Government declares 'default' on Newmont, threatens to revoke its contract

The government has declared a "default" status for copper and gold miner PT Newmont Nusa Tenggara (NNT), the Indonesian unit of U.S. mining giant Newmont Corp., because the company is still unable to divest 10 percent of its shares to the government or parties appointed by the government.

?Honestly, we should have long issued the status. We continue striving to show goodwill by negotiating, discussing and compromising to reach the best solution to all parties. Yet, Newmont did not show goodwill, intentionally ignoring its obligation,? Director General of Minerals and Coal Simon Sembiring said on Monday in Jakarta.

Simon said that NNT has been given until Feb. 22, 2008, to complete the divestment process.

"This afternoon I have sent them a note of default. I have given them until Feb. 22. If they still fail to heed this warning, the government will exercise its right of canceling the contract of work with NNT unilaterally," he said.

He said that before Feb. 22, NNT would have to complete meeting the agreement on the sales of 3 percent shares to the West Sumbawa regency administration and 7 percent to the West Nusa Tenggara provincial administration.

Meanwhile, NNT?s spokesman Rubi W Purnomo said that its divestment process had been going on properly, and therefore was shocked to learn that it had been declared in default status.

"We are shocked to receive the note of default," he was quoted as saying by Antara news agency.

He said that the legal division of NNT was studying the default note.

NNT, which obtained its contract of works to operate a copper and gold mine in Batu Hijau, West Nusa Tenggara in 1986, is required to divest up to 51 percent of its shares to the government or Indonesian companies by 2010. By the end of 2007, the company should divest 10 percent of its shares as part of the mandatory divestment program.

Currently, NNT?s shareholders are Newmont Mining Corp (45 percent), local company PT Pukuafu Indah (PI) which controls 20 percent and a consortium led by?s Sumitomo (35 percent). (godang)