Newmont Mining Corp. officials have filed for international arbitration against the Indonesian government after its ore export ban, aimed at forcing the domestic construction of smelters, halted copper concentrate exports. Its Batu Hijau operations have been idled since force majeure was declared last month; company officials are seeking an interim injunction.
Alongside Freeport-McMoRan Copper and Gold Inc., Newmont officials are challenging Jakarta over the tax they say betrays their contracts. First introduced in 2009, the escalating tax, effective Q1 2014, has deterred major investors from one of the world’s most geographically diverse, heavily mineralized nations. Newmont’s decision, meanwhile, casts doubt on a resolution before July 9 presidential elections.
The Colorado-based Newmont, accordingly, has “no option but to seek relief through arbitration to ensure stakeholders’ jobs, rights and interests are protected,” said Martiono Hadianto, president director of PTNNT, Newmont’s Indonesian operations, in a statement. “We have to protect the value of Batu Hijau and the thousands of jobs it provides.”
Newmont and Phoenix-headquartered Freeport, representing 97% of Indonesian copper output, have argued they should be exempt from the tax, which kicks in at 25% and rises to 60% by Q3 2016, pending a full concentrate export ban in 2017.
PTNNT officials added they will continue copper concentrate sales from storage to PT Smelting in Gresik, Indonesia, through Q4 2014, allowing for 58,400 tons of concentrate shipment. PT Smelting’s capacity limits, however, won’t satisfy PTNNT output sufficiently to permit normal Batu Hijau operations.