Indonesian mining exports come to a halt following new tax laws

26 January 2014 (Last Updated January 26th, 2014 18:30)

Export of metal ore and concentrate from Indonesia has come to a complete halt following imposition of the ban on ore shipment and export tax.

Export of metal ore and concentrate from Indonesia has come to a complete halt following imposition of the ban on ore shipment and export tax.

Indonesia is a major global exporter of metals, such as bauxite, copper, and nickel. The government imposed a controversial ore export ban on 12 January, in an attempt to boost the domestic mineral processing industry.

Indonesia's trade director general Bachrul Chairi spoke to Reuters on 12 January, saying: "As of now, no miners or companies have requested export approval for concentrate or processed ore from the trade ministry."

US mining companies including Freeport-McMoRan Copper & Gold and Newmont Mining initially got a respite from the ban and were allowed to export partially processed copper concentrate up to 2017.

The country later announced that both the US mining companies would have to pay progressive export tax on their concentrates.

Both Freeport-McMoRan Copper & Gold and Newmont Mining have now criticised the tax law, saying that it is breach of long-standing contracts.

Freeport-McMoRan Copper & Gold was quoted by the Financial Times as saying that the new regulations conflict with the "contractual rights" of its 91%-owned subsidiary Freeport Indonesia.

Newmont Mining said that Indonesian authorities had informed PT Newmont Nusa Tenggara (PTNNT), which operates the Batu Hijau copper and gold mine on the island of Sumbawa, that the ban on copper concentrate exports from Batu Hijau does not take effect until 11 January, 2017.

PTNNT is seeking further information and clarity regarding the new regulations, as well as evaluating the potential impact to its operation in Batu Hijau.

Newmont senior vice-president of Indonesia Blake Rhodes said that the contract of work (CoW) signed with Indonesia provides PTNNT with the right to export the copper concentrate produced at Batu Hijau's processing facility.

"The CoW also explicitly sets the types and levels of taxes, levies and duties PTNNT is required to pay, thereby establishing all tax obligations," Rhodes said.

The company added that it will continue to engage with government officials to resolve the issue, while also considering other remedies, including possible legal action.

Economists and mining companies believe that the new law will not improve the country's economy, as it will mean an end to billions of dollars in export revenues. They say it will also threaten more than 800,000 people's jobs.

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