September 4, 2014 / 7:40 AM / in 3 years

UPDATE 1-Newmont signs MoU with Indonesia govt, to resume copper exports next week

(Adds details on exports, context)

By Wilda Asmarini

JAKARTA, Sept 4 (Reuters) - Newmont Mining Corp has signed a deal with the Indonesian government that will allow for the resumption of copper concentrate exports next week, the head of the firm’s local unit said on Thursday, ending an eight-month tax dispute.

Newmont halted shipments in January after the government imposed a hefty export tax that the U.S. firm said violated its mining contract. It declared force majeure at its Batu Hijau copper mine on the remote Sumbawa island in June and filed for international arbitration in July.

“We have signed an MoU last night,” Newmont’s Indonesian Chief Executive Martiono Hadianto told reporters. “We will start exports early next week. We will call back our workers who have been laid off and prepare to produce again.”

Newmont, Indonesia’s second largest copper producer, is expected to ship around 200,000 tonnes of copper concentrate for the remainder of the year, said Sukhyar, director general of coal and minerals for the mining ministry.

The signing of the Memorandum of Understanding comes a little more than a week after Newmont withdrew its international arbitration filing against the government.

The legal challenge severely tested the relationship between the two sides, with outgoing president Susilo Bambang Yudhoyono criticising the company’s methods.

Newmont agreed to pay a $25 million assurance bond for the building of an Indonesian smelter with fellow U.S. miner Freeport-McMoRan Inc. Newmont will also pay a 3.75 percent royalty on gold and 4 percent for copper, up from 1 percent and 3 percent previously.

Freeport, Indonesia’s top copper producer, resumed exports last month after clinching a similar deal.

The government has agreed to significantly reduce its export tax on concentrates to 7.5 percent from 25 percent this year for companies building smelters.

Jakarta imposed the export tax in January as part of an effort to force all miners to develop local mineral-processing facilities, which would bring bigger returns to Indonesia from its mineral resources.

Mining industry executives in Indonesia initially 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. (Additional reporting by Fergus Jensen and Michael Taylor; Writing by Randy Fabi; Editing by Himani Sarkar and Richard Pullin)

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