Indonesia To Renegotiate Royalty Fees Paid By Mining Companies

By Ahmad Fuad Yahya JAKARTA, Feb 22 (Bernama) -- Indonesia wants to renegotiate royalty fees paid to the government by mining companies, which it believes are too low. Coordinating Minister for Economic Affairs Hatta Rajasa on Tuesday called for a renegotiation of royalty fees paid by US-owned mining giants Freeport Indonesia and Newmont Nusa Tenggara. Royalty fees paid by mining companies, especially Freeport which was only at one percent on its total gross sale was very small, he was qouted as saying by English daily the Jakarta Globe Wednesday. The government, he said, was in the midst of contract renegotiations with Freeport, and wanted to reassess contracts with other miners as well. Freeport Indonesia, the local unit of Freeport-McMoRan Copper & Gold, the world’s largest publicly traded copper producer, operates the Grasberg gold and copper mine in Papua, a province situated in the eastern most part of Indonesia. Newmont Nusa Tenggara (NTT) is the Indonesian unit of Newmont Mining. NTT, which signed its contract with the government in 1986 to operate the Batu Hijau gold and copper mine in West Nusa Tenggara, pays royalties of one to two percent on its gold production. Hatta however did not disclose the royalty level the government was seeking from the two miners. The report said that a 2003 government regulation on tariffs on non-tax state revenue applicable to the Ministry of Energy stipulates that mining companies have to pay four percent as royalty for copper, 3.25 percent for silver and 3.75 percent for gold. But the Indonesian legal system does not recognise the principle of retroactivity, which means terms agreed to in contracts signed before the 2003 law take precedent. Freeport’s Jakarta spokesman, Ramdani Sirait, said the miner paid US$2.4 billion to the Indonesian government last year. Ramdani told Suara Pembaruan, a sister publication of the Jakarta Globe, that the payment consisted of US$1.6 billion in corporate tax and employees’ income tax. There were also other levies imposed by local governments that were valued at US$397 million, royalties of US$188 million and dividend payment to the government of US$202 million. -- BERNAMA