Newmont refuses to give 10% stake to government

JAKARTA (JP): Minister of Mines and Energy I.B. Sudjana has confirmed that Newmont Mining Corp. of the United States refused to give a 10-percent share of a gold mine operated by its subsidiary to the Indonesian government.

Speaking before the monthly cabinet session on economic affairs on Wednesday, Sudjana said: "They said they don't want to (give the 10 percent)".

Sudjana said he had no problem with the refusal and considered the case closed.

The government said earlier this month that it had asked for a 10-percent share in the Batu Hijau gold mine in West Nusa Tenggara. The mine is controlled by PT Newmont Nusa Tenggara, a subsidiary of Newmont Mining Corp. of the United States.

The government said the request was made because the Indonesian people had put increasing pressure on it to take larger stakes in mining contracts.

According to earlier reports, private local firms also have expressed interest in the Batu Hijau mine. They include the Barito Pacific group, controlled by businessman Prayogo Pangestu, and the Citra group, controlled by President Soeharto's eldest daughter, Mrs. Siti Hardiyanti Rukmana.

Sudjana had said Tuesday that Newmont had the right to reject the request and stick to the terms of its contract of work which it received in 1986.

Newmont is currently preparing to construct mining facilities and start commercial production at the mine which is estimated to hold 14.7 million ounces of gold and 5.3 million tons of copper.

It has been waiting for a government permit to start building the US$2-billion facilities for more than six months now.

The contract is 45 percent owned by Newmont Nusa Tenggara, 35 percent by Sumitomo Corp. of Japan and 20 percent by PT Pukuafu Indah, which is controlled by local businessman Yusuf Merukh.

Reuters reported Wednesday that Newmont Nusa Tenggara President Eric Hamer had rejected the government's bid to secure a 10-percent stake in its Batu Hijau copper and gold project.

"It is not feasible. We are already carrying a 20-percent (local) partner... the project will not carry another", Hamer was quoted as saying.

"It is economics. It is a very tight project," he said. "Anyway, I need to talk to the (mines) minister myself and Adjat Sudradjat (the director general of mining)."

Hamer said he had heard from official sources that the government was about to grant Newmont Nusa Tenggara permission to begin constructing the mine at Batu Hijau.

"We have heard they will do so," he said. "But I won't believe it until I see it in my hand."

Sudjana said Tuesday that the government was planning to make it compulsory for the holders of future mining contracts of work -- outside the oil and natural gas sector -- to give the government at least 10-percent equity in their mines.

"We have asked (Newmont) to understand the people's needs because they have operated here for more than 30 years," he old a news conference on Tuesday.

The government's request for a stake in the Batu Hijau mine had caused a controversy and had come under sharp criticisms by analysts and former mining officials because it was made long after the investors and the government had signed the contract of work.

The government's move also raised many eyebrows as it was revealed amid the announcement of the stunning report from independent consultants Strathcona Mineral Services Ltd. on Sunday that the huge gold find claimed by Bre-X Minerals Ltd. at Busang in East Kalimantan turned out to have no economic value.

Sudjana said Wednesday that operations at the Busang mine would be placed under the control of state-owned general mining company PT Aneka Tambang.

"We have ordered Aneka Tambang to safeguard the Busang property. After all, it belongs to us," he said. (pwn)

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