Newmont Declares Force Majeure on Indonesia Mine

Newmont Mining Corp. declared force majeure on copper sales from Indonesia, after the nation’s ban on mineral ore exports forced it to shut down its mine in the country.

Newmont, the world’s second-largest gold producer, is putting about 80 percent of its Batu Hijau mine employees on leave at reduced pay from June 6, it said in an e-mailed statement today. Newmont halted output and copper concentrate processing at the facility on Sumbawa island on June 3.

Force majeure, which allows the company to miss deliveries because of circumstances beyond its control, signals Newmont doesn’t expect a quick resolution to its dispute with the government. Newmont and Freeport-McMoRan Copper & Gold Inc. have been negotiating with Indonesia after the country banned raw ore shipments on Jan. 12 and put a tax on concentrates in an effort to spur companies to build smelters domestically.

“Despite our best efforts, we have not been able to export copper concentrate since January, and we still do not have an export permit,” Martiono Hadianto, the president director of Newmont’s Indonesian unit, said in the statement. “We have taken numerous steps to help resolve the export issue and support the government’s desire to increase in-country smelting.”

Indonesia’s progressive tax on exports of copper concentrates will range from 25 percent presently to 60 percent from the second half of 2016, according to the Finance Ministry’s ruling in January. Newmont says the tax will undermine the mine’s profitability and conflicts with a previous agreement it had in place with the Indonesian government.

Continued Ban

The country’s leading presidential candidate Joko Widodo will keep the export ban should he win the July election, his running mate, Jusuf Kalla, said yesterday.

Newmont will continue selling material from storage to PT Smelting in Indonesia, allowing for the domestic shipment of 81,000 metric tons of concentrate between now and the end of the year, the company said in the statement.

Greenwood Village, Colorado-based Newmont rose 0.6 percent to $23.02 at the close in New York. Phoenix-based Freeport increased 0.8 percent $34.77.

Export Tax

Freeport, which has been operating its Grasberg mine at about half of normal levels after the new rules were introduced in January, appears close to a resolution with the Indonesian government. Freeport’s local unit has agreed to pay an export tax and can restart exports within a “short time,” R.Sukhyar, a director general at the energy and minerals ministry, said in Jakarta today after talks with the miner.

Freeport is working with the government on a resolution to the dispute and expects exports from its Indonesia mine to resume this month, Kathleen Quirk, its chief financial officer, said on June 4. The government indicated it was willing to reduce export duties and Freeport would expect any duty to be “significantly reduced” from what was published in January, Quirk said.

Freeport has told the government it will lead construction of a new copper smelter, provided the government participate by using some of the company’s tax revenues as a financial incentive for the project, Chief Executive Officer Richard Adkerson said May 28.

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