Newmont readies for arbitration battle

The Jakarta Post ,  Jakarta   |  Sat, 02/16/2008 12:42 PM  |  Business

A local unit of U.S.-based Newmont Mining Corp. is most likely to take a high-profile divestment dispute with the government to an arbitration tribunal before Feb. 22 -- the deadline for the firm to sell 10 percent of its stake.

"We haven't set a date yet to start the arbitration process and we see it not as a battle, but a mechanism to run a fair divestment process transparently," Newmont Mining Corp. vice president and CFO Russell Ball said Friday.

According to Ball, PT Newmont Nusa Tenggara expects an arbitration process to provide more time for the company to receive an explanation from the government on which points in the contract have been violated.

"It's important to realize if we follow the arbitration process, it won't stop us negotiating further with the government, local administrations and the Indonesia Investment Coordinating Board (BKPM)," he said.

Ball's remarks form the latest twist in the company's divestment saga, which started earlier this week when the government sent a so-called default letter to the company, saying it had failed to divest 10 percent of its stake before the end of 2007.

Under a 1986 contract, the company is required to sell 3 percent of its stake by the end of 2006 and a further 7 percent by the end of 2007, as part of its divestment program. By the end of 2010, according to the contract, the company must finalize the sale of 51 percent of its stake.

The government in the letter also set the Feb. 22 deadline for the firm to finalize the process, failing which the contract will be terminated.

However, the company insisted it had complied with all regulations in the divestment process, and the delay was mainly caused by prolonged negotiations with the government.

No agreements were reached Thursday during a meeting between the company and the government to clarify the issue, with the latter sticking to its deadline.

Ball said the 11-day deadline was too short.

"Sometimes the negotiation does not go the right way. For example, we sent our offering letter to West Nusa Tenggara province on Nov. 30 last year and we haven't heard anything from them since," he said.

"We want to negotiate soon but we can't negotiate by ourselves."

Ball said the company was considering other options in the divestment process.

"We are also still looking at other options to offer this 7 percent stake, including selling them to the Indonesian stock market, if the government is still not interested."

The contract stipulates the stake must first be offered to the central government or local administration. If they reject the offer, the company has the option to sell it to a local company whose majority stake is owned by Indonesians.

Ball said the company's intention was to achieve a win-win solution.

"Whatever the decision, be it arbitration or conciliation, it won't stop us mining. We want to achieve win-win solutions, not only for the stakeholders but also for around 10,000 workers in East Nusa Tenggara," he said. (rff)

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