Newly declared President Jokowi Widodo wants to sit down with mining companies in a bid to resolve the ore export tax issue. Definitely, a positive tone to get negotiations rekindled between Indo and Newmont.
“First, I want to sit down with stakeholders, investors, regulators and with the people to know the problem and find a good solution for them. I want to know the details,” Jokowi said in an interview at his residence in Jakarta on Saturday, before he was declared winner of the presidential election on Tuesday.
However, there is no harmony within the new leader's circle of power on the topic. The Vice President elect, Jusuf Kalla, was instrumental in developing the latest mining law strategy while he held the VP position in 2007.
Kalla also said there should be no tampering with the ban on unprocessed ore exports signed into law five years ago.
Still, in a more conciliatory view, some of the new economic advisors seems more willing to negotiate.
Darmawan Prasodjo, an economic adviser to Jokowi, has said that the new president would not “kill the industry” and that the government and industry were partners who should face the issue together. Prasodjo criticized the current administration for not creating the conditions for the industry to thrive.
Syahrir Abubakar, the executive director of the Indonesia Mining Association, said any move to review mining regulations would be welcomed. “There are contradictions from one article to the next, and many renegotiations have been held up because of this law.”
Anyhow, it is refreshing that the newly elected Government may be more receptive to engage in a fair and reasonable negotiation outcome involving Newmont Mining.
Here is the latest from the Indonesian Government.
“We are considering taking Newmont Nusa Tenggara to a different arbitration court,” Chairul Tanjung, the coordinating minister for the economy, said in Jakarta on Monday.
Though Chairul offered few details on the government’s plans to challenge NNT, he cited as a possible arbitration court the United Nations Commission on International Trade Law, a UN appellate body.
Amazing, these crooks from Indonesia want a change in venue? Guess, the International Center for Settlement of Investment Disputes (ICSID) is not credible to Indonesia?
Not sure how this would ultimately get handled, but think that first filed has the upper hand. It should be ICSID that handles proceeding; should it actually go through the arbitration path.
On another note, the Indonesia Government won't proceed with negotiations unless NEM withdraws their arbitration filing first. Duh, like NEM would even consider that action. Try that scenario, NEM agrees to withdraw arbitration request then forgoes it's place in the legal timeline (negate arbitration filing date) then Indonesia immediately files for arbitration with the UN venue. Yea, NEM is that dumb?
Stand firm Newmont...
The FOOLS are back at it today...they continue to signal that Freeport handled the negotiation with the Indonesian Government in a better manner than did Newmont...in principle because the arbitration path that Newmont pursued is now under attack by the Indonesian Government.
Oh yea, Newmont should follow the cave-in by Freeport. I'd like to know how the FOOLS can make their judgment without knowing the entire details of the MOU agreement. The MOU might be fair and reasonable, I don't know if it is; but I'm curious if the Indonesian Government has shared MOU details with Newmont. If they already did, then surely Newmont would jump at the opportunity to settle...but so far the arbitration process continues.
Stand firm Newmont, don't be a FOOL.
Indonesia has threatened NEM with breach of contract and claims that could terminate the contract within 90 after the filing of default. Extortion to the extreme?
How stupid is this claim? It continues to be the Indonesia Government that won't abide by the COW; and now they're suggesting that the very same contract that they are not adhering to is in breach by Newmont...at least it's good for laugh.
Until the negotiation team of Indo comes to their senses, then I say that NEM needs to stand firm. Let International arbitration settle this issue.
Bought more shares today.
From my perspective the same goes for the Motley Fool group.
Repeatedly, those authors suggest that FCX is outsmarting NEM dealing with negotiations with Indo. Basically, suggesting that cooperating with the extortion is better than taking legal action to protect your contract.
First, if you follow the FOOLISH ownership disclosure by Motley authors they do suggest that there is no direct share ownership by the individual authors BUT ownership only in FCX is held by the company. Self serving platitudes in my view. The final outcome of the MOU agreement between FCX and Indo hasn't been released--or signed for that matter. What is likely, is the MOU is WORSE economically than the current legal COW binding contract.
For me, I applaud NEM in taking a hard stand. Just like the FOOL articles suggest; the Indonesian government is using extortion against the companies. Let International Arbitration render judgment, I feel that NEM holds the higher ground. But hey, I'm all for a fair & reasonable negotiation to proceed on the matter. It just makes little business sense to accept terms that bring no consideration to NEM...something that the FOOLS should be saying about the cave-in by FCX.
True, it won't be given for nothing in exchange...the question remains, will transfer price be fair & reasonable...or will it be next to nothing?
How the heck did this ever take in excess of 6 months to negotiate? Waiting for disclosure on all the line item elements contained in the MOU...will there be a hidden surprise?
What kind of negotiator would give away so much of their future business? In this case apparently the CEO of the company. Freeport should explain to their shareholders, in depth, the cost benefit of the MOU agreement. As reported, this agreement doesn't appear to be a win-win solution...how many dollars will now flow to the Indonesian Government and not hit the Freeport balance sheet?
Unfortunately, Newmont has been undermined by the weak negotiating team (FCX-CEO) of their competitor. Thanks for nothing.
NEM will either bend over, from the example of FCX, and agree to like terms or fight onwards with the arbitration filing.
The news from Indo claims that an agreement has been reached for the MOU. It still needs cabinet approval and to be signed by the current President...but appears to be a done deal.
The question remains? Is it a fair and reasonable? Did FCX stand firm or cave in to the government demands?
Details forthcoming. Sure want an outcome that doesn't impact Newmont in the negative; NEM surely is at the mercy of whatever agreement made by Freeport.
Indonesia negotiators claim that a MOU have been agreed to between the Government and FCX. It still has to get cabinet approval and signed by the current President...but it's a done deal. No details on the ore ban tax relief amount or premises, still an encouraging event.
In the same breadth, the negotiator states that Newmont will be given one last chance to withdraw the arbitration legal action...or else...or else what?
Well, Newmont stepped up the ore export tax negotiation pressure on the Indo government; the question now is how firm will Freeport commit to counter-balance the take-it-or-leave negotiation tactic with Jakarta? For certain, whatever outcome is reached it falls on Freeport to continue to demand a fair & reasonable negotiation conclusion...Newmont is counting on an rational agreement by Freeport.
Today from Jakarta:
The director general for coal and mineral resources R. Sukhyar has said he is confident that an agreement can be made with disgruntled US mining conglomerate Newmont, despite the company filing an international arbitration against the government on Tuesday.
Newmont filed the arbitration to seek relief from export restrictions on unprocessed mineral ore imposed in January.
The official said that if an agreement could be found with Freeport Indonesia, — which operates the world’s biggest gold mine, in Papua — then Newmont would follow suit.
Your view seems exactly opposite to my perspective. I think a deal is imminent--perhaps days away.
First, FCX CEO Richard Adkerson remains in Jakarta attempting to seal a new deal with the current government. FCX has publically stated that they have no plans--yet--to follow NEM in seeking arbitration; but make no mistake, the arb filing by NEM strengthens the FCX negotiation process. The Indonesian government now has to consider that force majeure and arbitration by FCX must be considered as a high probability should no deal get inked.
Second, if there is no deal before the next President gets elected then the real possibility that a complete negotiation reset is highly likely and any settlement would be really protracted.
Anyhow, my two cents...
I'm a Newmont Mining shareholder and have followed the negotiation process between the Management and the Indonesian Government. NEM has countered the Indonesian Government relentless hard core negotiations tactics with like kind. Todays arbitration filing is the latest factor in the negotiation stalemate. I actually applaud NEM for undertaking the action.
From what I've been able to extract from the current Indonesian politics and upcoming election; both major candidates for President are even more "Nationalistic" than todays lame duct regime. I'd suggest if any deal is in order it needs to be done post haste. Moreover, towards your point of diplomatically taking a hard line by Freeport is somewhat intriguing...but too soft. FCX should simply follow the path established by NEM and first declare force majeure and then cripple the Indonesian hard core position by filing International arbitration.
Six months of negotiation has gotten nowhere fast.
Finally, Newmont files for International arbitration against the Indonesian Government.
For those that have kept a pulse on the mining law changes in Indonesia, the arbitration filing shouldn't come as a surprise. Based on the negotiation posture of the Indonesian Government over the last six months--the total lack of any compromise--it left Newmont (and Freeport should follow thru too) to declare force major and follow up that action with arbitration outside of the one-sided Indonesian position.
This story has really elevated the caution flag of any prospective foreign company investing with the hard core Government of Indonesia.
Lots more ahead...
The impact of Force Majeure...jobs lost and economy suffers...Government gets the blame for being "arrogant" but so does Newmont (much lessor extent). It's really up to the Government to curb those taxes...more to come real soon.
Dede Suhendra, Mineral Enterprise Director at the mining ministry, told reporters the government would try to help Newmont overcome any obstacles relating to exports in response to the force majeure.
An official at a trade union representing workers at Newmont's Indonesian mine said it may take legal action against both the company and the government over the mine closure and layoffs, and planned to organise demonstrations.
"We will sue both Newmont and the government because they have been so arrogant, and caused the workers to be the victims of their arrogance," Yoesrawan Galang, chairman of the Newmont Nusa Tenggara unit of an Indonesian mine workers' union, told Reuters. "This is why we will also stage demonstrations against them."
Word from Newmont today...Force Majeure...
Freeport should follow suit and claim Force Majeure too...that would weaken the negotiation tactics coming from the Indonesian Government.
Both Freeport & Newmont have already agreed to build a smelter and have committed money to start the build development process. Obviously, the amount of the export tax, if any, is still the sticking point. Force Majeure exhorts a major economic cost to the Indonesian Government (YES, to FCX & NEM also) and is the right lever to utilize to negotiate a fair and reasonable negotiation outcome.
Agreement reached on ore export tax...at least between Indonesia Government and Freeport-Mc...details not available yet...political posturing phase, everyone gets to publically announce their view on the settlement.
No word from Newmont; yet...
Promising scenario from Indonesia...there should be details released on the lowering of the ore export tax.
Moreover, Newmont has committed $25M to the smelter build...Freeport deposits $115M for the project.
A reduction of the tax levy is forthcoming...clarity of the details related to the lowered tax and criteria that must be met during the smelter build development should be released early next week. The importance of these material events should drive NEM share price upward upon release of the specific details...a 10% immediate gain would not be unreasonable.
Here is the update from Indonesia:
Contents of the side letters will include details on export taxes that Freeport and Newmont will have to pay to export their semi-finished products before the smelter is completed.
The government decided to relax the mineral-ore export ban by introducing progressive export taxes, following threats and complaints from mining companies that claimed the ban would cause substantial losses.
It's the eleventh hour to the ore export tax situation...does next week finally bring resolution to the dispute?
Bravo, Newmont Mining is now joining forces with Freeport & Antam [Indonesian entity] to develop and own a copper smelter. The feasibility study is expected to be complete by month end May 2014...think days remaining until submittal to the Indonesian Minister of Mining..
The Indonesian Ore Export Tax situation is churning towards partial repeal. Just how near term the decision is made, and the amount of reduction to the tax remain in question. Progress is progress.
A plan by mining giants PT Freeport Indonesia, PT Aneka Tambang (Antam) and PT Newmont Nusa Tenggara to jointly develop a copper smelter has caused uncertainty over the supply of concentrate for other projects.
The director general for minerals and coal at the Energy and Mineral Resources Ministry, R. Sukhyar, said that Newmont Nusa Tenggara — a subsidiary of the US-based Newmont Mining Corporation — had decided to participate in a proposed copper smelter involving Freeport and Antam, with ownership being part of the deal.
Early morning update from Freeport on the Indonesia situation. FCX & NEM are connected on the Indonesia issue; "imminently" means by 01 June 2014 or before. Any agreement on the reduced ore tax by the Ministry of Mining will benefit Newmont quite a lot. NEM stock price is headed higher as the month end approaches.
FCX Freeport McMoRan CEO says 'making progress' in Indonesia
Adkerson says mineral exports has become a politically charged issue in Indonesia. The company is prepared to move quickly to restore normal operations as soon as issues resolved, but the CEO adds that the company cannot sustain its current situation in Indonesia "forever." Adkerson says he has expected a resolution to come "imminently" in Indonesia for some time recently. Freeport now sees year CapEx $7.1B, excluding recent Oil & Gas transactions, which is up from $7B previously.