Newmont ceases all operations in Indonesia, declares force majeure

Newmont Mining Corp. (NYSE:NEM) halted Thursday operations at its Indonesian gold and copper mine and will put 3,200 workers on leave with reduced pay from Friday, after it failed to reach a compromise with the government over export restrictions.

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The Colorado, US-based mining giant had stopped copper concentrate output from its Batu Hijau mine on Tuesday and warned the results of government talks would determine the future of its employees.

Despite our best efforts, we have not been able to export copper concentrate since January, and we still do not have an export permit

Despite our best efforts, we have not been able to export copper concentrate since January, and we still do not have an export permit,” Martiono Hadianto, the president director of Newmont’s Indonesian unit, said in the statement. “We have taken numerous steps to help resolve the export issue and support the government’s desire to increase in-country smelting.”

The force majeure, which allows the company to miss deliveries because of circumstances beyond its control, signals Newmont does not expect a quick resolution to its dispute with the government. Indonesia banned raw ore shipments on Jan. 12 and put a tax on concentrates in an effort to spur companies to build smelters domestically.

Job losses

Freeport has warned previously that the export ban would force it to cut production by 60%, resulting in 15,000 job losses and costing the government an annual $1.6 billion in lost royalties and taxes.

Indonesia is a key global supplier of metals and a law implemented in January banning exports of raw minerals unless companies build processing plants has thrown the industry into turmoil.

Newmont and rival Freeport-McMoRan (NYSE:FCX), which operates a much larger copper and gold mine in Indonesia, both claim that the export restrictions breach their contracts of work and have been locked in negotiations with mining officials for months to find a workaround.

The Batu Hijau copper and gold mine, on the island of Sumbawa Barat, began its operations in 2000. Newmont had forecasted copper concentrate output for 2014 at 110,000-125,000 tonnes before the new export rules.

Henry Sapiecha

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