4 Min Read
* No deal expected this week -deputy finance minister
* Tax rate to be linked to progress on smelters (Adds Newmont's response)
By Wilda Asmarini and Adriana Nina Kusuma
JAKARTA, June 4 (Reuters) - Foreign copper miners in Indonesia have agreed in principle to pay a controversial export tax, the country's deputy finance minister said, following a series of talks aimed at restarting concentrate exports after a near-five-month halt.
The move would signal progress in reaching a deal over the tax, which was introduced on Jan. 12, along with a ban on mineral ore shipments, as part of moves to force miners to build smelters and processing plants in Southeast Asia's largest economy.
The new export tax halted about $500 million worth of monthly mineral ore and concentrate exports and led Freeport-McMoRan Copper & Gold Inc and Newmont Mining , which account for 97 percent of Indonesia's copper output, to slash production, arguing it conflicts with their contracts.
"What has been agreed on is the principle of the export tax," Deputy Finance Minister Bambang Brodjonegoro told reporters following government talks involving Freeport chief executive Richard Adkerson. "They agreed to an export tax."
Brodjonegoro said he did not expect the government and miners to reach a deal on the tax this week.
Freeport and Newmont have previously argued that they should be exempt from the 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.
Under the new proposal, officials would draft a tax regulation that would set a lower rate for miners that were progressing with plans to build smelters.
Freeport's chief financial officer, Kathleen Quirk, said at an investor conference in Chicago on Wednesday that the company expects to resume exports very soon. The company's production forecasts for the year had assumed exports would resume in May.
"The deal is not done yet, we're not in a position today to announce it, but I can report that we are making progress," Quirk said. Freeport expects the export tax would be "significantly reduced," she said.
Newmont is waiting to see the terms and conditions of the updated regulations before deciding if it is "feasible and appropriate" to pay an export duty on top of the taxes it pays already, company spokesman Omar Jabara said in an emailed response.
Both U.S. miners have questioned the economic viability of building new copper smelters in Indonesia, but have agreed to study the possibility of building a copper smelter with state-owned miner Aneka Tambang.
Separately, Indonesia's industry minister, M.S. Hidayat, said the export tax would be reduced. He was unable to give details but said the government and mining companies were close to an agreement.
The push to settle the dispute follows the appointment of billionaire businessman Chairul Tanjung as chief economics minister last month. Tanjung made restarting copper exports a top priority, amid a widening trade deficit, a slowdown in first-quarter economic growth and the prospect of job layoffs at mines.
Newmont said on Tuesday it had halted copper concentrate production at its Batu Hijau mine as its storage facilities were full, but had delayed standing down its 8,000 employees and contractors ahead of this week's meetings.
Tanjung led a series of high-level government and industry meetings on Wednesday, aimed at brokering a deal on the tax, and resolving contract renegotiations for major miners. (Additional reporting by Allison Martell in Toronto and Nicole Mordant in Vancouver; Writing by Michael Taylor and Fergus Jensen; Editing by Richard Pullin, Grant McCool and Leslie Adler)