Gold mining set to start in Sumbawa

Gold mining set to start in Sumbawa

NEW YORK (Reuter): Newmont Gold Co. and Sumitomo Corp. have agreed in principal jointly develop and operate the Batu Hijau Project, a large copper/gold porphyry deposit on the Indonesian island of Sumbawa, Newmont Gold said Tuesday.

It is 90 percent owned by Newmont Mining Corp.

In a statement released in New York, the company said the project means an expenditure of about US$1.5 billion for an open pit mine, mill, and infrastructure including employee housing, a port and electrical generation facilities. Construction is expected to take about three years.

The arrangement is subject to completion of a definitive agreement and approval by the boards of both companies and appropriate consultation with the Indonesian government.

PT Newmont Nusa Tenggara, an 80-percent owned subsidiary of Newmont Gold, holds a Contract of Work area on the islands of Sumbawa and Lombok of some 198,000 hectares.

Batu Hijau, located within the Contract of Work area, was discovered by Newmont in 1990, the company said.

The find contains a resource of 11.2 billion pounds of copper and 14.7 million ounces of gold, Newmont continued.

Under terms of the proposed agreement, Newmont Gold will retain a 45 percent interest in the Batu Hijau Project. Sumitomo will have a 35 percent interest. The remaining 20 percent is held by an Indonesian company, PT Pukuafu Indah.

Newmont said Batu Hijau is expected to produce some 245,000 short tons of copper and 500,000 ounces of gold per year in concentrates over an anticipated mine life of greater than 20 years.

Over the past decade, Newmont has spent $70 million in discovering and developing Batu Hijau, it said.

Upon execution of the Joint Venture Agreement, Sumitomo will make an initial investment in the project equal to its pro rata share of Newmont's investment through closing.

Sumitomo will make an additional payment of about $100 million which will be applied toward Newmont's share of future development and construction costs and will fund its own pro rata equity share. Sumitomo will also provide or arrange for 60 percent of the project's financing requirements up to $800 million, Newmont said.