Indonesia to revoke Newmont license unless resumes output, lifts lawsuit

Indonesia to revoke Newmont license unless resumes output, lifts lawsuit

Newmont's Batu Hijau copper mine.

Indonesia increased pressure on Newmont Mining (NYSE:NEM) over a six-month old dispute that has halted copper exports, demanding the US miner to withdraw an international arbitration request filed earlier this month or risk losing its mining license.

According to Sukhyar, director general of coal and minerals at the mining ministry, the government is planning to send a letter to the Colorado-based miner saying that it has defaulted on its contract, Dow Jones Business News reported Thursday.

The Indonesian authority, who goes by one name, added the default is due to the production freeze, which would allow the outgoing government to say the firm is “negligent."

If Newmont’s license is revoked, the country will open up bids for the miner’s Batu Hijau copper operation, which has been halted since early June, when the firm declared force majeure. Thousands of its employees have been placed on leave at reduced pay.

The US miner decided to file the arbitration lawsuit seeking interim, injunctive relief to resume exports of copper concentrate, despite a recent move by Indonesia to draw up a new mining export tax that will more than halve the base rate to be paid by miners.

Both Newmont and fellow US miner Freeport-McMoRan Copper & Gold (NYSE:FCX), which account for 97% of nation's copper output, have previously argued they should be exempt from the tax, which kicks in at 25% and rises to 60% in the second half of 2016, before a total concentrate export ban in 2017.

Last week Freeport managed to reach a preliminary deal over its copper exports with the Asian nation authorities.

Newmont, in turn, is allegedly stepping up efforts to return to the negotiation table, which may include lifting its international arbitration request, Xinhua reports.

The tax on concentrate exports is part of the outgoing government's drive to force miners to build smelters and processing plants in Southeast Asia's largest economy.

Image by Iso1600 | Wkimedia Commons