Finance Minister Agus Martowardojo has officially issued a letter to notify NNT management and the Energy and Mineral Resources Ministry of his ministry’s plan to purchase Newmont shares despite a threat from the local regency administration to put a halt to the mining company’s operations if the central government went ahead with its planned purchase.

“The government has stated that it will purchase 7 percent on NNT shares through the Government Investment Center [PIP]. The purchase is the final phase of NNT’s share divestment obligation in accordance with the 1986 working contract,” Finance Ministry Director General for State Assets Hadiyanto said in a statement released Sunday.

The 1986 contract stipulates that foreign ownership of the company needed to be gradually reduced to 49 percent after 10 years of commercial operations under the so-called mandatory divestment program.

As 20 percent of the company’s shares are already held by local investors PT Pukuafu Indah (17.8 percent) and PT Indonesia Masbaga Investama (2.2 percent), foreign shareholders Newmont Indonesia and Sumitomo need only to divest 31 percent, instead of 51 percent as stipulated in the contract.

Newmont and Sumitomo have so far divested 24 percent of their shares to a joint venture set up by PT Multicapital, a business unit of mining giant PT Bumi Resources, and a holding company set up by the West Nusa Tenggara provincial administration, PT Multi Daerah Bersaing (MBD).

The West Sumbaawa regency administration in West Nusa Tenggara has asked the central government to allow it and PT Multicapital to purchase the remaining shares so locals would have more of a say in the management and operation of the mine.

The House of Representatives’ Commission XI overseeing financial affairs supported the local administration’s request in the hope that the increase in the local government’s shares in the mining company would allow it to develop Newmont operations to support the local economy.

“If the government remains adamant in purchasing the 7 percent shares, the members of the commission will question the government’s reasoning,” Achsanul Qosasi, the deputy chairman of the commission, said.

He said the commission would ask the Energy and Mineral Resources Ministry to extend the divestment deadline from April 18 so legislators would have time to probe the government’s motives.

“Currently, the PIP is finalizing the terms and conditions of the NNT shares purchase that includes, among other things, payment-related points, rights and obligations of the parties and other technical points pertaining to the sale,” Hadiyanto said.

According to the 1986 contract, the central government has the right to buy shares that need to be divested.

If it does not want to use that right it can appoint the local administration to do so.

“If the PIP funds the purchase, we will summon PIP officials to explain their business plan,” Achsanul, a Democratic Party lawmaker, said.

Hadiyanto said that by owning a stake in NNT, the government aimed to more closely monitor the implementation of the 1986 working contract to “provide a more conducive investment climate” and “contribute in adding value and governance” in the firm.

“The government’s presence as an NNT stakeholder is based on broader state interests, which
is the central government’s commitment in building governance and better supervision in mineral business practices in Indonesia,” Hadiyanto explained.

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