LAUNCESTON, Australia, Sept 1 (Reuters) – In the high-stakes poker game being played between the Indonesian government and mining companies, it has come as a bit of a surprise that Jakarta appears to be playing the winning hand.
So far the Indonesian government has successfully stared down two U.S. mining giants, imposed a ban on exporting some raw metal ores and is deaf to the squeals of the beleaguered coal industry as it tightens rules on what had been a cowboy sector.
When the government started down the path of changing the laws and regulations in order to ensure a greater share of the Southeast Asian nation’s mineral wealth stayed at home, it was widely assumed that it would lack the resolve and the ability to stand up to the powerful mining industry.
Previous attempts had resulted in compromises that favoured miners and the government was widely viewed as inefficient, inconsistent and largely ineffectual. But in recent weeks the government has been shown to be holding a stronger hand than its opponents, and it has been willing to call their bluffs.
First, U.S. mining major Freeport McMoRan signed a memorandum of understanding with the outgoing administration of President Susilo Bambang Yudhoyono that should result in the government getting what it wanted, without giving up much in return.
The deal allows Freeport, which operates Grasberg, the world’s second-largest open-cut copper mine, to resume exports of copper ore after providing a $115 million bond for the building of a smelter with partners.
Freeport also agreed to higher royalties, an export tax and to divest 30 percent of its Indonesian unit, while in return the government committed to providing the U.S. company with a mining licence between 2019 and 2021 to allow it to continue operations until 2035.
This was important for Freeport, as the Grasberg site is believed to contain large deposits of copper and gold, but will need exploration and other investments to develop.
Newmont Mining Corp, which like Freeport had halted copper ore shipments earlier this year in dispute over the government’s hike to export taxes, had taken a different path to Freeport in attempting to force Indonesia to international arbitration.
However, the Denver, Colorado-based group withdrew the claim last week, almost immediately leading to a breakthrough in its seven-month dispute with Jakarta.
Newmont will resume copper exports next week after agreeing to pay increased royalties, a government official said on Monday..
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