Newmont's fight in Indonesia could lead to international arbitration

July 2, 2014

A month after it declared a force majeure at its Batu Hijau copper mine in Indonesia because of the country’s escalating export tax, Newmont Mining Corp. announced that had filed for international arbitration against the Indonesian government.

Newmont and Freeport-McMoRan have struggled since Indonesia instituted the tax on the firm’s exports of copper concentrate from the country, Reuters reported.

“PT Newmont Nusa Tenggara (PTNNT) and its shareholders are left with no option but to seek relief through international arbitration to ensure our stakeholders’ jobs, rights and interests are protected,” Martiono Hadianto, president director of PTNNT, Newmont's Indonesian operations, said in a statement.

"We want continued dialogue with the government to lead to a resolution outside of arbitration," he added. "In the meantime, we have an obligation to protect the value of Batu Hijau and the thousands of jobs it provides, as we are still unable to export copper concentrate due to the regulations."

Newmont intends to request interim, injunctive relief to allow it to resume copper concentrate exports so that Batu Hijau operations can be restarted, according to the statement.

Indonesia's coal and minerals director general, Sukhyar, said while he had not yet read Newmont’s letter notifying the government on its decision to seek arbitration, he regretted the miner had taken this action and that the government would seek to resolve it.

Newmont's decision to pursue international arbitration, despite a recent move by Indonesia to draw up a new mining export tax that will more than halve the base rate to be paid by miners, casts doubt on whether the export spat will be resolved before presidential elections on July 9.
Both Freeport and Newmont, which account for 97 percent of Indonesia's copper output, have 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.

The tax on concentrate exports is part of the outgoing government's drive to force miners to build smelters and processing plants in Southeast Asia's largest economy.


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