Bloomberg News

Freeport, Newmont Say Indonesia Is Reviewing Mining Contract

February 17, 2012

(Updates with Newmont’s comment in third paragraph.)

Feb. 17 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, and Newmont Mining Corp. will cooperate with the Indonesian government as it reviews the companies’ mining contracts.

“We believe our contract is fair to all parties and results in substantial contributions to the government,” Phoenix-based Freeport said in an e-mailed statement yesterday. “We will work cooperatively with the government to complete this review and to seek extension of the contract beyond 2021.”

PT Newmont Nusa Tenggara is ready for discussions with the Indonesian government on the contract of work amendment plan, Rubi Purnomo, a Jakarta-based spokesman at Newmont’s local unit, said in an e-mailed response to questions today.

Indonesia, rich in copper, tin and coal, formed an evaluation team in January to review all mining contracts in an effort to ensure they are in the country’s interest and to increase state revenue. The team has until December 2013 to conclude the review, according to a decree signed by President Susilo Bambang Yudhoyono on Jan. 10.

Southeast Asia’s biggest economy seeks to increase the gold-mining royalty paid by Freeport to 3.7 percent from 1 percent, the Energy and Mineral Resources Ministry said in August 2010.

Freeport operates the Grasberg mine in Indonesia’s Papua province, which accounted for 19 percent of the company’s revenue last year and contains the world’s largest recoverable copper reserve, according to Freeport. Production was cut in 2011 because of a three-month strike that ended in December.

Agreed to Renegotiate

Freeport said in the statement its so-called contract of work can only be modified by mutual agreement between the government and the company. Eric Kinneberg, a Freeport spokesman, declined to comment further.

The Indonesian Energy Ministry said yesterday Freeport’s local unit, PT Freeport Indonesia, agreed to renegotiate the contract of work.

Energy and Mineral Resources Minister Jero Wacik and Freeport Indonesia President Director Rozik B. Soetjipto met in Jakarta yesterday to discuss the contract renegotiation, the ministry said in an e-mailed statement.

Newmont “understands that the amendment to the CoW has been regulated under the CoW itself and can be made based on a mutual agreement between the parties that provides benefits to both parties,” Newmont’s Purnomo said in the e-mail, referring to the contract of work by its initials. He provided no details on the content of the amendment.

Newmont, the world’s second-largest gold producer by sales, operates the Batu Hijau mine in Indonesia under a 1986 contract of work. Barrick Gold Corp. is the world’s largest gold producer.

--With assistance from Simon Casey in New York. Editor: Greg Ahlstrand

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net; James Poole at jpoole4@bloomberg.net


Tim Cook's Reboot
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus