Central government insists to buy Newmont?s stake

The government is going ahead with its plan to purchase a 7 percent stake in Newmont Nusa Tenggara (NNT) despite threats from the local administration that it will close the company?s gold mine if it is not allowed to buy the stake, The Jakarta Post reported on Friday.

Finance Minister Agus Martowardojo said Thursday that the government would complete the purchase of the company?s shares in April. ?Legal issues and other commercial issues are [underway]. Of course we will ask for a time extension of one month,? he said.

According to NNT?s contract signed in 1986, foreign ownership of the company needs to be gradually reduced to 49 percent after 10 years of commercial operations under the so-called mandatory divestment program.

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

The central government has decided to buy the remaining 7 percent stake on its own instead of allowing the local government the opportunity as in previous years. This move has angered the local administration.

The local administration asked the central government to allow its joint venture with PT Multicapital to purchase the shares so that locals would have more of a say in the management and operation of the mining company.

On Wednesday, the West Sumbawa regency administration threatened to put a halt to the mining company?s operations if Jakarta continued with its plan for the purchase.

?If the central government has ownership in Newmont, I hope it will give added value to the company. We believe that all of the principles of good governance and healthy management can be implemented,? the finance minister said, adding that the central government would also continue efforts to push NNT to go public so that locals would have a chance to buy shares in the company.

Under the mandatory divestment program, 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 government to do so. The price of the shares to be sold under the program is jointly determined by the government and the company?s shareholders.

The remaining 7 percent that must be divested this month is fixed at US$271.6 million.

PT NNT?s current shareholders are Newmont Indonesia Limited (31.5 percent), Sumitomo subsidiary Nusa Tenggara Mining Corporation (24.5 percent), domestic mining firm PT Pukuafu Indah (17.8 percent), PT Multi Daerah Bersaing (24 percent and PT Indonesia Masbaga Investama (2.2 percent). (*)