Bupati Minahasa Agrees to Withdraw Suit if Newmont Pays Outstanding Tax and Fines

JAKARTA, APRIL 19, 2000-The Bupati Minahasa announced today he will withdraw a controversial suit against PT Newmont Minahasa Raya filed last year by Kabupaten Minahasa.

At a meeting with the Department of Mines and Energy last night Dolfie Tanor, the Bupati of the Minahasa Regency in North Sulawesi, said he will withdraw the suit provided Newmont Minahasa Raya complies with the findings of the department's verification team and pays taxes and interest it owes on Galian C material it used for community roads.

"We believe our action upholds the effort we have made to protect the interests of the people of Minahasa," Tanor said. "The company will pay the taxes and fines it owes on material an independent audit showed they used. At the same time, the "waste" they move in order to get access to the ore they mine will not be taxed."

Tanor said the outstanding taxes and interest are expected to be in the range of US$500,000.

Newmont welcomed the Bupati's action. "As a contractor to the Indonesian government," said Richard Ness, president director of NMR, "Newmont has always said it would abide by the findings of the Department of Mines-initiated Verification Team regarding overburden. We believe this is fully in line with our contract with the Indonesian government and of course we will comply. At the same time, we believe Bupati Tanor's acknowledgement upholds the supremacy of the Contract of Work."

At issue is a suit filed by the Bupati in September of last year. The suit, which was for a total of US$8.2 million, alleged the company owed approximately US$2.8 million in taxes on "overburden" used by the mine, as well as a variety of penalties and compensation. The legal advisors to the Bupati argued that the mine used the "overburden" - which is topsoil and rock removed in order to get access to the ore that has gold in it - when it was moved and put into a dump.

But NMR said the overburden had no economic value and was being moved only to access the ore. It said the overburden would later be moved back as part of the company's program to return the mined area to its original state.

Despite lengthy discussions, the two parties were unable to agree on the overburden issue. The Minister of Mines and Energy, Bambang Yudhoyono, entered the dispute when he confirmed that the Contract of Work signed by Newmont did not allow for local taxes on overburden. However, in the process, it became clear that a rigorous, independent audit of exactly how waste rock was treated would be useful and all parties agreed to honor the findings of an independent Verification Team initiated by the Minister of Mines.

The team was comprised of representatives of the PEMDA Minahasa, regional office of public works, the regional office of the Department of Mines and Energy, the central office of the Department of Mines and Energy and the company. The team spent two weeks in March, 2000, investigating the situation. Among their findings was that NMR had used some overburden to repair public roads as part of a community-development project. Newmont has agreed to pay tax and associated penalties and interest on this material. (*)