The government is insisting PT Newmont Nusa Tenggara complete its planned divestment process by Feb. 22, threatening to terminate the U.S. company's mining contract for its gold and copper operations in West Nusa Tenggara if it fails to meet the deadline.
Simon Sembiring, director general for geology and mineral resources at the Energy and Mineral Resources Ministry, said Thursday the government had decided to stick to its deadline after a meeting with the company failed to reach an agreement.
"The decision to terminate the contract will rest with Energy and Mineral Resources Minister Purnomo Yusgiantoro, as the original contract of agreement was signed with the ministry", Simon said.
The government gave default status to Newmont on Feb. 11, arguing the company had failed to complete a divestment plan under which it should have sold a 3 percent stake and a 7 percent stake by the end of 2006 and 2007 respectively. The government also set a new deadline of Feb. 22 for the company to conclude the process, or its contract will be terminated.
During Thursday's meeting, Newmont insisted it had already complied with all regulations and therefore refused to accept the default status.
Newmont Mining Corp. vice president and CFO Russell Bal, who represented the company at the meeting, said the government had given the company little room to maneuver.
If no agreement can be reached the two remaining options will be either to seek an out-of-court settlement or to send the case to an arbitration tribunal as is required in the contract of work. The company has yet to decide which way it will take, he said.
Regarding the possible battle in an arbitration, Simon said that the government is prepared. He added the government was willing to help the company speed up the divestment process to help it meet the deadline.
"They have complained that the time we have given is too short' that they can't afford to get the deal done within 11 days as they deem the local governments are not being cooperative. Therefore, we're ready to help the company negotiate with local governments," Simon said.
The West Sumbawa regency said it was interested in the 3 percent stake, while Sumbawa regency and West Nusa Tenggara province are interested in buying the 7 percent.
Newmont spokesperson Rubi W. Purnomo said that the current negotiation with the government had not disrupted mining operations in West Nusa Tenggara.
Simon, however, said that mining operations would be halted as soon as the government terminated the contract.
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