Newmont may end gold production early

Newmont may end gold production early

By Christiani S.A. Tumelap

MANADO, North Sulawesi (JP): PT Newmont Minahasa Raya said it
would halt its gold production activities in 2003 or 2004, six
years earlier than scheduled, if no new reserves were found at
its mining sites.

Company manager for government and community relations Tri
Harjono said on Monday that gold deposits at the mining site were
heavily depleted due to fast and extensive production activities
in the early years of the operation.

He said the production level of the company, which has been
plagued by conflicts with the local community, would still be
significant in the next two years.

Gold production output next year was expected to reach about
700 kilograms per month, above the 650 kilograms of gold bullion
per month this year, he said.

"Next year's production output will likely increase in line
with the ostensible finding of troy ounce with higher gold
concentrate."

The company's production output from 2001 to the end of the
mine's life span in 2003 or 2004, however, would likely decline
because it would be more difficult to find the ore, he said.

Tri said the company initially predicted that the gold mine,
which has 2.1 million troy ounces of gold reserves, would have a
13-year life span until 2009.

The local community is unhappy with the activities of the
company, which began its commercial operations in mid-1996 after
conducting exploration projects at the Minahasa mining site from
1986 to 1988.

The local government said that the company, which is a
subsidiary of Newmont Mining Corporation of the U.S., shirked
paying full taxes. Newmont is also blamed for polluting local
rivers.

The company reported gold production of 58,000 ounces in the
first quarter of 1998, 49 percent more than the 39,000 ounces
produced in the same period of 1997.

Tri said the company used better systems and equipment with
higher technology to optimize and accelerate the excavation and
production activities in its US$220 million gold mine, resulting
in faster completion of the mine's life span.

He said the company would reclaim the mining site after it was
fully exploited or turn it into a mining study center, based on
the local government's approval.

The company is exploring two new sites in Bolaangmongondow
regency as possible alternatives for future projects.

"We began exploration on the two sites, which are also located
within our contract of work areas, last year. We are set to make
feasibility studies on the sites if the exploration indicates
there are enough gold reserves there to be exploited," he told
The Jakarta Post after a visit by House of Representatives
Commission V covering industry, trade, investment and
cooperatives.

Commission members are visiting North Sulawesi to meet with
government officials and private companies operating in the
province.

Commission members asked Newmont to clarify details of the
recent conflict with the Minahasa regency.

Conflicts

Minahasa regency filed suit against Newmont Minahasa Raya,
accusing the company of not paying C-class taxes, a local tax
imposed for the excavation of building materials and industrial
minerals, including sand, stone and kaolin.

It is yet another problem for the company, already beset by
allegations it pollutes the surrounding environment and engaged
in collusion in its establishment.

The regency demanded the company pay Rp 61 billion in overdue
taxes and asked the local district court to close down the
company's mine if it failed to pay.

Chairman of Commission V Bachtiar Chamsyah called on the local
government to use appropriate means to solve the dispute.

"A demand for foreign companies operating in Indonesia to
terminate their operation without firm reasons could damage our
image with foreign investors," he said.

He said the Ministry of Mines and Energy, which issued the
contract of work for Newmont Minahasa Raya, should also be blamed
for the ambiguous contract terms.

The mining company reported it paid the government $11.80
million in taxes, royalties and excises from January to October
this year, much higher than the $6.40 million in 1998, $9.52
million in 1997 and $7.40 million in 1996.

The tax payment did not include the C-class taxes demanded by
the local administration.

Company general manager Paul A. Lahti said the local
administration misunderstood the terms of the contract of work
regarding taxes obligations.

He said the C-class taxes were applied only when a company
gained added value by mining, selling or making another product
out of the materials.

"But that is not happening there. The overburden soil that we
are removing is placed on a garbage dump. I have to point out
here that there is not one mining company in the world that pays
taxes on overburden," he told the Post.

He denied allegations that the company caused marine pollution
through waste management, which channels the processed wast into
an underwater dumping site.

He said the company regularly monitored its Environmental
Impact Analysis (AMDAL). An examination has also been done and
found no proof of the accusation, he added.

Newmont Mining Corporation also operates in Sumbawa, West Nusa
Tenggara; China; the Philippines; Kazakhstan and Mexico, with
worldwide production of about 123 tons of gold a year.