Govt told to terminate Newmont contract

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Mon, 02/25/2008 12:02 PM  |  Headlines

A recommendation to terminate PT Newmont Nusa Tenggara's mining contract has been issued to the Energy and Mineral Resources Minister Purnomo Yusgiantoro following a deadlock in Friday's negotiations over its mandatory divestment program.

The ministry's Director-General for Geology and Mineral Resources Simon Sembiring said on Sunday he had told the minister about the collapsed negotiation and recommended a revocation of the firm's permit to operate a gold and copper mine in Batu Hijau, West Nusa Tenggara.

"I have given the recommendation to the minister verbally and an official letter will soon follow," he said.

Simon said the recommendation was inevitable as the firm could not meet the Feb. 22 deadline to divest a 10 percent stake, as mandated under the so-called default letter sent to the company on Feb. 10.

The default status was given in the first place as the firm failed to sell the 10 percent stake by the end of 2007 as required under the 1986 contract.

The contract requires the firm to gradually sell up to a 51 percent stake by 2010.

Blake M. Rhodes, vice president and chief counsel of Newmont Mining Corp., which holds 45 percent of NTT, said earlier Sunday despite Friday's deadlock, Newmont was still upbeat about the settlement of the divestment process.

"We are hoping that tomorrow (Monday) we can have further discussions with whoever wants to speak to us, whether it is the minister, the director general, local governments and their representatives, in order to resolve the issue," Blake told a media gathering.

NTT spokesperson Rubi W. Purnomo said however that by Sunday afternoon the company had not received any confirmation of another meeting with government officials for Monday.

Blake said Friday's talks included the government's disapproval of Newmont's proposal to conduct a due diligence process before going ahead with the divestment plan.

Blake said the due diligence process was aimed at getting information on the new shareholders' status and origins and where they had secured financial funds.

The company said it had an obligation to give that information to a group of banks that had provided US$1 billion in loans for investment in Batu Hijau.

He also said the company's lending transactions had gained prior approvals from the central bank, the Energy and Mineral Resources Ministry, and the Investment Coordinating Board (BKPM).

Despite the differences, Blake said he was hopeful the company would be able to bridge disagreements with the government.

He said he hoped the company would not have to challenge any contract termination.

"If we do go to arbitration, it will only be done as a defensive mechanism to protect our interests as required under the contract of work," he said.

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