Govt, Newmont talk on divestment program deadlocked

After almost eight hours of intense negotiations, the government failed to reach an agreement with PT Newmont Nusa Tenggara (NNT), the Indonesian unit of US mining giant Newmont Corp. on the divestment of shares to local administrations.

Acting as a facilitator for the negotiations, Investment Coordinating Board chairman M. Lutfi said talks were deadlocked due to a ?fundamental inability? on NNT?s side.

According to Lutfi, some shares in NNT had already been used as collateral for US$1 billion worth of loans to support the company?s operations. ?That difficulty came up about 10 minutes before the negotiations ended tonight,? he said.

Director General of Geology and Mineral Resources Simon Sembiring said he would report to Minister of Energy and Mineral Resources Purnomo Yusgiantoro about the deadlocked talks.

?What I am going to do is to report the results of the meeting. It is for the minister to decide whether to terminate (NNT's contract)," Simon said.

NNT's spokesperson Rubi W. Purnomo confirmed Lutfi?s statement, but refused to provide more details.

?There was no agreement yet. We shall continue the talks. The arbitration option is still there, but we have yet to exercise it," he said.

He reiterated that NNT had not defaulted on its contracts because it sold 2 percent of a planned 10 percent to the Sumbawa regency government on Jan. 28.

The meeting was initially aimed at bridging differences between the government and NNT over the company?s mandatory divestment program, agreed to under a contract of work signed in 1986.

The government has declared a "default" status for NNT and threatened to revoke its contract because it is still unable to divest 10 percent of its shares to the government or parties appointed by the government.

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

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.

Of the 10 percent stake, West Sumbawa regency was planning to buy 3 percent, while Nusa Tenggara provincial government and Sumbawa regency to jointly purchase the remaining 7 percent.

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). (Bernard)