Freeport and Newmont agree to increase royalty to 3.75%

Two mining giants Freeport Indonesia and Newmont Nusa Tenggara have agreed to increase their royalties to the government to 3.75 percent from 1 percent at present following renegotiation of their contracts of works with the government, Kontan reported on Wednesday.

Thamrin Sihite, the Director General of Coal and Mineral at the energy and mineral resources ministry, said in Jakarta on Tuesday that the agreement was achieved after a long process of negotiations with the two mining giants.

With the agreements made by the two mining giants, he hoped other companies would also follow suit to increase their royalties. In addition to the royalty, Freeport has also agreed to return their mining areas located in the Lorenz national forest park to the government. ?However, Freeport will maintain their areas above 25,000 hectares,? Thamrin said.

According to the new mining law the mining area for each IUP mineral permit is limited to only 25,000 hectares, and that for each IUP for coal mining permit is limited to 15,000 hectares. Freeports which operates under KK contract of works has concession a area of 212,950 hectares.

Renegotiations with mining companies have taken place since early last year as part of the government?s plan to bring all existing mining policies in line with the new mining law.

The renegotiations cover six main issues, including the increase in royalty payments, the obligation to process mineral ores in Indonesia, the use of local goods and services, divestment, contract extensions and the size of mining areas.

Thamrin said earlier that Newmont and Freeport have not yet agreed on the obligation to process mineral ores in local smelting plants. (*)