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.