* Newmont's copper mining licence may be given to state-run
* Govt to send letter soon to Newmont citing contract
* Newmont says cannot restart production as storage is full
* President directs state to start preparing to defend case
(Adds Newmont response)
By Wilda Asmarini and Fergus Jensen
JAKARTA, July 17 Newmont Mining Corp
risks its Indonesian mining licence being taken over by a
state-owned firm if the U.S. miner does not resume copper
production, the Southeast Asian nation warned, escalating a
six-month dispute over export rules.
The move represents a hardening of the stance of Indonesia's
outgoing government. The mining ministry earlier this week said
it could terminate Newmont's mining contract in response to the
miner stopping production and filing legal arbitration over the
The developments mark the latest twist in the dispute
between Indonesia and U.S. miners Newmont and Freeport-McMoRan
Inc that has led to a halt in copper concentrate
shipments from Southeast Asia's biggest economy.
Indonesia plans to soon send a letter to Newmont saying that
the company has defaulted on its contract, said Sukhyar,
director general of coal and minerals at the mining ministry.
"The default is due to the stopping of production, so we can
say they are negligent," Sukhyar told reporters on Thursday.
A Newmont spokesman did not comment on the risk of the
company losing its mining licence at its Batu Hijau copper mine
but said in an email that the company is eager to resume
production as soon as the government issues it an export permit.
Newmont repeated that it had to halt production as its
storage facilities were at full capacity, a statement it made
last month when it declared force majeure on shipments.
The company and Freeport are in dispute with the government
over an escalating export tax imposed in January that they say
conflicts with their mining contracts. The tax is part of a
government drive to force miners to build smelters and
processing plants in Indonesia.
Experts said the company would have a good case against the
government in international court.
"On the basis of the facts as I know it, Newmont would
almost certainly win," said Jakarta-based foreign advocate Bill
If the government terminates Newmont's contract, the mining
ministry said it would first offer the Batu Hijau mine to Aneka
"The procedure is this mining site will be given back to the
government," Sukhyar said. "First, the government will offer it
to a state-owned enterprise, then a local-government owned
enterprise, and then private."
Antam Corporate Secretary Tri Hartono said it would be ready
to accept Newmont's mine if offered by the government, which
holds a 65 percent stake in the Indonesian miner.
PREPARING FOR A FIGHT
President Susilo Bambang Yudhoyono on Thursday directed his
chief economic minister Chairul Tanjung to start making
preparations, including appointing a lawyer, to defend the
government's case in international court.
"I heard today that Newmont will sit down with us ... but we
must be ready. We do not want (Newmont) to be just buying time,"
Chairul told reporters.
The current government, which has been criticised by
investors for its increasing nationalistic policies in the oil
and mining sectors, has only three months left in office.
Indonesia's likely next president has signalled a more
conciliatory approach to the contract dispute with Newmont.
Such a move by the new president could prove politically
costly if he is seen to be backing down to a foreign company,
"If they had waited until the next government was in place,
it might have been possible to solve this in a more amenable
fashion," advocate Sullivan said.
"But now having started arbitration ... I think (the new
government) will just say 'Hey, it'll be politically disastrous
for us to be backing down in the face of Newmont's
(Writing by Randy Fabi; additional reporting by Nicole Mordant
in Vancouver; Editing by Richard Pullin, Muralikumar
Anantharaman and Marguerita Choy)