Freeport and Newmont face export ban despite MoU

Signing memoranda of understanding to supply concentrates to local smelters has not spared US-backed gold miners Freeport Indonesia and Newmont Nusa Tenggarra from next year’s export prohibition.

Indonesia’s coordinating minister for economy Hatta Rajasa said the MoUs were not sufficient to approve export deadline extensions to the miners.

“If the ground breaking is already done and the financial closing has been made, we can consider granting them extensions,” Hatta said.

Hatta, who is at the head of government negotiations with miners, said miners have to go through domestic processing to be permitted commodity exporting, The Jakarta Globe said.

“The mining export ban will still be imposed,” he said.

The Indonesian government called on miners for submissions last year to build refineries or smelters as deadline approached for a ban on raw mineral exports in 2014.

This was in a bid to make the nation’s natural resources more lucrative and collect royalty payments to increase state income.

But a deadline was never in place to finish smelter projects, hinting the government was willing to negotiate.

Papua province Grasberg Mine operator Freeport is processing a third of its ore in Indonesia through a local company that used to run a copper smelter and refinery in East Java.

But lower copper prices this year deterred the local company from growing its facilities.

Freeport is also unwilling to build smelters in Indonesia and is worried this problem is impeding its multi-billion dollar Grasberg underground mining expansion and plans to increase the mine’s life.

Freeport recently resumed its underground operations at its copper and gold Grasberg mine after production was halted for nearly two months due to a tunnel collapse.

Operations stopped the day after the tunnel collapse in an underground training facility on May 14, which killed 28 people. Chairman of the Indonesian Mining Association Martiono Hadianto wants the government to loosen its export ban on Freeport and Newmont.

“We need a situation of give and take.”

Government officials allege miners export their output in raw form. But Hodianto said Indonesian metal miners usually process raw materials locally before exporting and this makes up 90 per cent of the its market value.

The 2009 Mining Law brought in new measures for mining profits and operations such as cutting the size of mining concession areas and contract lengths.

But miners say they do not have to follow this law as they signed contracts before the law was enforced.

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