Freeport, Newmont Say Indonesia Is Reviewing Mining Contract

Freeport, Newmont Say Indonesia Is Reviewing Mining Contract

Freeport-McMoRan Copper & Gold Inc.,
the largest publicly traded copper producer, and Newmont Mining
Corp. will cooperate with the Indonesian government as it
reviews the companies’ mining contracts.
“We believe our contract is fair to all parties and
results in substantial contributions to the government,”
Phoenix-based Freeport said in an e-mailed statement yesterday.
“We will work cooperatively with the government to complete
this review and to seek extension of the contract beyond 2021.”
PT Newmont Nusa Tenggara is ready for discussions with the
Indonesian government on the contract of work amendment plan,
Rubi Purnomo, a Jakarta-based spokesman at Newmont’s local unit,
said in an e-mailed response to questions today.
Indonesia, rich in copper, tin and coal, formed an
evaluation team in January to review all mining contracts in an
effort to ensure they are in the country’s interest and to
increase state revenue. The team has until December 2013 to
conclude the review, according to a decree signed by President
Susilo Bambang Yudhoyono on Jan. 10.
Southeast Asia’s biggest economy seeks to increase the
gold-mining royalty paid by Freeport to 3.7 percent from 1
percent, the Energy and Mineral Resources Ministry said in
August 2010.
Freeport operates the Grasberg mine in Indonesia’s Papua
province, which accounted for 19 percent of the company’s
revenue last year and contains the world’s largest recoverable
copper reserve, according to Freeport. Production was cut in
2011 because of a three-month strike that ended in December.

Agreed to Renegotiate

Freeport said in the statement its so-called contract of
work can only be modified by mutual agreement between the
government and the company. Eric Kinneberg, a Freeport spokesman,
declined to comment further.
The Indonesian Energy Ministry said yesterday Freeport’s
local unit, PT Freeport Indonesia, agreed to renegotiate the
contract of work.
Energy and Mineral Resources Minister Jero Wacik and
Freeport Indonesia President Director Rozik B. Soetjipto met in
Jakarta yesterday to discuss the contract renegotiation, the
ministry said in an e-mailed statement.
Newmont “understands that the amendment to the CoW has
been regulated under the CoW itself and can be made based on a
mutual agreement between the parties that provides benefits to
both parties,” Newmont’s Purnomo said in the e-mail, referring
to the contract of work by its initials. He provided no details
on the content of the amendment.
Newmont, the world’s second-largest gold producer by sales,
operates the Batu Hijau mine in Indonesia under a 1986 contract
of work. Barrick Gold Corp. is the world’s largest gold producer.