Government will wait for report in Newmont saga, Purnomo says

Ika Krismantari , The Jakarta Post , Jakarta | Thu, 02/21/2008 12:08 PM | Business

The government may back down on its earlier threat to terminate its contract with PT Newmont Nusa Tenggara, as it wants to wait for a team currently conducting a study on the issue.

Energy and Mineral Resources Minister Purnomo Yusgiantoro said Wednesday the government would first wait for the results of a report from the fact-finding team sent to investigate the stalled divestment program, before making a decision on the contract.

"I will not be careless with this (and) according to the bureaucratic norm, I need to report to my boss before making any decision.

"Therefore, the decision will be made at a Cabinet meeting," Purnomo said at a hearing with the House of Representatives.

Purnomo added that the team might conduct the study until next week, exceeding the government's deadline of Feb. 22.

Previously, the Directorate General of Geology and Mineral Resources had given Newmont a default status for failing to divest 10 percent of its stake by the end of 2007, as scheduled under the company's gradual divestment program.

In its letter sent Feb. 11, the directorate general warned the company to complete the divestment process within 11 days, or the office would recommend its contract be terminated.

A director general at the ministry also said that the termination would take immediate effect as of Feb. 22.

However, Purnomo said it was a difficult decision to implement, since based its the contract of work, the company is allowed up to 180 days to settle the divestment from the day it was given a warning.

Newmont insists it has followed all existing regulations and that the delayed divestment was due to prolonged negotiations with the local governments where the mines are located.

The company is now considering taking the dispute to an arbitration tribunal.

Under the contract, when a dispute between a company and the government is brought to arbitration, the government can not terminate the contract before a verdict has been reached.

Under a 1986 contract, the company is required to divest a 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, he company must finalize the sale of 51 percent of its stake.

The House commission VII which oversees energy and mineral resources had recommended the government be firm with Newmont.

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