Indonesia threatens to end Newmont’s mining contract over arbitration

July 16, 2014

Indonesia could terminate Newmont Mining Corp’s copper mine contract if Newmont does not withdraw a legal challenge to the country’s export taxes, Reuters reported.

Newmont and Freeport McMoRan Copper & Gold have halted copper extracts from Indonesia in response to an escalating export tax imposed by government of Indonesia in Janurary ME, Jan. 24.

The government of Indonesia is charging that because of the stopped production state revenues have declined and therefore the mining companies have defaulted.

Newmont field for international arbitration in July and declared a force majeure on shipments in June. It said that it was forced to halt production at its Indonesian operations, PTNNT, because it had still not received an export permit from the government and that its copper concentrate storage facilities had reached full capacity in early June.

“PTNNT’s contract of work with the government of Indonesia explicitly grants the company the right to export copper concentrate,” Newmont spokesman Omar Jabara said in an email to Reuters.

“As such, PTNNT remains in compliance with the contract of work and is prepared to resume production upon receiving an export permit from the government.”

Jabara added that Newmont’s preference was for talks with the government to continue to seek a resolution outside of arbitration.

Sukhyar, director general of coal and minerals at the mining ministry, said Newmont’s contract could be revoked 90 days after the government declares it to be in default or negligent. It was not clear when the government might make such a declaration against Newmont.

Indonesia has also threatened to sue Newmont for breach of contract.

Newmont has said it wanted interim, injunctive relief to allow it to resume copper concentrate exports so that Batu Hijau copper mine operations can be restarted.

Freeport McMoRan has continued to hold high-level talks with the government in the hopes of avoiding a lawsuit.

Both companies, 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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