(Recasts, adds details, comments, market reaction)
By Michael Taylor
JAKARTA May 7 Newmont Mining Corp said
it will be forced to cut production at its Batu Hijau copper and
gold mine in Indonesia from around June 1, if talks with the
government remain unresolved over export permits and taxes.
Indonesia in January levied an escalating tax on copper
concentrate exports, but both Newmont and fellow miner
Freeport-McMoRan Copper & Gold Inc - who account for 97
percent of Indonesia's copper output - say the rule conflicts
with contracts they signed with Indonesia that exempt them from
new taxes and duties.
"Batu Hijau's copper concentrate storage facilities will
reach capacity in late May, requiring an orderly ramp down of
operations," Newmont said in a statement.
"Once the mine's copper concentrate storage is filled, PTNNT
(PT Newmont Nusa Tenggara) will move to cease mining and
Newmont CEO Gary Goldberg said late last month the miner was
running out of space to store copper concentrate in Indonesia
but was cautiously optimistic it would get permission to export
in the coming weeks and that the country's proposed export tax
"will be clarified".
Before the new export rules, Newmont forecast copper
concentrate output for 2014 at 110,000-125,000 tonnes.
Newmont, which is the world's third largest gold producer by
market value, usually supplies around 30 percent of its
Indonesian output to the country's only copper smelter, PT
Smelting at Gresik.
While talks with the government continue, Newmont said it
will continue to ship and sell copper concentrate to PT Smelting
However, it is currently unable to export the rest of the
concentrate, which the government says is liable to a 25 percent
export tax, rising to 60 percent in the second half of 2016,
before a total concentrate export ban takes effect in 2017.
The government has demanded Newmont and Freeport commit to
building or supplying smelter projects in Indonesia before they
can resume concentrate shipments, and has hinted this may give
them leeway with the export tax.
Newmont said it had obtained registered exporter status from
Indonesia's ministry of trade in April, which was "a necessary
milestone prior to receiving the export permit".
But once storage capacity is full, the miner will scale back
contracted services and capital expenditure, reduce overtime and
place most employees on leave at reduced pay from early June.
"We have taken numerous steps to support the government's
desire to increase in-country smelting," PTNNT President
Director Martiono Hadianto said in the statement.
"This is a very unfortunate and difficult situation for all
of us, as it will disrupt the lives of our 8,000 employees and
contractors and impact thousands of more people in the Sumbawa
Barat area who derive their incomes from our operation."
The copper market currently has ample global concentrate
supplies and given that exports from both Newmont and Freeport
have already been largely halted this year, the impact on copper
and gold prices of any stoppage in production by Newmont would
be muted, said a mining source.
London copper prices recovered to near two-month
highs around $6,800 late last month but have struggled to build
on the momentum. The global market for copper is expected to
post a surplus this year for a second year running.
(Additional reporting by Melanie Burton in Singapore; Editing
by Richard Pullin)