Government wants 10 percent of Newmont's gold: Minister

Government wants 10 percent of Newmont's gold: Minister

JAKARTA (JP): The Indonesian government has asked for a 10
percent share in the Batu Hijau gold mine in West Nusa Tenggara,
controlled by a subsidiary of the U.S. Newmont Mining Corp.

Minister of Mines and Energy I.B. Sudjana said: "It's only a
request. Newmont has the right to reject the request and stick to
the terms of its contract of work."

"We don't mind if it rejects the request. We will still honor
its contract," Sudjana told a press conference held to announce
the government's reaction to the Busang gold hoax.

Sudjana said since the government had no money, it would pay
the 10 percent stake with future dividends from the mining
venture.

The Batu Hijau mine, which is preparing to construct its
mining facilities, is based on a 1986 contract of work of the
fourth generation. Assessments predict it holds 14.7 million
ounces of gold and 5.3 million tons of copper.

The contract is 45 percent owned by Newmont Nusa Tenggara, 35
percent by Sumitomo Corp. and 20 percent by Indonesian company,
PT Pukuafu Indah, controlled by Jusuf Merukh.

The contract requires the contractor to divest part of its
shares to Indonesian companies only after the 6th year of
production.

Sudjana also confirmed that two private national companies
were interested in the Batu Hijau mine.

He said the two companies were Barito Pacific, which is
controlled by timber tycoon Prajogo Pangestu, and the Citra Marga
group, controlled by President Soeharto eldest daughter Mrs. Siti
Hardiyanti Rukmana.

Sudjana said the Indonesian people had put increasing pressure
on the government to take large stakes in mining contracts.

"The government plans to make it compulsory for the holders of
future mining contracts of work (outside oil and natural gas) to
give the government at least 10 percent equity," he said.

"We hope Newmont understands this. Anyway, the company is
going to operate in Indonesia for 30 years," he said.

Newmont president Erik Hamer said last week his company had
been waiting for a government permit to start building its mining
facilities for the two billion dollar project.

The contract of work says the construction permit will be
given to the contractor after it completes a general survey (one
year), exploration (three years) and feasibility study (one year)
before it starts production.

Newmont's president Erik Hamer said his company had stopped
operations at the mine pending the issuance of the construction
permit which was applied for six months ago.

But Sujana said the government was not deliberately
withholding the permit to pressure the company into accepting the
10 percent stake request.

"There is no connection between the permit and the request. We
are processing the permit. It takes time," he said.

The government's move on Newmont has attracted criticism from
analysts, including Indonesian former mining officials who see
the measure as evidence of policy inconsistency.

Former Mines and Energy expert Mohammad Sadli said the
government should not yield to nationalistic sentiment at the
expense of an already signed contract of work.

"The contract of work is legally binding and cannot be changed
midway simply because of the nationalistic sentiments voiced by a
group of people or analysts," Sadli said. (jsk)