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The government has warned PT Newmont Nusa Tenggara to comply
with its mandatory divestment program or lose its mining contract. The
Energy and Mineral Resources Ministry's director general for geology
and mineral resources, Simon Sembiring, said Friday that the government
would issue a warning to the company at the end of this month if it
still refused to press ahead with the mandatory share sale.
"If the company does not heed the warning within 180 days, we will send
another warning," he told The Jakarta Post . He refused to say what
sanctions would be imposed on the company if it continued to ignore the
warnings. However, in an interview with Antara news agency, he said
that the government would immediately terminate Newmont's mining
contract in Sumbawa, West Nusa Tenggara, if the firm failed to heed the
government's warnings.
The conflict between the ministry and Newmont has arisen due to their
differing perceptions over the divestment of a 10 percent stake in the
company to local investors. Under its contract of work, Newmont is
required to sell up to 51 percent of its shares to local investors by
2010. According to the divestment schedule set out in the contract of
work, the company is required to sell a 3 percent stake to local
investors in 2006, and a 7 percent stake in 2007.
Based on previous negotiations between the government and Newmont, the
two parties had agreed to put a price tag of US$109 million on the 3
percent stake and $282 million on the 7 percent stake. However, Newmont
now refuses to employ the government-set prices in selling the 10
percent stake as the buyers comprise not only local governments as
earlier planned, but also private companies. With the involvement of
the private companies in the deal, the prices should be based on
commercial negotiations, not on the prices fixed by the government,
Newmont says.
According to reports, the West Sumbawa regency is to team up with PT
Tambang Sumbawa Barat to buy the three percent stake, while the West
Nusa Tenggara provincial government and Sumbawa regency administration
have designated PT Bumi Sumbawa Mas to acquire the other seven percent
stake. The ministry has insisted that the price of the entire 10
percent stake should continue to be based on the government-set price
tags. With 2007 almost at an end and no progress being made, it appears
likely that the company will miss the latest deadline.
Newmont, which operates a copper and gold mine at Batu Hijau, West
Sumbawa, is controlled by United States-based Newmont Corporation and
Japan's Sumitomo Metal Mining Corp. Meanwhile, PT Pakuafu Indah, owned
by Indonesian businessman Jusuf Merukh, owns a 20 percent stake in the
firm.
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