With China’s economic growth slowing to 7.3 percent year-on-year (y/y) in the third quarter of 2014, Indonesian exports will be affected as China is one of Indonesia’s most important trading partners. Prior to the release of China’s Q3-2014 GDP growth result, the outgoing government of Indonesia had already trimmed its export target for 2014 as global commodity prices have still not picked up. In fact prices of palm oil, coal, rubber, copper and iron ore have fallen in the first three quarters of 2014 according to Indonesian government data.

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The Chief Executive at Newmont Nusa Tenggara, Martiono Hadianto, said that on Wednesday evening (03/09) a Memorandum of Understanding (MoU) has been signed between the USA- based mining giant and the Indonesian government after an 8-month dispute over the country’s ban on exports of mineral ore (implemented on 12 January 2014). The mining company can now resume copper concentrate exports next week. Earlier this week it had been announced that both sides would come to an agreement.

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The Indonesian government and Newmont Nusa Tenggara (NNT) have reportedly agreed on the content of a renegotiation package after an 8-month dispute over the mineral ore export ban. NNT, subsidiary of the USA-based Newmont Mining Corporation, will be allowed to resume copper concentrate exports up to 200,000 tons (with a value of about USD $400 million) until the end of 2014. Last week, NNT already announced it would not seek international arbitration over this matter.

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Contrary to Newmont Nusa Tenggara (which has been in a heated dispute with the Indonesian government), Freeport Indonesia obtained a permit to resume copper concentrate exports from Indonesia after these had ceased since January 2014 when the government implemented the ban on exports of unprocessed minerals. Freeport Indonesia Chief Executive Rozik Sutjipto announced that the memorandum of understanding between both sides has been signed. The miner is the Indonesian unit of US based Freeport-McMoRan Copper & Gold.

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On 06 July 2014, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve political and economic topics such as the presidential election, a rupiah and stock market update, an analysis of inflation and the trade balance, corruption, poverty, GDP growth, prospects of the copper price, and more.

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Indonesia's Minister for Energy and Mineral Resources Jero Wacik opened the possibility for Newmont Nusa Tenggara, subsidiary of US-based gold miner Newmont Mining Corporation, to resume exports of ore concentrates, provided that Newmont shows its commitment to build a smelter in Indonesia as in accordance with the new and controversial 2009 Mining Law. One of the targets of this new law is to boost Indonesia’s downstream mining industry by prohibiting export of unprocessed minerals.

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R. Sukhyar, Director General for Coal and Mineral Resources at the Indonesian Ministry of Energy and Mineral Resources, said that Freeport Indonesia and Newmont Nusa Tenggara, two of the largest copper miners in Indonesia, have shown their commitment to build refining facilities (in line with the 2009 Mining Law) by agreeing to transfer a total of USD $140 million to the government as a deposit guarantee. Freeport will transfer USD $115 million, whereas Newmont will transfer the remaining USD $25 million.

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The owners of Tujuh Bukit, a gold and copper project located near Banyuwangi (East Java), are planning to conduct an initial public offering on the Indonesia Stock Exchange in the third quarter of 2014. The project zone is estimated to contain at least 1.6 million ounces of gold and 60 million ounces of silver. If construction of the mine can be realized this year, then gold production can start in 2016. Construction of the copper mine is expected to start in 2019. Through the IPO, USD $75 million is targeted to be raised (used for concession development).

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PT Indosmelt, an Indonesian smelting company, is planning to conduct an initial public offering (IPO) on the Indonesia Stock Exchange (IDX) somewhere in 2015. Through this corporate action the company aims to raise USD $450 to $500 million in new funds by selling 49 percent of its enlarged capital to the public. President Director of Indosmelt Natsyir Mansyur said that the company is currently in talks with Kresna Graha Sekurindo to act as lead underwriter. The funds will be used to build a gold refinery.

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Last Friday, the International Monetary Fund (IMF) released its January 2014 Commodity Market Monthly. This report provides an update on global commodity prices. According to the report, global commodity prices rose 2.4 percent in December 2013, with increases in most main indices. During 2013, commodity prices increased 0.8 percent, with gains concentrated in the energy sector, up 3 percent from December 2012. Metals prices declined 7 percent due to continued increases in new capacity.

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The Indonesian rupiah exchange rate depreciated on Wednesday (14/01) as global oil and other commodity prices continued to fall thus casting a negative spell on Indonesia’s currency. The rupiah depreciated 0.11 percent to IDR 12,614 per US dollar according to the Bloomberg Dollar Index. Market participants are concerned about the negative influence of low commodity prices on Indonesia’s export performance. Southeast Asia’s largest economy has had to cope with a wide trade and current account deficit in recent years.

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Production is still not back on track at Freeport Indonesia’s Grasberg mine in Papua as around 1,000 workers have not showed up for work since the second week of October. These workers refuse to work after a series of (fatal) incidents that led to concern about safety policies. In May 2013, 28 Freeport Indonesia workers died after a tunnel collapsed. More recently, in late September 2014, four workers died after a giant haulage truck collided with another vehicle (carrying nine passengers) at the Grasberg mine.

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Global copper prices can come under pressure as Newmont Nusa Tenggara (NNT) has started to export copper concentrate again this week after a nine-month hiatus caused by the dispute between the Indonesian government and NNT about Law No. 4 of 2009 on Mineral and Coal Mining (the “New Mining Law” of Indonesia), which sets high export taxes on unprocessed mineral exports (and stipulates a complete ban by 2017), in an effort to force Indonesian miners to build local processing facilities.

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Newmont Nusa Tenggara (NNT), subsidiary of US-based mining company Newmont Mining Corp, has received a permit from the Indonesian government to export 350,000 metric tons of copper concentrate in the next three years. Three weeks ago it became known that both parties agreed on the content of a renegotiation package after an eight-month dispute over Indonesia’s mineral ore export ban, implemented on 12 January 2014 (part of the New Mining Law). In the remainder of 2014, the company is expected to export 160,000 tons.

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Reportedly, Newmont Nusa Tenggara (NNT) will not seek international arbitration at the Centre for Settlement of Investment Disputes (ICSID) in Washington (USA). Previously, the miner threatened to file for arbitration in an attempt to force the Indonesian government to cancel the recently introduced ban on exports of unprocessed minerals as well as to abort higher export duties. NNT is a subsidiary of Newmont Mining Corporation that operates the Batu Hijau mine, an open pit copper and gold mine in Sumbawa.

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Subsidiary of US-based natural resources company Freeport McMoRan Copper & Gold Inc, Freeport Indonesia, decided to build its copper smelter in Gresik (East Java) as infrastructure around this regency makes it easier to transport its mining products for export purposes. The other location that Freeport was considering was in Papua, near its mining site the Grasberg mine, the world’s largest gold mine and third-largest copper mine. However, infrastructure in Papua (one of the poorest regions in Indonesia) is still underdeveloped.

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Freeport Indonesia, subsidiary of US-based natural resources company Freeport McMoRan Copper & Gold Inc, is optimistic that the Indonesian government will extend the company’s contract to operate the Grasberg mine in Papua (eastern Indonesia). This mine is the world’s largest gold mine and third-largest copper mine. The current contract between the Indonesian government and Freeport Indonesia expires in 2021. However, Freeport is currently in need of some certainty before investing a large amount on mining operations and smelting facilities.

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The dispute between the Indonesian government and mining giant Newmont Nusa Tenggara (NNT) over the recently implemented ban on the export of unprocessed copper, gold, nickel, bauxite and iron is heading for a climax. In Indonesian media, President Susilo Bambang Yudhoyono was quoted saying “NNT has undermined the sense of justice of the Indonesian people” and pronounced his disappointment of NNT’s reluctance to respect the sovereignty of the state. Previously, the government said it may revoke mining permits of NNT.

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Whether Newmont Nusa Tenggara (NNT) will file for international arbitration over a six-month old export dispute with the Indonesian government remains unclear. Although many analysts would like to see international arbitration over this case, such a step would imply several risks for the copper miner (which is for 56 percent owned by US-based Newmont Mining Corporation and Japan’s Nusa Tenggara Mining Corporation). The source of the dispute is Indonesia’s recently-introduced ban on exports of ore concentrates.

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In the last 12 months, the international copper price showed a neutral movement (moving more or less sideways). This is particularly due to a number of issues in China, the world’s second largest economy, which impact negatively on the copper price movement. China has become such an important market for a variety of commodities, including copper (used in construction and electronics), that other countries can be considered almost irrelevant. Why do analysts have low expectations of the copper market for the remainder of 2014?

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