Newmont reaches out-of-court settlement

JAKARTA (JP): The months-long tax dispute pitting gold mining company PT Newmont Minahasa Raya against a local government in North Sulawesi ended on Wednesday as both parties finally agreed on an out-of-court settlement.

Director general for general mining at the Ministry of Mines and Energy Surna Tjahja Djajadiningrat said Newmont agreed to pay US$500,000 in overdue taxes plus some "compensations" to the Minahasa regency administration, while the regency would drop its lawsuit against the subsidiary of American mining firm Newmont Mining Corporation.

The amount was much smaller than the Rp 19 billion ($2.4 million) in overdue taxes on the building materials from 1995 to 1998, demanded by the company in its lawsuit.

"The regency will drop its lawsuit, Newmont's contract will be honored and both have made compromises on the disputed tax payment," Surna said.

The regency filed a lawsuit against Newmont last year in the Tondano District Court on charges that the company failed to meet its obligation of paying tax on overburden.

Newmont refused to pay the taxes, saying the taxes were not included in its contract of work it signed with the Indonesian government in 1986.

Surna maintained that under the tax regulation and contract, Newmont was actually not obliged to pay taxes on the used overburden.

But, under the Wednesday agreement, Newmont was ready to pay taxes on the building materials extracted from its overburden which it had used to build a public road from a port to its gold mine at the Ratatotok village.

"This is a bit strange. Actually, Newmont built the road for the regency. Still, the regency taxed the company for that," he said.

He said Newmont would further contribute $1.5 million to establish a foundation to promote the welfare of the local people, which will be jointly the regency, the company and the representatives of the local people.

The company, he said, would also spend an additional $1 million per year for a period of three years for community development programs.

"The money will be managed by Newmont, but the regency will develop the programs," Surna said.

The agreement was reached after months of negotiations that took place while the hearing of the dispute was underway.

The Ministry of Mines and Energy, which from the beginning supported Newmont in the dispute, had initiated the negotiations due to growing concerns of foreign investors over the litigation process.

Talks, however, reached a dead end when the regency demanded that the US$1.5 million, which Newmont had offered for community development programs, be managed by the regency.

The Tondano district court further issued a provisional ruling ordering Newmont to shut down its gold mine by last Sunday, awaiting the final verdict on the dispute.

But, the Supreme Court interfered and ordered the district court head to delay the mine closure.

Newmont president Richard Ness welcomed the agreement, saying that the company and the regency had come to very amicable terms of settlement.

"Newmont as an investor is very happy with the fact that the government has supported our contract," he said.

Regent Dolfie Tanor said he would drop the charges against Newmont either this Saturday or in the week after.

"Newmont showed commitment to build our region, so we see the problem as settled," Dolfie said.

He added that previous negotiations were fruitless, due to different views on how to manage the community development funds.

He further denied that he sought personal benefits from bringing Newmont to court.

"I am totally committed to the people of Minahasa, not a single dime is meant for my personal benefit" he said. (bkm)