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)