Mining in Indonesia: Newmont Nusa Tenggara’s Ore Concentrate Export
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.
Instead, miners are required to process the minerals domestically first. This law came into force on 12 January 2014 and replaced the previous long standing Contracts of Work scheme (and is thus a sign of weak legal certainty in Southeast Asia’s largest economy). However, a last-minute introduced regulation - signed by President Susilo Bambang Yudhoyono - stipulates that if a miner can provide evidence that it is serious about building smelting facilities in Indonesia then exports of unprocessed minerals are temporarily allowed (until 2017), although the miner will also need to face progressive export taxes (increasing from 20 percent in 2014 to 60 percent in mid-2016).
Newmont Nusa Tenggara, a Contracts of Work-holder as well as one of the largest copper miners in Indonesia, announced earlier in June 2014 that the company sees no other option than to declare a force majeure at its Batu Hijau copper mine in Sumbawa (West Nusa Tenggara). The miner has not been able to export copper concentrate since January 2014 as it has not been granted an export permit due to an export tax dispute with the Indonesian government, leading to a weakening of its financial balance. Only 30 percent of Newmont’s copper concentrate is processed at local smelter PT Smelting, located in Gresik, the remainder is stockpiled as the PT Smelting has limited smelting capacity. President Director of Newmont Nusa Tenggara Martiono Hadianto threatened that 80 percent of the company’s workers will be put on leave with reduced salaries due to financial turmoil. Currently the company’s employees number around 8,000 permanent and contracted workers at the Batu Hijau mine.
Energy and Mineral Resources Minister Jero Wacik stated on Tuesday (17/06) that Newmont’s exports of ore concentrates can be resumed after the government receives a deposit of USD $25 million for the construction of smelting facilities. Although Newmont has stated before that it plans to build a smelter in cooperation with Freeport Indonesia, the former has still not paid the collateral, and therefore has still not been given the export permit.
Together, NNT and Freeport Indonesia account for 97 percent of Indonesia’s copper production. NNT is for 56 percent owned by the US-based Newmont Mining Corporation and Japan’s Nusa Tenggara Mining Corporation. In line with the new mining law, seven percent will need to be divested to an Indonesian stakeholder (possibly the Indonesian government).