Freeport and Newmont MoUs Not Enough: Hatta
Freeport workers looks on at the Grasberg mine area in Tembagapura, Indonesia Papua province. (Reuters Photo/Muhammad Yamin)
Indonesia will not exempt US-backed gold miners Freeport Indonesia and Newmont Nusa Tenggara from next year's export ban despite both mining giants having signed memoranda of understanding to supply their concentrates to local smelters, a senior minister says.
Hatta Rajasa, the coordinating minister for the economy, on Tuesday said the signing of MoUs was not enough to grant miners extensions of the export deadline.
"If the ground breaking is already done and the financial closing has been made, we can consider granting them extensions," said Hatta, who leads the government's negotiations with the mining companies.
He said miners would not be allowed to export their commodities without domestic processing. "The mining export ban will still be imposed," he said.
The government last year asked all miners to submit plans to build refineries or smelters ahead of the deadline for a ban on raw mineral exports in 2014, as part of a series of efforts to add more value to the country's natural resources and boost state revenue through royalty payments.
But the government never set a deadline for the completion of the smelter projects, prompting expectations that it was open to negotiation.
Freeport, which operates the Grasberg Mine — the world's second-largest copper mine — in Papua province, is processing a third of its ore in Indonesia via a local company that operated a copper smelter and refinery in East Java.
But the local company was not interested in expanding its facilities after weaker copper prices this year raised the likelihood of slimmer margins.
Freeport has signaled its reluctance to build smelters in Indonesia and voiced concern that the issue has delayed its multi-billion-dollar investment plan to expand Grasberg into underground mining and extend the life of the mine, which is claimed to have the world's largest gold reserves.
Newmont Nusa Tenggara, which operates the Batu Hijau copper and gold mine in West Sumbawa, West Nusa Tenggara, has signed MoUs with three local smelters — Indosmelt, Indovasi Mineral Indonesia and Nusantara Smelting — to process concentrates.
The three companies have said that they plan to invest billions of dollars to develop the smelters, but no ground has been broken yet.
Martiono Hadianto, chairman of the Indonesian Mining Association, said he hoped the government would relax the export ban for miners, especially the giants such as Freeport and Newmont.
"We need a situation of give and take."
He said metal miners operating in Indonesia generally already process raw materials domestically before export. The output from this process is called concentrate, which Martiono said represents 90 percent of the minerals' market value.
Government officials have repeatedly claimed that miners export their output in raw form.
Meanwhile, officials from the ministries of trade, industry, and energy and mineral resources met at Hatta's office on Tuesday to ensure a unified position on a series of controversial mining contract renegotiations.
Many large miners are engaged in discussions to alter decades-old agreements over royalty payment and government regulations.
The government is seeking to improve its benefits from miners operating under the so-called contract of works, which would affect 111 contract holders.
The 2009 Mining Law stipulates new provisions are required, including higher royalty payments and reducing the limit of the size of mining concession areas and the length of contracts. It also introduces divestiture obligation for foreign-owned miners. But miners say they are excluded from the law because it was passed after they signed contracts.
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