Tue, 11 Apr 2000

Government regrets court order to shut Newmont mine

JAKARTA (JP): The government expressed regret on Monday over a decision of a district court in North Sulawesi to close the gold mining operation of PT Newmont Minahasa Raya because of a tax dispute between the company and local authorities.

Minister of Mines and Energy Susilo Bambang Yudhoyono said the government would not interfere with the court's decision, but he promised that the government would continue efforts to settle the dispute between the company and the Minahasa regency out of court.

"It's our obligation, together with the home affairs minister and the finance minister, to seek an (out-of-court) solution to this case," Bambang said at a news conference.

He said the ministry had done its utmost to settle the dispute out of court, but thus far to no avail.

The Tondano District Court ordered Newmont on Saturday to temporarily close its gold mine in Ratatotok village by next Sunday, while the hearing of its dispute with the Minahasa administration was under way.

The provisional order for the company's shutdown was issued by the court in January this year, but the court could only execute the ruling now as the provincial high court recently approved it.

Bambang said Newmont could still appeal to the Supreme Court and the arbitration court.

"This is a legal matter. It is inappropriate for the government to meddle with the examination of a legal dispute," Bambang said.

The Minahasa regency sued Newmont for a total of Rp 19 billion (US$2.4 million) in taxes on the overburden it extracted from 1995 to 1998.

Newmont refused to pay the taxes, saying it was not included in its contract of work and it had extracted the overburden to access the gold deposit underneath.

Under the local tax regulation, mining companies are obliged to pay taxes on gravel, sand and stone extracted and commercially used. The regency believed that Newmont had commercially used all the overburden.

However, a joint verification team later found that Newmont had used only a small portion for its construction needs, and the company needs only to pay Rp 550 million in taxes, which is much lower than the amount demanded by the regency.

Newmont has said it was ready to pay the amount of taxes determined by the joint verification team.

Surna Tjahja Djadjadiningrat, the director general of mining, dismissed the regency's litigation efforts as a reflection of its "narrow-mindedness".

He said the government would not force the regency to withdraw its lawsuit, but would try to explain to it the consequences of its actions.

Executive director of the Indonesian Mining Association (IMA) Paul L. Courtier said the case set a bad precedent in the government's plans to give greater autonomy to regions to manage their own affairs.

"Just imagine what it could be like once autonomy is fully implemented next year," Courtier told The Jakarta Post.

Newmont president Richard Ness said he regrets the court's decision and was outraged by the fact the court did not give any chances for Newmont to present expert witnesses during the whole hearing of the case.

"We are quite frankly outraged at the blatant disregard for the due process of law that the court displayed," he said.

Newmont Minahasa, which started to operate in 1996, planned to end its mining operation by 2001 due to the depletion of gold deposits. It projected its gold production at 350,000 ounces this year, up from 344,000 in 1999.

Newmont Minahasa Raya is 80 percent owned by the Denver-based Newmont Mining Corporation and 20 percent by Tanjung Sarapung, which is owned by local businessman Yusuf Merukh. (bkm)