Newmont Mining's hardball tactics could raise tensions in Indonesia

Newmont Mining's (NEM) force majeure declaration at its Batu Hijau copper mine in Indonesia was a surprising move but illustrates how its tactics in dealing with the government in the dispute over export taxes have differed from Freeport McMoRan (FCX).

FCX is much more heavily invested in the country, with more to lose by picking a fight with the government, according to Bernstein's Ignace Proot; FCX employs 30K-plus people in Indonesia, more than 7x as many as NEM, and is planning an ambitious new underground copper mine.

"It makes sense for Newmont to do this now, because they have inventory built up for the holiday season, and there'll be a new president in the fall," who might renegotiate the export taxes, Proot says.

NEM has been vocal in discussing the possibility of taking Indonesia to arbitration, while FCX has proceeded cautiously and its CEO met with government officials this week; FCX has indicated it was close to reaching an agreement, which could involve getting a break on taxes in exchange for helping to build a new smelter.

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Comments (4)
  • HighSierraTrader
    , contributor
    Comments (7) | Send Message
    Hardball is the only game these guys understand. Still, as a government they have the upper hand.
    5 Jun 2014, 06:04 PM Reply Like
  • Carlos54
    , contributor
    Comments (44) | Send Message
    I don't know that they have the upper hand. If Newmont had a legally good position and felt confident of winning the arbitration this might be a good time to "pick a fight" given the excess of copper flooding the market. The copper would stay in the ground, copper prices might recover a err bit and Newmont could collect on an arbitration and the copper would still be in the ground----and the entire mine could be sold making Newmont more liquid at least
    5 Jun 2014, 07:09 PM Reply Like
  • HYMN
    , contributor
    Comments (183) | Send Message
    sounds like good cop, bad cop. And the smelters are what the gov. wanted in the first place. I don't know as I can blame the Gov. for wanting a bigger piece of the pie there's plenty to go around. Why not help them to industrialize and improve their standard of living, while the mining companies rape their natural resources and take Advantage of the countries cheap labor.
    6 Jun 2014, 05:57 AM Reply Like
  • barryreavis
    , contributor
    Comments (49) | Send Message
    It was my understanding it is not just the mine. I believe they also need their power grid beefed up quite a bit to handle the new smelters.
    6 Jun 2014, 07:02 AM Reply Like
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