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Indonesia Seeks to Increase Royalties From Mineral Mining to 10%

Indonesia has asked metal mining companies including the local units of Freeport-McMoRan Copper & Gold Inc. (FCX) and Vale SA (INCO) to raise royalties to 10 percent.

The government is seeking higher payments as part of negotiations to extend the companies’ mining contracts, Deputy Energy and Mineral Resources Minister Rudi Rubiandini said. PT Freeport Indonesia currently pays 1 percent as royalty for mining gold and 3.5 percent for copper.

“Ten percent is the proper rate for royalties,” Rubiandini said in an interview yesterday. “We will sit with them again and discuss this. It’s part of the renegotiation.”

Indonesia formed a team in January to review mining contracts and consider raising the state’s share. The group has until December 2013 to conclude the review, according to a decree signed by President Susilo Bambang Yudhoyono on Jan. 10. Coal mining companies in Indonesia pay 13.5 percent as royalty and the government is seeking to bring mineral miners to a similar level, Rubiandini said.

Fourteen mining companies have agreed to raise the royalties and are waiting for the government’s approval, he said.

Freeport Indonesia operates the Grasberg mine in the Papua province, which contains the world’s largest recoverable copper reserves. The mine accounted for 19 percent of the parent’s revenue last year.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Fitri Wulandari in Jakarta at fwulandari@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Mike Anderson at manderson34@bloomberg.net

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