Newmont Nusa Tenggara's Arbitration Case over Indonesian Export Ban
Indonesian Minister of Energy and Mineral Resources Jero Wacik regrets to see Newmont Nusa Tenggara, one of Indonesia largest copper miners, file for international arbitration due to Indonesia’s export ban stipulated by Law 4/2009 on Mineral and Coal Mining (Minerba). This new law includes the ban on exports of ore concentrates from Southeast Asia’s largest economy. Instead, Indonesian miners are required to process the minerals domestically first. The ban was implemented on 12 January 2014.
The government of Indonesia decided to take a more protectionist approach in its mining sector through the new 2009 Mining Law (for example diminished foreign share ownership in mining companies) and aims to increase revenue by banning exports of raw minerals (thus boosting domestic processing facilities to produce products with added-value). This means that, despite Newmont Nusa Tenggara’s long standing contracts of work, the company has not been able to export copper concentrate. As a result, the company announced earlier in June 2014 that it sees no other option than to declare a force majeure at its Batu Hijau copper mine in Sumbawa (West Nusa Tenggara), with the risk that 80 percent of the company’s workers will be put on leave with reduced salaries. Newmont Nusa Tenggara is a subsidiary of US-based gold miner Newmont Mining Corporation. Together with Freeport Indonesia, the company accounts for more than 97 percent of Indonesia’s copper production.
Newmont Nusa Tenggara and its majority shareholder Nusa Tenggara Partnership BV of the Netherlands have now decided to bring the case to the International Center for the Settlement of Investment Disputes. It will be an interesting case as the long standing contract of works signed between Newmont Nusa Tenggara and the Indonesian government does not mention a possible ban on exports of copper concentrate and the new law is also not in line with the bilateral investment agreement between Indonesia and the Netherlands.
Previously, the Indonesian government said that Newmont Nusa Tenggara’s exports of ore concentrates can be resumed after the government receives a deposit of USD $25 million for the construction of smelting facilities as a last-minute introduced regulation - signed by President Susilo Bambang Yudhoyono - stipulates that if a miner can provide evidence that it is serious about building smelting facilities in Indonesia then exports of unprocessed minerals are temporarily allowed (until 2017), although the miner will face progressive export taxes (increasing from 20 percent in 2014 to 60 percent in mid-2016). Freeport Indonesia has also been granted this reprieve (and which was not offered to producers of other minerals such as nickel and bauxite, leading to protests from state-owned bauxite miner Aneka Tambang).
However, both parties - the Indonesian government and Newmont Nusa Tenggara - still keep the possibility open to settle the matter through negotiations.