Newmont divestment talks with govt end in deadlock

Ika Krismantari , The Jakarta Post , Jakarta | Sat, 02/23/2008 4:44 AM | Headlines

After almost eight hours of intense negotiations, the government failed to reach an agreement with PT Newmont Nusa Tenggara on the divestment of shares to local administrations.

Acting as a facilitator for the negotiations, Investment Coordinating Board chairman M. Lutfi said talks were deadlocked due to a "fundamental inability" on Newmont's side.

According to Lutfi, some shares in Newmont had already been used as collateral for US$1 billion worth of loans to support the company's operations.

"That difficulty came up about 10 minutes before the negotiations ended tonight," he said.

Newmont spokesperson Rubi W. Purnomo confirmed Lutfi's statement, but refused to provide more details.

"We will try to continue the negotiations over the weekend. Hopefully, we will be able to come up with a favorable solution for both of us by Monday," Rubi said.

Director General of Geology and Mineral Resources Simon Sembiring said he would report to the energy and mineral resources minister about the deadlocked talks.

The meeting was initially aimed at bridging differences between the government and Newmont over the company's mandatory divestment program, agreed to under a contract of work signed in 1986.

The contract says Newmont is required to sell 51 percent of its shares in phases through 2010, to either the central government, regional governments or firms owned by Indonesian nationals.

By the end of last year, the company was supposed to have sold off 10 percent of its shares, but failed to do so.

On Feb. 11, the government, through the Directorate General of Geology and Mineral Resources, issued a so-called default status for the company for breach of contract, while setting a new deadline of Feb. 22 for the 10 percent divestment.

Newmont refused the default status, saying it had carried out procedures for the divestment as required under its contract of work.

It blamed the failure to sell the stake as scheduled on prolonged negotiations with regional administrations.

Newmont's parent company, Newmont Mining Corp., one of the world's largest gold producers, was reported earlier as threatening to take the case to an arbitration tribunal.

During a conference call with analysts, as quoted by Reuters, Newmont Mining Corp. CEO Richard O'Brien denied the breach of contract accusation and said the company was working with government representatives to resolve the dispute.

"We're doing everything we can to get that done," he said. "I hope we can continue to work constructively to try to avoid a situation where we would otherwise have to invoke international arbitration to protect our interests at Batu Hijau."

O'Brien called that a "last resort" that he would prefer not to take. "I would say it is day-to-day as to what happens."

Denver-based Newmont has a 45 percent stake in the Batu Hijau mine, while a local unit of Japan's Sumitomo Corp. has a 35 percent share.

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