Building a smelter is not economically feasible: Newmont

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PT Newmont Nusa Tenggara (NNT), a subsidiary of the United States-based Newmont Corporation, said building its own smelting plant to process its gold and copper concentrates as required by the government was not economically feasible for the company.

The company’s spokesman, Rubi Purnomo, said in Jakarta on Friday that rather than building its own smelter, NTT, which operates a large copper and gold mine in West Nusa Tenggara (NTB), would prefer to collaborate with other companies to process its cooper and gold concentrates.

“Based on our studies, constructing a smelter is not feasible for the company,” he told reporters over the phone on Friday.

At present, NNT processes half of its copper and gold production in cooperation with PT Smelting Gresik, which operates a large smelting plant in Gresik, East Java. The copper and gold miner said previously that the other half of its unprocessed copper and gold concentrates were exported to meet long-term contracts. Like NNT, Freeport Indonesia also processes part of its copper concentrate at PT Smelting Gresik’s smelters.

The government began renegotiating contracts of work (COWs) with mining companies earlier this year as part of its plan to bring all existing mining policies in line with the new mining law.

The renegotiations cover six main issues comprising an increase in royalty payments, the obligation to process mineral ore in Indonesia, the use of local goods and services, divestment, contract extensions and the size of mining areas.

Also on Friday, the Energy and Mineral Resources Ministry’s minerals and coal director general, Thamrin Sihite, acknowledged that issues relating to the construction of smelting plants had become stumbling blocks in the negotiations between the government and Newmont.

“The most sensitive issue in our negotiations regards the requirement to process raw mineral in Indonesia as they [Newmont] say it is not economically feasible,” he said.

He said the government would not ask Newmont to a further formal meeting, but the former did invite NNT to attend a focus group discussion to talk about the feasibility of building smelters.

“There are formal and informal negotiation processes; that is why we organized a focus group discussion, also involving university experts, to consider the outlook for building smelters,” he said. “We wanted to know whether or not it was feasible for Newmont to build their own smelter.”

Local mining companies have been encouraged to build smelting plants to ensure that they can meet the government’s new mining policy, which will ban exports of unprocessed metal beginning in 2014. In order to ensure that all miners comply with the regulation, the government is restricting exports of unprocessed metal by imposing an average of 20 percent duty on 14 mineral ore exports, including copper and gold, beginning May.

In addition, the miners should also show their commitment to processing their mineral production in local smelters in order to obtain an export permit from the Trade Ministry.

As reported earlier, Deputy Energy and Mineral Resources Minister Rudi Rubiandini said the export tax was needed in order to prevent the overexploitation of mineral ore ahead of the implementation of the new mining law

He said around 185 companies had submitted proposals to the ministry to build smelters.