM Indonesia Thu Jun 5, 2014 11:23am EDT

BATAM Indonesia (Reuters) - Indonesia's chief economics minister on Thursday questioned Newmont Corp's commitment to resolve a five-month long mineral export tax dispute, after executives from the U.S. firm did not attend meetings in Jakarta this week.

Billionaire businessman Chairul Tanjung, who spearheaded the meetings between industry and government in an effort to break the deadlock, also said he believed Newmont was playing "games" when it said on Tuesday it may soon stand down mine workers.

A Newmont spokesman said, however, that neither the company nor its Indonesian subsidiary had been invited to participate in the meetings. Omar Jabara said the subsidiary made a formal request to participate, and did not receive any response.

Newmont and fellow miner Freeport-McMoRan Copper & Gold Inc - which account for 97 percent of Indonesia's copper output - are in dispute with the government over an export tax imposed in January that has halted copper concentrate exports.

"Newmont is not coming. Are (they) not serious in wanting to collaborate with the Indonesian government?" Tanjung told Reuters on the sidelines of a presidential visit to Batam island. "There needs to be willingness from both sides."

Later on Thursday, Newmont announced it would place 80 percent of the employees at its Batu Hijau mine on leave with reduced pay with immediate effect and declared force majeure. It halted copper concentrate production earlier this week after running out of space to store the material.

Spokesman Jabara said Newmont "wants nothing more than to quickly resolve this issue in a way that will allow Batu Hijau to resume normal operations in an economically sustainable manner."

"Our hope is that the government will resolve this quickly, and we can recall our employees and contractors back to work," he said in an emailed statement.

Tanjung said he hoped as soon as possible to resolve the dispute, which has contributed to slower economic growth, but did not give a time frame for when it might be settled.

At Wednesday's meeting, the government said copper miners agreed in principle to pay the export tax with the understanding that the rate would be reduced as miners progress with plans to build smelters, in line with Indonesia's push to boost onshore mineral processing.

Speaking at a conference in Chicago on Wednesday, Freeport's chief financial officer confirmed that a reduced export tax was being discussed, and said exports could resume very soon.

Newmont said in statement on Wednesday it was waiting to see the terms and conditions of the updated regulations before deciding if it was "feasible and appropriate" to pay an export duty on top of the taxes it pays already.

Freeport Chief Executive Richard Adkerson and the head of Vale Indonesia attended Wednesday's meetings, but Newmont executives did not.

Tanjung said Freeport had showed its commitment to Indonesia by sending its CEO from the United States for the meetings.

Asked if Newmont was playing games on the possible stand-down of workers, Tanjung said: "I think so."

He added: "They try to push the government too hard. I'm a businessman, I know about the games companies play."

Newmont workers are due to hold a protest in Jakarta on Friday.

Freeport and Newmont have previously argued that they should be exempt from the export tax, which kicks in at 25 percent and rises to 60 percent in the second half of 2016, before a total concentrate export ban in 2017. They said their current contracts prohibit any extra taxes.

The tax was introduced on Jan. 12, along with a ban on mineral ore shipments, to force miners to build smelters and processing plants in Southeast Asia's largest economy.

"Freeport has already agreed to build a smelter ... and put a deposit as a guarantee to the government on how serious they are," said Tanjung, who said he has no ambitions to stay in government after the next administration takes office in October.

"We want them to continue exporting as soon as possible to make our (trade) deficit to turn into a surplus."

(Additional reporting by Wilda Asmarini in Jakarta and Allison Martell in Toronto; Editing by Richard Pullin and Marguerita Choy)

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