Newmont Unit Seeks Arbitration Against Indonesia Export Ban

Jul 01, 2014 6:26 pm ET

July 1 (Bloomberg) -- Newmont Mining Corp.’s Indonesian unit started international arbitration proceedings against the government in a bid to restart mineral ore export and production from the Batu Hijau mine.

PT Newmont Nusa Tenggara is seeking to resume shipments and restart operations at Batu Hijau, a copper and gold mine on Sumbawa island, it said in an e-mailed statement today. The case was filed at the Washington D.C.-based International Centre for the Settlement of Investment Disputes, it said.

Southeast Asia’s largest economy, seeking to encourage investment in smelters and refineries, banned exports of raw mineral ores from Jan. 12, while allowing shipments of processed metals such as copper concentrates, subject to a progressive tax. The policy violates the Contract of Work and bilateral investment treaty between Indonesia and the Netherlands, Newmont Nusa said.

“Despite our best efforts over the last six months to resolve the export issues through good faith commitments to support the government’s policy, PTNNT has been unable to convince the government that our CoW should guide resolution of our differences,” President Director Martiono Hadianto said in the statement, referring to Newmont Nusa by its initials.

The company declared force majeure on shipments from Batu Hijau after the export ban forced it to shut the mine, Newmont Nusa said June 5. Force majeure is a condition that allows companies to miss deliveries because of circumstances beyond its control.

Take Years

International arbitration to enforce contract rights would take years and leave miners without exports during the dispute, said Keith Loveard, head of political risk analysis at Jakarta- based security company Concord Consulting. “It comes down to figuring out whether it’s worth the games and the stress,” he said.

Batu Hijau is under maintenance as efforts to resolve the export issues continue, the company said. Newmont Nusa will sell 58,400 metric tons of copper concentrate from storage to PT Smelting in Gresik, Indonesia, until the year end.

“We want continued dialog with the government to lead to a resolution outside of arbitration,” Martiono said. “In the meantime, we have an obligation to protect the value of Batu Hijau and the thousands of jobs it provides, as we are still unable to export copper concentrate due to the regulations.”

The government has received the arbitration notice, R. Sukhyar, director general of coal and minerals at the Energy and Mineral Resources Ministry, told reporters in Jakarta today.

“This is a long process,” he said. “There is a mediation process in between, so this is not the end of the world but this is what they choose to do.”

The government has stopped talks on Newmont’s CoW renegotiation following the arbitration, he said.

--With assistance from Eko Listiyorini in Jakarta.