Arientha Primanita – A senior minister on Tuesday called for a renegotiation of royalty fees paid to the government by US-owned mining giants Freeport Indonesia and Newmont Nusa Tenggara.

Hatta Rajasa, the coordinating minister for economic affairs, said royalty fees paid by mining companies, especially Freeport, were not big enough. "Now, it is only at 1 percent, it is very small," Hatta said, referring to the royalty Freeport pays the government on its total gross sales.

The government is in the midst of contract renegotiations with Freeport, and has said it wants to reassess contracts with other miners.

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. Newmont Nusa Tenggara 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 1-2 percent on its gold production.

Hatta did not disclose the royalty level the government was seeking from the two miners, saying that was still to be renegotiated. "We cannot say it now," Hatta said.

A 2003 government regulation – No. 45 on tariffs on non-tax state revenue applicable to the Ministry of Energy – stipulates that mining companies have to pay 4 percent as royalty for copper, 3.25 percent for silver and 3.75 percent for gold.

But the Indonesian legal system does not recognize 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 $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 $1.6 billion in corporate tax and employees' income tax. There were also other levies imposed by local governments that were valued at $397 million, royalties of $188 million and dividend payment to the government of $202 million. NNT spokesman Rubi Purnomo was not immediately available for comment.

A more recent mining law issued in 2009, Hatta said, regulates four main issues: government revenue and royalty fees; miners' obligations to process the raw materials in the domestic market; miners' obligation to divest a stake to local owners; and the size of the mining concession areas.

Hatta said renegotiations of mining contracts were mandated by a presidential decree issued earlier this year. "So, for the renegotiations, they [the results] should be better than the previous ones, its royalties should be better, [minerals] should be processed in the domestic market and there should be a divestment plan," Hatta said.

Hatta, who was named chairman in the renegotiation team by the government on Jan. 10, gave no further details.

Energy Minister Jero Wacik is the team's operations chairman while Thamrin Sihite, the director general of minerals and coal at the Energy and Mineral Resources Ministry, was appointed secretary general of the renegotiation team.

Freeport on Friday said it believed the contract was fair to all parties but that it would cooperate with the government in its review. It also said the contract could only be modified by mutual agreement.

The Freeport mine has been the site of unrest in the past year, with a prolonged strike and acts of violence affecting operations.