Indonesia Gives Newmont Mining Ultimatum: End Lawsuit Or Else

Just when thing were beginning to look up, the turbulence between Newmont Mining and Indonesia rages on. The country is now threatening to terminate Newmont’s mining contract if the company does not comply and withdraw its lawsuit.  

Newmont earlier this month filed an international arbitration over Indonesia’s escalating export tax claiming it violates the company’s mining contracts. Newmont and fellow US miner Freeport-McMoRan Copper & Gold have halted copper exports since January 23.

"By stopping production, they are making our state revenues decline so we can say that they have defaulted," Sukhyar, director general of coal and minerals at the mining ministry said.

"Stopping production is just the same as negligence."

According to Newmont, the company was forced to stop copper production while it waited for an export permit from the government. It also states storage facilities reached full capacity in June.

"PTNNT's contract of work with the government of Indonesia explicitly grants the company the right to export copper concentrate," Newmont spokesman Omar Jabara said.

"As such, PTNNT remains in compliance with the contract of work and is prepared to resume production upon receiving an export permit from the government."

Newmont’s contract could possibly be revoked 90 days if Indonesia’s government declares it to be in default or negligent. Indonesia has also threatened to sue Newmont over breach of contract.

The tax on exports is part of Indonesia’s effort to force miners to build smelters and processing plants in the area. Freeport and Newmont have previously argued the two companies should be excused from the tax as they account for 97 percent of Indonesia’s copper output.

Freeport-McMoRan has had better luck with Indonesia. The company recently agreed on a Memorandum of Understanding (MoU) with Indonesia over its contract renegotiations.