US miners hit out at Indonesia copper tax – by Ben Bland (Financial Times – January 23, 2014)

Jakarta – US mining majors Freeport McMoRan and Newmont have hit out at Indonesia’s new tax on the export of copper concentrate, saying it is in breach of their long-standing contracts of work with the government.

Both companies, which employ thousands of people at their vast copper and gold mines in Indonesia, said on Wednesday they were in talks with the government to resolve the situation. Newmont said it was considering other remedies including “possible legal action”.

Indonesia, a major global exporter of metals such as bauxite, copper, and nickel, implemented a hotly-contested ban on the export of unprocessed mineral ores on January 12 as part of a drive to promote the development of a refining industry. Freeport and Newmont, which together contribute well over $1bn a year in taxes and royalties to the Indonesian government, initially won a reprieve, getting permission to export their partially processed copper concentrate until 2017.

But the finance ministry delivered a sting in the tail when it announced shortly afterwards that the companies would have to pay a progressive export tax that will start at 25 per cent and rise to 60 per cent by 2017.

Both Freeport and Newmont said that the new tax was in breach of their contracts of work with the government, which lay out the royalties and taxes that the companies must pay and state that they should not be subject to any further taxes, duties or fees imposed by the government.

Freeport said on Wednesday that the new regulations conflict with the “contractual rights” of its 91 per cent-owned subsidiary Freeport Indonesia. It said it was working with the government to clarify the situation and defend Freeport Indonesia’s rights under its contract of work.

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