Newmont Seeks Arbitration in Indonesia Copper Dispute

Newmont Mining Corp., the U.S. owner of the Batu Hijau mine in Indonesia, filed for arbitration after failing to resolve a six-month-long dispute with the Southeast Asian country over exports of copper ore.

The company’s Indonesian unit is seeking to resume shipments and restart the mine on Sumbawa island, it said in a statement yesterday. The case was filed with the Washington-based International Centre for the Settlement of Investment Disputes.

Newmont and Freeport-McMoRan Copper & Gold Inc., another U.S. company mining copper in Indonesia, have been in talks with the government since it banned raw ore shipments in January and put a progressive tax on concentrates, a semi-processed ore that’s shipped to smelters for processing into finished metal.

Indonesia, Southeast Asia’s largest economy, is curbing exports in an effort to encourage construction of domestic smelters and refineries. Newmont said yesterday the policy violates its so-called contract of work, an investment accord with the government, and a bilateral investment treaty between Indonesia and the Netherlands. Newmont’s Indonesian unit, PT Newmont Nusa Tenggara, is controlled by its parent via a Dutch joint venture.

“We want continued dialog with the government to lead to a resolution outside of arbitration,” PT Newmont Nusa Tenggara President Director Martiono Hadianto said in the statement. “In the meantime, we have an obligation to protect the value of Batu Hijau and the thousands of jobs it provides.”

‘Long Process’

The government has received the arbitration notice, said R. Sukhyar, director general of coal and minerals at the Energy and Mineral Resources Ministry. It has halted talks with Newmont about renegotiating its contract of work following the filing, he said.

“This is a long process,” he told reporters in Jakarta yesterday. “There is a mediation process in between, so this is not the end of the world, but this is what they choose to do.”

International arbitration to enforce contract rights would take years and leave miners without exports during the dispute, said Keith Loveard, head of political risk analysis at Jakarta-based security company Concord Consulting. “It comes down to figuring out whether it’s worth the games and the stress,” he said.

Newmont declared force majeure on shipments from Batu Hijau last month after the export ban forced it to shut the mine. Force majeure is a condition that allows companies to miss deliveries because of circumstances beyond their control.

The Greenwood Village, Colorado-based company said yesterday that for the rest of 2014 it will ship 58,400 metric tons of copper concentrate from storage to PT Smelting, Indonesia’s only copper smelter.

Newmont’s shares dropped 1.4 percent to close yesterday at $25.08 in New York. They have climbed 8.9 percent this year.

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