Newmont declares force majeure at Indonesian copper mine

June 6, 2014

In the wake of Indonesia’s export tax that was imposed in January, Newmont Mining Corp. announced that would invoke a force majeure at its Batu Hijau copper mine.

Newmont, along with Freeport-McMoRan, have been in a long running dispute with the Indonesian government regarding the export tax. Newmont and Freeport-McMoRan account for 97 percent of the country’s copper output.

“Despite our best efforts, we have not been able to export copper concentrate since January, and we still do not have an export permit,” Martiono Hadianto, CEO of Newmont’s Indonesian operations, said in a statement. “We are left with no option but to declare force majeure.”
Reuters reported that Newmont's move came after the Indonesian government launched a drive this week to force a breakthrough in the dispute, which has contributed to slower economic growth. 

Reuters reporthed that Freeport and Newmont have previously argued that 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 said their current contracts prohibit any extra taxes.

"The new export conditions, duty and January 2017 ban, fundamentally impact Batu Hijau's economics and conflict with our Contract of Work," Hadianto added.

Before the new export rules, Newmont forecast copper concentrate output for 2014 at 110,000-125,000 tonnes at its Indonesian mine, but halted production after it was unable to break the deadlock over the new export rules.

The mine will be placed under care and maintenance, although Newmont said it will continue shipping concentrate from storage to Indonesia's only copper smelter, PT Smelting at Gresik, through 2014, said the statement.

This would allow for copper concentrate shipments of 81,000 tonnes between now and the end of the year, the statement added.

Newmont, the world's third-largest gold producer by market value, had said its storage facilities at the Indonesian mine were full after the near five-month export halt, but that it had delayed standing down its employees and contractors ahead of government meetings this week.

About 80 percent of Batu Hijau's 4,000 employees will be placed on leave at reduced pay from Friday, the statement added, as export talks with the government continued.

Freeport said earlier this year it had cut production at its Grasberg mine in Papua, Indonesia, the world's fifth-largest copper mine, by around 60 percent and that a force majeure could be announced if the export dispute dragged on.


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