Newmont's closure could harm effort to woo investors

JAKARTA (JP): The ruling by a local court in North Sulawesi ordering gold mining company PT Newmont Minahasa Raya to shut down its operations could undermine the government's efforts to attract foreign investors and might harm the government financially, an official said.

The director of mining development at the Ministry of Mines and Energy, Simon Sembiring, said on Tuesday Newmont might appeal the ruling.

If the company wins its appeal, it could demand compensation from the government for losses incurred by the closure of its gold mine, he said.

"In the end, this (forced closure of the gold mine) could harm the government," he said.

Simon said the government would support Newmont's appeal of the court's ruling.

Newmont was ordered by the Tondano District Court to close down its mine in Ratatotok village, Minahasa regency, by next Sunday.

The Minahasa regency filed a lawsuit against Newmont at the district court last year, demanding a total of Rp 61.5 billion in overdue taxes and compensation.

At the regency's request, the court issued a provisional ruling closing down Newmont's mine while the court hears the suit against the company.

"We regret this decision because the case is still in progress," Simon said.

He said Newmont's alleged nonpayment of taxes was insufficient grounds for the regency to demand the closure of the gold mine.

Newmont has already promised its assets, which are worth far more than the amount of taxes and compensation demanded by the regency, as a guarantee it will comply with any decision taken by the court, he said.

"If it had been for environmental reasons, the mine closure would have made sense," Simon was quoted as saying by Antara news agency.

The Mining Advocate Network (JATAM), however, demanded the permanent closure of Newmont's mine on the grounds of environmental destruction.

JATAM cited an unpublished study by an audit team, including governmental officials and experts, stating that Newmont had polluted the nearby Buyat Gulf with its tailings.

The Indonesian Mining Association (IMA), meanwhile, said the closure of Newmont's mine might have resulted from a misunderstanding of mining operations on the part of the judge.

The association said the regency believed the company had to pay taxes on all extracted overburden. But Newmont refused to pay, saying the overburden was not taxable since it was simply extracted to access the gold ore underneath, and only a small portion of the overburden was used to make aggregates for construction needs.

IMA said the judge in Tondano needed experts to explain these technical points to him, but the judge did not allow the expert witnesses presented by Newmont to testify during the hearing.

The experts were a mining professor from the prestigious Bandung Institute of Technology and a former director general of mining.

The company expects the gold deposit at the mine to be depleted by 2001. It estimated gold production would reach 350,000 ounces this year, up from 344,000 ounces in 1999.

Newmont Minahasa Raya is 80 percent owned by the Denver-based Newmont Mining Corporation, with the remaining 20 percent held by Tanjung Sarapung, which is owned by local businessman Yusuf Merukh. (bkm)