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Newmont to restart mining with withdrawal of arbitration case

Indonesia News
27 Aug 2014, 10:42 GMT+10

JAKARTA - Newmont Mining Corp., the largest U.S. gold producer, has withdrawn an arbitration claim filed with the International Centre for Settlement of Investment Disputes (ICSID) relating to the export restrictions placed by the Indonesian government that led to the company halting production at the Batu Hijau copper and gold mine

The decision to discontinue and withdraw arbitration comes after Newmont Mining received a commitment from senior government officials to open formal negotiations to conclude a Memorandum of Understanding (MoU) with its joint venture PT Newmont Nusa Tenggara (PTNNT) upon cessation of the arbitration claim.

PTNNT is 56 percent owned by Nusa Tenggara Partnership B.V. (which is owned by Newmont Mining Corporation and Nusa Tenggara Mining Corporation of Japan). Around 7 percent of Nusa Tenggara Partnership B.V (NTPBV)'s stake is expected to be divested to the Indonesian government through a purchase by an agency of the Ministry of Finance.

PT Pukuafu Indah owns 17.8 percent of PTNNT, PT Multi Daerah Bersaing owns 24 percent (which in turn is owned by PT Multi Capital and PT Daerah Maju Bersaing, a joint company owned by the province of Nusa Tenggara Barat, and the provinces of kabupatens Sumbawa Barat and Sumbawa, while PT Indonesia Masbaga Investama owns 2.2 percent.

According to Newmont, signing of a MoU with the government would be followed "by the safe ramp-up of copper concentrate production" and a restart of exports from Batu Hijau" this month.

"PTNNT remains committed to its long-term partnership with Indonesia and seeks to demonstrate its support for the Government's policies, the Indonesian people, and the ongoing responsible development of the country's natural resources," the joint venture stated.

It announced plans to set up a new smelter with the Indonesian unit of Freeport McMoRan Inc.

The Batu Hijau copper and gold mine was developed under an investment agreement called the Contract of Work (CoW), which provided for stability of long-term investments as it is endorsed by Parliament and approved by the President of Indonesia.

The CoW details PTNNT's obligations and rights including the obligation to produce and the right to export copper concentrate while also explicitly establishing all the taxes and duties PTNNT is required to pay.

Despite changes in various laws and regulations over the years, the obligations and rights specified in the CoW have continued to govern operation of the mine.

While multiple studies have demonstrated that it is not economically viable for PTNNT to build its own smelter, the company has a Memorandum of Understanding to set up one with PT Freeport Indonesia.

"The value added through Batu Hijau's processing plant improves the quality of the copper ore mined by more than 50 times, capturing roughly 95 percent of the entire value stream in Indonesia," Newmont stated.

PTNNT also has supported in-country smelting for many years by shipping as much copper concentrate to PT Smelting Gresik Indonesia's only copper smelter as it can take from Batu Hijau, Newmont stated.

PTNNT also has negotiated and signed conditional concentrate supply agreements with two Indonesian companies that have also announced plans to build their own copper smelters in the country.

Newmont rose 1.5 percent to $26.37 at 11:59 a.m. in New York. The shares have climbed 15 percent this year, reported Bloomberg.

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