Newmont evaluates new export ban policy, considers possible legal action
Thursday, January 23 2014 - 01:38 AM WIB
PT Newmont Nusa Tenggara (PTNNT), the Indonesian subsidiary of US-based Newmont Mining Corp, which operates the Batu Hijau copper and gold mine on the island of Sumbawa, said it was evaluating the potential impacts of the government?s mineral ore export ban policy on its operations at Batu Hijau.
PTNNT said on Wednesday it was concerned with the potentially restrictive conditions to obtain an export permit, as well as a significant export duty following the introduction of the export ban policy.
The long-planned export ban policy took effect on January 12 as mandated by the 2009 Mining Law, forcing miners to process mineral ores at domestic smelters in a bid to generate greater value added for the country. Amid fears of potentially catastrophic impacts to the economy, the ban, however, is a diluted version of the original plan, as the government still allows the export of six so-called mineral concentrates including copper until 2017 as long as they meet the minimum purity levels. The copper concentrates produced by Newmont and PT Freeport Indonesia, which account for about 97 percent of Indonesia?s output, have met the minimum purity levels.
But as part of the export ban policy, the government via the ministry of finance imposed punitive progressive export tax on the six mineral concentrates, and introduces new regulations which are seen to further lengthen the bureaucracy line in obtaining export permit.
?The Contract of Work (CoW) signed with the Government of Indonesia provides PTNNT the right to export the copper concentrate produced at Batu Hijau?s processing facility,? said Blake Rhodes, Newmont?s Senior Vice President, Indonesia. ?The CoW also explicitly sets the types and levels of taxes, levies, and duties PTNNT is required to pay, thereby establishing all tax obligations.?
PTNNT said it will continue to engage with government officials in Indonesia in an effort to resolve this issue, while also considering other remedies, including possible legal action. Newmont plans to provide an update on January 31, 2014, during a call with investors regarding the Company?s 2013 preliminary operating and sales results.
PTNNT is currently mining Phase Six of Batu Hijau, with plans to gain access to higher grade ore later this year. PTNNT said it does not have plans to export copper concentrate until later this quarter, as previously scheduled shipments were completed in early January.
The value added through Batu Hijau?s processing plant improves the quality of the copper ore mined by more than 50 times, capturing roughly 95 percent of the entire value stream in Indonesia, the company claimed. PTNNT said it also has supported in-country smelting for many years by shipping as much copper concentrate to PT Smelting Gresik ? Indonesia's only copper smelter ? as it can take from Batu Hijau.
Since operations began in 2000, PTNNT said it has paid more than $3 billion in taxes and royalties to the government, in addition to investing approximately $10 million each year toward local economic, infrastructure and social development. Approximately 9,000 people, including employees and contractors, support their families by working at Batu Hijau.
Editing by Reiner Simanjuntak