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Newmont Suspends Indonesian Operations As Minerals Export Issue Remains Unresolved – by Trefis Team (Forbes Magazine – June 9, 2014)

http://www.forbes.com/

Newmont Mining has announced the suspension of operations at its Batu Hijau mines in Indonesia. This follows the halt in production and processing of copper concentrate at its Indonesian operations after its copper concentrate storage facilities were filled to capacity.

The company had halted exports from Indonesia in January, as a law banning exports of unprocessed minerals from the country came into effect. Though last minute changes to the law permitted Newmont to export its copper concentrates, they imposed a 25% tax on exports which would rise to 60% by 2016. The company claimed that this tax violated the terms of its original investment agreement, or contract of work, with the Indonesian government.

The company is engaged in negotiations with the government regarding the export duty, leading to resumption of its exports from the country. The company invoked the force majeure clause of its contract of work, in order to suspend operations, after its storage facility was filled to capacity and production could not be continued.

The suspension of production will impact Newmont’s quarterly and annual results, though the extent of the impact will be determined by the duration for which operations remain suspended.

A law enacted in Indonesia in 2009 banned exports of unprocessed minerals from the country with effect from January12, 2014.

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Non-mining areas key issue in Vale’s contract renegotiation [Indonesia] – by Raras Cahyafitri (Jakarta Post – June 10, 2014)

http://www.thejakartapost.com/

The Energy and Mineral Resources Ministry and nickel miner PT Vale Indonesia are still hammering out issues relating to Vale’s contract renegotiation.

The ministry’s director general for minerals and coal, R. Sukhyar, recently said Vale had agreed to return around 83,000 hectares (ha) of its concession area to the government.

However, he said, both parties were still negotiating to accommodate requests by the local administration regarding the utilization of areas that had not been mined or explored. These areas have been left idle.

A meeting attended by several governors and regents of areas where Vale holds concessions was held last week. According to Sukhyar, local administrations were seeking assurance that Vale’s activities would benefit the regions.

“It’s important to know Vale’s future plans. If they conflict with governors and regents’ plans, we have to settle. In the future, if none of the plans are realized, Vale’s operation can be reviewed,” Sukhyar said.

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Western Investors Might Not Yet Have Redeveloped An Appetite For Resources But China Certainly Has – by Tim Treadgold (Forbes Magazine – May 16, 2014)

http://www.forbes.com/

China is buying resources. The west is selling. Who’s got the timing right? That’s the $64 billion question as interest in mineral resources heats up just as some people expect it to continue cooling.

Over the past 12 months a series of deals has seen Chinese companies soak up surplus assets being offloaded by western companies or, more recently, step up their buying demands by launching unsolicited takeover offers.

The latest raid came on Tuesday when Guangdong Rising made a $1.4 billion, all-cash offer, for full control of the Australian-base copper producer, PanAust. That followed a similar $1.4 billion all-cash offer by China’s biggest steel-maker Baosteel, in conjunction with an Australian rail operator, Aurizon, for the iron ore project developer, Aquila Resources.

Buying Ahead Of A Possible Commodity-Price Recovery

Interesting as the bids are for PanAust and Aquila the more important message for investors is that they are not the only moves by Chinese companies on mining assets, nor are they the only recent examples of corporate activity in the global mining sector which seems to be developing a head of steam despite there being little evidence of a significant recovery in commodity prices.

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Indonesia considers new restrictions on coal output, exports – by Fergus Jensen (Reuters India – June 6, 2014)

http://in.reuters.com/

JAKARTA, June 6 (Reuters) – Indonesia, the world’s top exporter of thermal coal, is considering new regulations to limit coal production and tighten controls on exports, government officials said on Friday, and could introduce the rules by early next month.

The country currently exports around 70 percent of its coal production, much of it to China and India, but the government says output must be capped as domestic demand for the power station fuel is expected to rise by 13 percent this year and next.

“Technically we are already restricting (coal production) through discussions on companies’ work plans and budgets, but formally we need a ministerial regulation on mines,” Coal Enterprise Director Edi Prasodjo told Reuters, referring to an output cap for producers his team is working to release soon.

In March, Prasodjo said Indonesia hoped coal production would remain at or below 421 million tonnes this year, but the government’s ability to restrict output has yet to be proven.

Many of Indonesia’s biggest coal mines, such as Bumi Resources and Toba Bara Sejahtera, are owned by politically connected figures, and with presidential elections fast approaching in July the government may face difficulties imposing new rules on the sector.

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BHP Billiton to follow China on its next growth journey – by Vicky Validakis (Australian Mining – June 6, 2014)

http://www.miningaustralia.com.au/home

BHP Billiton will invest heavily in energy and food as it follows China on its transition from a construction-led economy to a consumption power-house.

Speaking to the media in Beijing where he wound up a 10-day tour of meeting BHP’s commodity customers in China, India, Japan and South Korea, BHP boss Andrew Mackenzie said while Chinese steel production would remain strong the company was also keen to meet the country’s other needs.

“We see a Chinese economy gradually shifting from construction to consumption,” he told reporters yesterday, adding “and so, will we transition.”

He said materials with high consumer demand included copper, energy and potash. “Copper is core. Coal is core. Oil and gas is core. Potash is core,” Mackenzie said.

“We’ve exited diamonds. We’ve exited arguably medium-sized ore bodies which don’t fit with our overall strategy to own the great ore bodies of uranium and copper and to some extent in oil and gas. And we reduced our exposure to liquefied natural gas.

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UPDATE 2-Newmont says declares force majeure at Indonesian copper mine – by Michael Taylor and Fergus Jensen (Reuters India – June 5, 2014)

http://in.reuters.com/

(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.

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North Korea Gold Taints U.S. Firms – by Joel Schectman (Wall Street Journal – June 4, 2014)

http://online.wsj.com/home-page

Country Was Source of Metal Used in Variety of Products

As companies scrambled to meet a deadline to report whether their suppliers used minerals from mines controlled by armed groups in the Congo region, they stumbled on something even more troubling: Many of their products may contain North Korean gold.

Dozens of companies disclosed over the past week that their suppliers used gold refined by North Korea’s central bank. These companies include Hewlett-Packard Co., Ralph Lauren Corp., International Business Machines Corp. IBM, Rockwell Automation Corp. and Williams-Sonoma Inc. IBM, for example, revealed the North Korean gold was used to make its memory-storage systems.

U.S. sanctions law bars importing materials from North Korea even if they come from deep within a supply chain and are in a completely different form by the time they reach the end user, sanctions experts said. “It’s a problem even if the raw materials are coming very indirectly through suppliers,” said Alexandra Lopez-Casero, an attorney at Nixon Peabody LLP who specializes in sanctions.

North Korea’s central bank provides currency for the regime and refines gold. Until 2006, the bank refined gold bars that were certified by the London Bullion Market Association, a gold marketplace, according to public records.

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China Swaps Gusto for Rigor as It Learns From Africa – by Franz Wild (Bloomberg News – June 3, 2014)

http://www.bloomberg.com/

China’s gung-ho foray into Africa is waning. As trade with the continent surpasses an annual $160 billion, its companies are avoiding risk by taking smaller stakes in projects close to making money.

Cowed by capricious commodity prices, political instability and a string of lost investments, Chinese financiers aren’t as gutsy as when state-owned giants used their heaps of cash to propel the nation’s “Go Out” drive and whip up business abroad 15 years ago.

“There was a lot of enthusiasm and momentum,” said Clement Kwong, whose Beijing-based Long March Capital Ltd. clubbed together with other investors last year to take over a South African gold company. “That momentum is definitely reined in by a new level of risk aversion and caution.”

China surpassed the U.S. as Africa’s largest trading partner in 2009. Trade volumes soared 11-fold in the decade through 2013, according to data from the Geneva-based International Trade Centre. The quest for profit now trumps the wider aim of creating a Chinese footprint abroad.

Smaller private companies are taking the lead from the state-owned giants that prepared the ground. After many African leaders doubled back on the initial fervor for China, the new players are less conspicuous and score quicker returns.

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Indonesian minister spearheads drive to restart copper exports – by Wilda Asmarin and Michael Taylor(Reuters India – June 4, 2014)  

http://in.reuters.com/

JAKARTA – (Reuters) – Indonesia’s chief economics minister is spearheading a series of high-level government and industry meetings on Wednesday, aiming to broker a deal with foreign miners to restart copper concentrate exports that were halted nearly five months ago over a controversial tax.

Billionaire businessman Chairul Tanjung, who was appointed to the role last month, has made restarting copper exports a top priority amid a widening trade deficit, a slowdown in first-quarter economic growth and the prospect of job layoffs at mines.

Tanjung was due to attend a cabinet meeting on Wednesday morning to thrash out a new tax deal that could potentially be put before miners, including Freeport-McMoran Copper & Gold Inc and Newmont Mining Corp.

“After the cabinet meeting I will receive a report from the negotiating team at the coordinating economic ministry,” Tanjung said on Wednesday, speaking ahead of the cabinet meeting in the capital Jakarta. “Let’s see the result. If the results are finalized, I will officially receive the Freeport and Vale CEOs,” he said.

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COLUMN-Asian coal miners, traders face up to grim realities – by Clyde Russell (Reuters India – June 4, 2014)

http://in.reuters.com/

Clyde Russell is a Reuters columnist. The views expressed are his own.

NUSA DUA, Indonesia, June 4 (Reuters) – “There is no skin left on my teeth to hang on with,” was the lament of a coal trader, expressing a sentiment echoed time and again at the industry’s largest gathering in Asia.

Normally coal miners, traders and shippers are a fairly optimistic bunch, their good humour likely shaped by a tough industry that is increasingly unloved across the world despite being essential to keeping the lights on.

But the mood at the Coaltrans Asia conference in the Indonesian resort island of Bali this week was subdued, and the question on everybody’s lips was how much lower can coal prices go.

At a roundtable session, a well-known analyst talking about the outlook for prices was mobbed, while an expert on valuing coal mines cut a lonely figure, underscoring that nobody is currently interested in investing in coal production.

The price of coal at Australia’s Newcastle Port , an Asian benchmark, fell to $73.89 a tonne in the week to May 30, down 14.3 percent so far this year and close to the 4-1/2 year low hit in March.

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China Builds Sulawesi Smelters as Ore Ban Cuts Jobs: Commodities – by Yoga Rusmana (Bloomberg News – June 2, 2014)

http://www.bloomberg.com/

Since Indonesia banned ore exports, the global nickel industry has been rocked by surging prices, Chinese workers like Zhang Qi Guang are building smelters in Sulawesi and business at Eva’s Jewel restaurant has collapsed.

Indonesia, the world’s largest producer of mined nickel, halted shipments Jan. 12, sending prices up as much as 56 percent and prompting Morgan Stanley to forecast a global output deficit over the next five years.

The government’s rationale for the ban was that too much wealth was leaving the country because the raw ore is worth far less than refined metal. It figured the world would come to its doorstep to build smelters that extract nickel from the red earth. While some of those investments have begun, the downside is idle mines, tens of thousands of lost jobs and piles of unwanted ore waiting to be processed. Sales at Eva’s Jewel in the town of North Konawe fell as much as 80 percent.

“You never get the sweet thing unless you eat the bitter thing,” said Alexander Barus, vice president of PT Sulawesi Mining Investment, a joint venture of Jakarta-based Bintangdelapan Group and Chinese steelmaker Tsingshan Holding Group, which is building two smelters on Sulawesi. “We feel sad about the people, but just you wait two or three years.”

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Campaign against tin mining in Bangka island targets Microsoft – by Sajid Shaikh (The Guardian – May 30, 2014)

http://www.theguardian.com/uk

Company singled out for direct action for ignoring tin mining’s enviromental impact on Indonesian island

A campaign against tin mining in Bangka and Belitung islands of Indonesia is targeting tech giant Microsoft. The islands, off the coast of Sumatra, are being stripped off their forests and marine wealth and dug up for tin, used widely in the electronics and IT industry by major brands making mobile phones, tablets, laptops, computers and other gadgets.

Friends of Earth Netherlands, an environmental group fighting for sustainable sourcing of tin, said they are targeting Microsoft for “refusing to take steps to end irresponsible mining practices on Bangka and Belitung islands.” Asus, HTC and Huawei are other brands named by the group using tin sourced unethically.

“Big brands such as Apple, Philips and LG openly support projects to produce tin in a better way. It is unacceptable that other brands still refuse to follow this lead and take responsibility. They have been made aware Bangka-Belitung islands are being destroyed and miners are dying every week. All brands use tin from Bangka-Belitung since a third of global tin production comes from these Indonesian islands,” said FoE campaigner Evert Hassink.

The group has launched an online petition against Microsoft. “We ask people to support our petition. In the Netherlands we will be collecting signatures on the streets and at festivals. We will take direct action against Microsoft,” Hassink said.

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Indonesian export ban not a hangup for Vale N.L. – by Ashley Fitzpatrick (St. John’s Telegram – May 30, 2014)

http://www.thetelegram.com/

Long Harbour first nickel expected by end of second quarter

A ban by Indonesia on the export of unprocessed ores containing nickel will not affect the startup of Vale’s new hydromet processing facility in Long Harbour.

As previously reported, the plan for the facility in Newfoundland and Labrador is to use nickel matte from Indonesia during startup, before transitioning to ore from the Voisey’s Bay mine in Labrador as a main feed. Workers inspect equipment at Vale’s hydromet nickle processing facility in Long Harbour. — Telegram file photo

The Indonesian nickel matte, at about 78 per cent nickel, is considered less likely to cause difficulties for the Long Harbour commissioning in comparison to the material from Voisey’s Bay, at about 20 per cent nickel, as individual parts of the multibillion-dollar plant are checked and made ready for regular use.

According to Vale’s vice-president of corporate affairs in Toronto, Cory McPhee, the mining giant has been conscious of the potential for the ban on raw exports from Indonesia for years, as the company has multiple processing facilities in that country.

“The Indonesian restrictions on exports of unprocessed ore were first signaled by the Indonesian government years ago with the 2009 Mining Law which included stipulations calling for value-added domestic processing,” McPhee said in an emailed response to questions Thursday.

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Mongolia Sees $1 Billion Investment From Doubling Area for Mines – by Michael Kohn (Bloomberg News – May 28, 2014)

http://www.bloomberg.com/

Mongolia is seeking to expand its area available to mining to a fifth of the country, and by the close of the decade to end its dependence on foreign oil, according to a senior government official.

The outlook hangs on the passage of laws governing mining and energy, Vice Minister for Mining Erdenebulgan Oyun said last week in an interview. Both could be signed off by parliament within a month, he said.

The mining plans alone could unlock $1 billion in developments this year, easing pressure on Mongolia’s mineral-dependent economy. As recently as 2011, its growth was a world-beating 17.5 percent. That moderated to 11.7 percent last year, amid a collapse in foreign investment that has continued into 2014. The government last month embarked on a 100-day race to improve economic performance via dozens of measures to boost investment and cut imports.

Replacing Mongolia’s 1991 Petroleum Law would expand investment opportunities to include different types of contracts between parties, and regulate new energy sources including the nation’s nascent oil shale industry.

“The law is outdated and many industries are unregulated,” said Erdenebulgan, speaking in Ulaanbaatar. The new law is based on the “best international petroleum laws from different countries.”

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Nationalist drum-beating a threat to Indonesia’s prospects – by Andy Mukherjee (Globe and Mail – May 27, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

SINGAPORE — Reuters – Indonesian politicians are playing with the fire of economic nationalism. If actual policies mimic their pre-election rhetoric, the country’s long-term growth potential will suffer.

Both presidential hopefuls are chanting the mantra of self-sufficiency. Joko “Jokowi” Widodo, the Jakarta governor and front-runner in the July 9 poll, is calling for a “mental revolution” to reduce the country’s dependence on foreign investment and technology.

He also wants to restrict the sale of national banks to foreign investors, according to local media reports. His rival, ex-army general Prabowo Subianto, wants more of Indonesia’s mineral riches exploited domestically.

The mining issue has already proved problematic. In January, Indonesia banned exports of unprocessed nickel and bauxite, and imposed steep taxes on overseas shipments of raw copper, zinc and iron ore.

The government wants to nudge mining companies – particularly large multinationals – to put up local smelters and refineries; but the miners don’t seem to be interested. Users may switch to other suppliers if Indonesia prices itself out of the market.

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