T

he government has called on copper miner PT Newmont Nusa Tenggara (NNT), a subsidiary of US mining company Newmont Mining Corporation, to withdraw its arbitration appeal, saying it will otherwise risk bitter consequences.

Coordinating Economic Minister Chairul Tanjung said the Indonesian government could be forced to take action in response to Newmont'€™s arbitration appeal.

'€œThe government of Indonesia always wants to protect the interests of investors, both domestic and foreign, including Newmont. However, if Newmont takes a course of action and gives the government no other choice, the government will also take measures that would definitely be detrimental to Newmont itself,'€ Chairul said after a ministerial meeting on Monday.

Earlier, the government expressed its disappointment with Newmont Nusa Tenggara following the company'€™s move to file an arbitration appeal over Indonesia'€™s raw mineral export ban. The miner claims the ban has violated its contract of work (CoW) with the government.

Starting Jan. 12, the government banned all exports of unprocessed mineral materials as part of efforts to boost downstream industry in the country. The government, however, is allowing exports of semi-finished mineral products, such as copper concentrate, until 2017. A progressive export tax ranging from 20 percent to 60 percent is imposed in return for the exemption.

Miners such as Newmont Nusa Tenggara have said that the export tax is against CoWs, which say that companies cannot be charged with additional taxes other than those stipulated in their contracts.

Regarding its copper concentrates, Newmont is unable to export the products because it refuses to pay the progressive tax. Consequently, the company had to terminate its concentrate production and stockpile concentrates for months.

Eventually, the company declared a force majeure at its Batu Hijau mine and shut down operations last month, saying its stockpiling facilities could no longer receive more concentrates.

Newmont Nusa Tenggara lodged the arbitration appeal at a time when the company was renegotiating mining contracts with the government. The renegotiations, which are mandated under the 2009 Mining Law, cover six main issues, namely adjustment in royalties, size of mining areas, divestment, domestic processing and refineries, continuance of mining operations, as well as the utilization of local goods and services.

'€œNewmont had actually agreed to build a smelter. But suddenly it filed the arbitration. This is what has disappointed us. If they want arbitration, we will face it. But, if they want to sit again, revoke the arbitration, so let'€™s settle this in good faith,'€ said Energy and Mineral Resources Minister Jero Wacik.

Jero was referring to Newmont Nusa Tenggara'€™s participation in the development of a copper smelter with Freeport Indonesia and state-owned diversified miner PT Aneka Tambang.

Chairul added that he had ordered the Energy and Mineral Resources Ministry and the Investment Coordinating Board (BKPM) to summon Newmont Nusa Tenggara for negotiations and revoke its arbitration appeal.

Details of what government measures will be taken if Newmont insists on continuing its lawsuit are not available. The closure of its mining site could be a possibility, according to Industry Minister M.S. Hidayat.

Newmont Nusa Tenggara president director Martiono Hadianto and the company'€™s spokesperson, Rubi Purnomo, could not be immediately reached for comment on Monday.

Apart from a looming legal battle with Newmont Nusa Tenggara, the Indonesian government is currently facing an arbitration battle with UK-based Churchill Mining Plc. In 2009, the London-listed mining firm filed a request for arbitration after its mining license for a coal site in East Kalimantan was revoked.

In February this year, the International Center for Settlement of Investment Disputes (ICSID) rejected the government'€™s request to dismiss the Churchill case.

It was the first blow for the government in what could be a lengthy legal battle that, if it loses, could compel Indonesia to pay up to US$1.05 billion in fines.