JAKARTA Aug 27 Indonesia wants copper miners
Newmont Mining Corp and Freeport-McMoRan Inc to
hammer out a deal on concentrate supply for an upcoming smelter
before allowing Newmont to resume exports, a mining ministry
official said on Wednesday.
U.S.-based Newmont, which runs the Batu Hijau copper mine on
remote Sumbawa island, withdrew its international arbitration
filing against the Indonesian government this week, indicating a
possible breakthrough in a seven-month dispute that has halted
Newmont declared force majeure at its Indonesian mine in
June and then filed for arbitration in July, and has been in a
dispute with the government over an export tax imposed in
January that the miner says conflicts with its mining contract.
"They both have to sit together," Sukhyar, director-general
of coal and minerals at the mining ministry, told reporters. "We
are asking for their (Newmont's) certainty in working with
"We recognise that Freeport's smelter plan also accommodates
concentrates from Newmont, so I've asked them to meet again to
confirm this (plan)." He did not elaborate.
The tax is part of government moves to force miners to
develop local mineral-processing facilities, which would bring
bigger returns for Indonesia from its mineral resources.
Mining industry executives in Indonesia have balked at the
idea of developing downstream industries and building smelters,
citing a lack of power and infrastructure in remote areas where
mines are often located.
Both Freeport and Newmont, which together account for 97
percent of Indonesia's copper output, had 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.
But Freeport's Indonesian unit resumed exports earlier this
month after being granted a much reduced tax rate on condition
it builds a smelter, and after signing a Memorandum of
Understanding (MoU) with the government in July.
Freeport has begun initial work on the construction of a
domestic smelter and is looking at potential sites to build the
$2.3 billion project. Freeport declined to comment on Wednesday
but has previously stated that the project may also involve
Newmont could not be reached for immediate comment on
Wednesday. Newmont said in a statement on Tuesday that multiple
studies had shown it was not economically viable for it to build
a smelter on its own.
"The company has an MoU to participate in a process with PT
Freeport Indonesia designed to lead towards the development of a
smelter," the statement said. Newmont also has conditional
concentrate supply agreements with two Indonesian companies that
plan to build their own copper smelters in the country, it said.
Government officials have previously stated that Newmont has
already agreed to pay an export tax, without giving an exact
figure, but that further talks were needed over the issue of an
increase in royalties.
The MoU talks between Newmont and the government are likely
to be concluded next week, Yoesrawan Galang, chairman of the
Newmont Indonesia workers' union, told Reuters, adding that
production may return to full capacity by mid-October.
Newmont's copper concentrate stocks are around 80,000
tonnes, Galang added.
Before the new export rules, Newmont forecast total output
of copper in concentrate would amount to 110,000 to 125,000
tonnes from its Indonesian mine this year.
A trade ministry official said on Wednesday the ministry was
yet to receive a recommendation from the mining ministry to
enable issue of a concentrate export permit to Newmont.
(Additional reporting by Wilda Asmarini and Michael Taylor;
Writing by Michael Taylor; Editing by Muralikumar Anantharaman)