INDONESIA – Newmont withdraws arbitration case

Newmont Mining Corp last week withdrew an international arbitration filing against the Indonesian government, suggesting a breakthrough in a seven-month dispute that has halted copper exports. The US-based company is expected to resume production at its Batu Hijau copper mine soon.

A company statement said: “The decision to discontinue and withdraw arbitration comes after commitments from senior government officials to open formal negotiations to conclude a Memorandum of Understanding (MoU) with PT Newmont Nusa Tenggara (NNT) upon cessation of the arbitration claim.

“Signing of a MoU with the government would be followed by the safe ramp-up of copper concentrate production and exports from Batu Hijau.

“PT NNT remains committed to its long-term partnership with Indonesia and seeks to demonstrate its support for the Government’s policies, the Indonesian people, and the ongoing responsible development of the country’s natural resources.”

US-based Newmont, which declared force majeure at Batu Hijau in June and filed for arbitration in July, has been in dispute with the Indonesian government over an export tax imposed in January that it says conflicts with its mining contract. The tax was part of government moves to force miners to develop local mineral-processing facilities.

Before the new export rules, Newmont forecast total 2014 Batu Hijau output of copper in concentrate would amount to 110,000 to 125,000 tonnes.

The relationship between Newmont and the government has been tested with outgoing President Susilo Bambang Yudhoyono criticising the company’s methods. In contrast, President-elect Joko Widodo said he wanted to sit down with mining companies in a bid to resolve the dispute over policies.

Freeport-McMoRan’s Indonesian unit resumed exports in early August after signing an MoU with the government in July.

Freeport and Newmont, which account for 97% of Indonesia’s copper output, had argued they should be exempt from the tax, which kicks in at 25% and rises to 60% in the second half of 2016, before a total concentrate export ban in 2017.

Freeport agreed to a much reduced export tax rate of 7.5%, which will fall further depending on its progress in the construction of a domestic copper smelter.

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