Mining Companies Face Possible Penalties
12 May 2014 17:42 WIB
TEMPO.CO, Jakarta - Deputy Finance Minister Bambang Brodjonegoro threatened to give a penalty to mining companies that has not shown seriousness to build smelters. "If by next year there is still no progress, there will be a penalty," Bambang said last weekend.
Building smelter plants is an absolute requirement for miners to obtain export duty reliefs. In addition, miners must pay a security bond ensuring their commitment to build smelters, which amounts to five percent of the total investment. Not paying the security bond would incur them progressive export duties of 20 to 60 percent.
However, until last week, mining companies have yet to pay the guarantee bonds. US-based miners Freeport Indonesia and Newmont Nusa Tenggara, for example, had promised to deposit US$100 million and US$25 million, respectively, into the government's escrow account.
The government is waiting for the payment until the end of this week. Bambang said the rule is a way to accelerate smelter construction, and make sure that it gets done. He has asked that the construction be completed in a matter of six month, and not until 2015 or 2016.
Last week, Newmont warned the government that they would reduce production starting in June. The gold and copper mining company operating in West Sumbawa said their copper storage facility at Batu Hijau mine will be full by the end of this month because they have not received the export license.
A disrupted production would result in the housing of a number of employees "to conserve and maintain the company's ability to operate normally and on time," Newmont president director Martiono Hadianto said through in a written statement. "Most of our employees will be sent home with their salaries cut beginning in early June," he said.
Bambang responded to Newmont's warning by saying that Newmont and other miners should have thought about protecting their workers the minute the regulation was promulgated.
Mining analyst Marwan Batubara asked the government to be firm and not be provoked by threats of layoffs. "This is an old tactic. They clash with employees to influence the government to cancel the export ban," he said. Marwan hopes the government will soon demand all mining companies to keep their promises to build smelters.
MARIA YUNIAR | BERNADETTE CHRISTINA