Newmont says issue on loan collateral won't affect divestment

U.S mining giant Newmont Mining Corporation has acknowledged that Newmont Indonesia Limited (NIL), Nusa Tenggara Mining Corporation (NTMC) and their local partner PT Pukuafu Indah have pledged their entire shares in PT Newmont Nusa Tenggara (PT NNT) as security for the company's US$1 billion loan to a number of foreign banks.

Newmont?s Chief Counsel, Blake Rhodes said that using their shares as the collateral for the loans, which were obtained several years ago, was not against the Indonesian law.

In fact, the Ministry of Energy and Mineral Resources issued a letter on Oct. 30, 1997 approving the pledging of the shares as the security for the loan, he said in statement on Sunday.

According to Rhodes, the loans were used to finance the development of the Batu Hijau mine in West Sumbawa, West Nusa Tenggara which cost the company about US$2 billion.

He assured that the loan collateral issue would not pose a problem in the divestment process of NNT's shares. "If the local government buy the company's shares as part of the divestment program, their shares should be also be pledged as the loan security as required by banks in the loan agreement."

Rhodes, however, said that the pledging of their shares would not in any way affect their voting rights or the amount of dividends that they might receive from NNT. In addition, he said, that the shares would be returned back to shareholders when all the loans have been repaid.

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.

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)