July 15, 2014 / 4:45 PM / 3 years ago

Indonesia threatens to end Newmont's mining contract over lawsuit

JAKARTA, July 15 (Reuters) - Indonesia could terminate Newmont Mining Corp’s copper mine contract if the U.S. firm does not withdraw a legal challenge to its export taxes, a government official said on Tuesday.

Newmont earlier this month filed for international arbitration over an escalating export tax the government imposed in January that it says is in breach of their mining contracts.

The firm, along with fellow U.S. miner Freeport-McMoRan Copper & Gold, have halted copper exports for the last six months due to the ongoing dispute. Both firms have significantly reduced domestic operations, and Newmont last month declared force majeure on shipments.

“By stopping production, they are making our state revenues decline so we can say that they have defaulted,” Sukhyar, director general of coal and minerals at the mining ministry, told reporters.

“Stopping production is just the same as negligence.”

Sukhyar said Newmont’s contract could be revoked 90 days after the government declares it to be in default or negligent. It was not clear when the government might make such a declaration against Newmont.

Indonesia has also threatened to sue Newmont for breach of contract.

Company officials in Indonesia could not be immediately reached for comment.

Newmont has said it wanted interim, injunctive relief to allow it to resume copper concentrate exports so that Batu Hijau copper mine operations can be restarted.

Critics have said Newmont’s challenge was a risky option in a country where open confrontation is often frowned upon. Freeport, on the other hand, has continued to hold high-level talks with the government in the hopes of avoiding a lawsuit.

Both companies, which account for 97 percent of Indonesia’s copper output, have previously argued 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.

The tax on concentrate exports is part of the outgoing government’s drive to force miners to build smelters and processing plants in Southeast Asia’s largest economy. (Additional reporting by Fergus Jensen; Writing by Randy Fabi, editing by David Evans)

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