Indonesia cuts mining export tax in draft regulation-official

JAKARTA, June 20 Fri Jun 20, 2014 3:45am EDT

JAKARTA, June 20 (Reuters) - Indonesia has drafted a new mining export tax that would more than halve the base rate to be paid by miners, a ministry official said, as the government tries to resolve a five-month-old dispute that has halted copper concentrate exports.

Indonesia's main copper producers Freeport-McMoRan Copper & Gold Inc and Newmont Mining Corp halted concentrate exports in January when the government introduced new mining rules, including an escalating export tax that the two firms say violates their mining contracts.

The CEOs of both firms have been in Jakarta in recent days to meet with chief economics minister Chairul Tanjung in a renewed government push to find a solution.

Coal and Minerals Director General Sukhyar said on Friday the new regulation meant the export tax would start below 10 percent and would be linked to a company's progress in building a smelter.

"Yesterday I had discussions with the finance ministry and they said the draft is already finalized," Sukhyar told reporters, adding that it been agreed by the mining, industry and finance ministries.

Finance Minister Chatib Basri said on Friday the draft tax regulation still needed to be approved by Tanjung and President Susilo Bambang Yudhoyono.

Freeport could not be reached for comment, while Newmont was unable to give immediate comment.

The current copper export tax kicks in at 25 percent and rises to 60 percent in the second half of 2016, before a total concentrate export ban in 2017.

Yudhoyono's outgoing administration has been trying to force miners to build smelters and processing plants in Indonesia, but a lack of progress in ending the dispute has led Newmont to declare force majeure and Freeport to slash output.

Freeport is also reluctant to commit to building a billion-dollar plus smelter without assurances it will get a contract extension for its giant Grasberg mine after 2021.

Discussions with Freeport over a contract extension were continuing, Sukhyar added. (Reporting by Wilda Asmarini; Additional reporting by Adriana Nina Kusuma and Michael Taylor; Writing by Michael Taylor; Editing by Richard Pullin)

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