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UPDATE 1-Indonesian govt officials meet copper execs, hopes for quick deal
June 13, 2014 / 8:05 AM / 3 years ago

UPDATE 1-Indonesian govt officials meet copper execs, hopes for quick deal

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By Yayat Supriatna and Wilda Asmarini

JAKARTA, June 13 (Reuters) - Indonesian government officials met with major foreign copper miners on Friday, with the chief economics minister hoping a quick deal can be reached to overcome a controversial tax that has halted concentrate exports for five months.

Richard Adkerson, the CEO of Freeport McMoRan Copper & Gold Inc and Newmont Mining Corp CEO Gary Goldberg are in the capital Jakarta, signalling a fresh effort to reach a settlement over the export tax that the miners say they should not have to pay.

The tax is part of a government drive to force miners to build smelters and processing plants in Southeast Asia’s largest economy, but a lack of progress in resolving the dispute has led Newmont to declare force majeure and Freeport to slash output.

“We hope this happens quickly, everyone wants it to happen quickly,” said chief economics minister and billionaire businessman Chairul Tanjung, who is spearheading a new government push aimed at brokering a deal.

Asked about a possible timeframe, Tanjung said: “As quickly as possible but we mustn’t rush.”

Both Freeport and fellow U.S.-based copper and gold miner Newmont have 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. They say their current contracts prohibit any extra taxes.

The two miners account for 97 percent of Indonesia’s copper output, with concentrate exports having now been halted for the past five months.

Freeport was working with the government in an effort to find a solution, said company spokeswoman Daisy Primayanti. Newmont was unable to give any immediate comment.

The two parties are also discussing the miners’ contracts, with Freeport seeking a contract extension beyond 2021 before agreeing to invest more than $15 billion to turn its Grasberg complex into an underground mine after 2016.

Tanjung said on Friday he hoped for a conclusion on the contract talks by the end of the month, which could potentially pave the way for a deal on the export tax.

Government officials reiterated that both Freeport and Newmont have agreed to pay the export tax, with the percentage likely to be tied to progress made in smelter construction.

However, the extension of Freeport’s miner’s contract beyond 2021 appears to now be a key stumbling block.

Government officials say Freeport can only renew its contract in 2019 at the earliest, but are consulting legal experts to see whether there is room for manoeuvre.

A legally binding Memorandum of Understanding (MoU) with Freeport is being suggested by the government as one way to bypass the extension issue, although the validity of such a document may be a concern for Freeport.

An extension to Newmont’s deal, which ends in 2030, is not under discussion in the talks, Coal and Minerals Director General Sukhyar said on Friday. The main issue of concern was a proposed increase in royalty percentages paid to the government.

Additional reporting by Fergus Jensen; Writing by Michael Taylor; Editing by Richard Pullin

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