Local govts to team up with firms to buy Newmont shares

The Jakarta Post , Jakarta | Thu, 09/27/2007 3:29 PM | Business

The Jakarta Post, Jakarta

The West Nusa Tenggara provincial government and the Sumbawa and West Sumbawa regency governments will team up with a number of domestic firms to jointly buy a 10 percent stake in PT Newmont Nusa Tenggara (NNT).

Kontan reported Wednesday that the West Nusa Tenggara provincial administration and Sumbawa regency would establish a consortium with a local company, PT Bumi Resources, the country's biggest coal producer, to acquire a 7 percent stake, while West Sumbawa regency would collaborate with another local firm to buy the other 3 percent stake.

It is not clear yet what participating interests each company will have.

The plan to form consortiums was arrived at following the local governments' decision to reject NNT's offer of providing soft loans to pay for the shares.

The provincial and regency administrations have refused the offer of risk-free loans as such arrangements would prevent the local governments from becoming involved in NNT's management.

NNT, the operator of a copper and gold mine at Batu Hijau, West Nusa Tenggara (NTB), should have sold a 3 percent stake to local investors last year, and a further 7 percent this year, as part of the company's mandatory divestment program, under which the foreign shareholders of NNT must sell a minimum of 51 percent of its shares to local investors by 2010.

Under the program, NNT is required to first offer the shares to the central government. If this offer is rejected, the right to buy the shares automatically goes to the local administrations. Local companies are allowed to buy the shares only if both the central and local governments fail to purchase them.

The Energy and Mineral Resources Ministry's director general for geology and mineral resources, Simon Sembiring, said Wednesday that the central government had decided to not buy the shares due to budgetary constraints.

However, he added, the local governments had shown an interests in purchasing the shares, with the West Nusa Tenggara provincial administration and Sumbawa regency eyeing the 7 percent stake, and West Sumbawa Regency the other 3 percent stake.

To speed up the divestment of the 3 percent and 7 percent stakes, NNT had offered no-risk bridging loans to help the local administrations pay for the shares.

The loans could have been used to pay for the 3 percent stake worth $109 million, and the other seven percent stake worth $282 million. The local governments would then repay the loans out of the royalties they would receive from NNT.

Under the soft loan mechanism, the local governments would also have been assured of an annual cash flow of US$333,333 for each percentage of their ownership in the operation.

The local governments, however, refused the offer, saying they preferred to team up with local companies to buy the stakes.

NNT spokesman Rubi Purnomo told The Jakarta Post that the plan by the local governments to establish consortiums with third parties meant that the divestment process would now be based on a business-to-business approach, meaning that there would have to be more negotiations to determine the price of the shares to be divested.

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