(Reuters) – Newmont Mining Corp said on Thursday it has notified the Indonesian government that it is invoking force majeure at its Batu Hijau copper mine and plans to put most of the mine’s employees on leave with reduced pay.
Newmont and fellow miner Freeport-McMoRan Copper & Gold Inc – accounting for 97 percent of Indonesia’s copper output – are in dispute with the government over an export tax imposed in January.
“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, CEO of Newmont’s Indonesian operations, said in a statement. “We are left with no option but to declare force majeure.”
A declaration of force majeure, which literally means “higher power”, allows certain terms of an otherwise legally binding contractual agreement to be ignored. Newmont’s move came after the Indonesian government launched a drive this week to force a breakthrough in the dispute, which has contributed to slower economic growth.
Both Freeport and Newmont have previously argued that they should be exempt from the tax, which kicks in at 25 percent and rises to 60 percent in the second half of 2016, before a total concentrate export ban in 2017. They said their current contracts prohibit any extra taxes.
“The new export conditions, duty and January 2017 ban, fundamentally impact Batu Hijau’s economics and conflict with our Contract of Work,” Hadianto added.
Before the new export rules, Colorado-based Newmont forecast copper concentrate output for 2014 at 110,000-125,000 tonnes at its Indonesian mine, but halted production earlier this week after it was unable to break the deadlock over the new export rules.
The Indonesian mine will be placed under care and maintenance, although Newmont said it will continue shipping concentrate from storage to Indonesia’s only copper smelter, PT Smelting at Gresik, through 2014, said the statement.
This would allow for copper concentrate shipments of 81,000 tonnes between now and the end of the year, the statement added.
Dede Suhendra, Mineral Enterprise Director at the mining ministry, told reporters the government would try to help Newmont overcome any obstacles relating to exports in response to the force majeure.
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