2nd UPDATE: Indonesia Wins Against Newmont Unit - Minister
April 01 2009 - 2:42AM
Dow Jones News
Indonesia's mines minister said Wednesday that international
arbitrators had ruled in Indonesia's favor on two of the major
disputes it has with Newmont Mining Corp. (NEM).
Purnomo Yusgiantoro, Minister for Energy and Mineral Resources,
confirmed an earlier statement from the government which said
Newmont has 180 days from Tuesday to sell 17% of its local unit PT
Newmont Nusa Tenggara, or PTNNT or be found in default of its
contract.
Newmont confirmed in a separate statement that the arbitrators
had ruled the foreign shareholders in PTNNT - Newmont and minority
partner Sumitomo Corp. - had been found to be in default of
contract for failing to sell stakes in PTNNT on time. The company
said it is "committed" to meeting the new divestiture deadline set
by the arbitrators.
"We are currently reviewing the decision and look forward to
outlining a path forward with the government to implement the
arbitration panel's decision," said Richard O'Brien, President and
Chief Executive Officer.
Newmont has been overruled on both major issues on which it
sought arbitration - pledge agreements with its senior lenders on
shares in PTNNT and the source of funds to be used to buy stakes in
the local unit, which are scheduled for divestiture.
"The shares to be divested must be free and clear of pledge
(agreements), and the source of the funds to be used to buy those
shares is not PTNNT's business," Purnomo told a news
conference.
He said 10% of PTNNT must be sold to local governments in
Indonesia, and that the central government itself may purchase a
further 7% in the unit or may find another local buyer for the
stake before the deadline expires.
Purnomo said the arbitrators' decision was final and cannot be
appealed, adding that the arbitrators have ruled that Newmont must
pay all costs incurred during arbitration proceedings, within 30
days. He didn't elaborate.
Newmont originally filed for arbitration in 2007 to avoid being
found in default of its Contract of Work after missing a deadline
to sell 3% of PTNNT in 2006 and 7% of the unit in 2007, claiming
the government had blocked the sales.
It then filed for further arbitration last year claiming the
government was again blocking sales of the unit - including a
further 7% scheduled for divestiture in 2008 - claiming that a
pledge agreement between Newmont and its senior lenders in PTNNT
meant the shares couldn't be sold.
Newmont sought a ruling from the arbitrators that the share
pledges were legal and not an impediment to divestiture.
It had also protested a plan by Indonesian mining giant Bumi
Resources (BUMI.JK) to fund local governments' purchases of 31% of
PTNNT. It claimed Bumi should not be allowed to fund the purchases
and that Bumi's involvement may have led to disputes with the
government, in turn leading to Newmont missing its divestiture
deadlines.
Newmont Denies Government Can Revoke License
The government earlier said it can revoke Newmont's operating
license should the company fail to meet the deadline to divest the
stake in PTNNT.
However, the three international arbitrators overseeing the case
said the government could not revoke Newmont's operating license,
known as a Contract of Work, people familiar with the matter said
Tuesday.
Newmont also said in its statement Wednesday that the government
had not been given authority to revoke the license.
Purnomo didn't comment on this Wednesday. In an earlier
statement, Purnomo said that the ruling "sets a positive precedent
for the government to continue to take strong action against
foreign companies that do not fulfill their responsibilities but
simply abuse their privileges."
PTNNT operates the Batu Hijau copper and gold mine, on
Indonesia's Sumbawa island. It expects the mine to produce 455
million pounds of copper concentrate this year, up from 284 million
pounds in 2008, and 486,000 troy ounces of gold this year compared
to 269,000 ounces in 2008.
Under Newmont's 1986 contract with the Indonesian government, it
is required to sell 51% of PTNNT to local investors by 2010. A 27%
stake in PTNNT has already been sold to privately-held local firm
PT Pukuafu Indah as of late March.
-By Reuben Carder and Deden Sudrajat, Dow Jones Newswires; 62 21
3983 1277; Reuben.Carder@dowjones.com