Newmont seeks to save contract: Report

US gold producer Newmont Mining is seeking ways to avoid having its contract of work terminated by the government if it fails to divest a 17 percent stake in its local unit, PT Newmont Nusa Tenggara (NNT), a government attorney told the Jakarta Globe on Sunday.

Newmont, which appears uncertain about meeting the arbitration panel?s ruling, is now proposing to designate an escrow agent to handle the stake divestiture, said Joseph Suardi Sabda, the attorney involved in Newmont?s arbitration case.

?With the designate escrow agent, they seem want to rule out the responsibility to divest if it fails to meet the 180-day deadline,? he said. ?The arbitration panel gave the government until May 20 to respond to the escrow proposal.?

The panel gave Newmont 45 days, or until this Friday, to ask for clarification on its ruling. In addition to the escrow agent proposal, the company has questioned the divestiture process, including whether it would be blamed if it missed the dateline because it could not reach an agreement with the government on the stake price, or if the government could not appoint a buyer for the stake, the attorney said.

However, following the government?s move to register the case with the state civil judiciary on April 20, the arbitration ruling now has to comply with Indonesian law, he said. ?It means that the government won?t allow any exceptions to the arbitration ruling, including on the matter of the escrow agent,? he added.

The government and Newmont met again on Friday, but failed to reach any agreement on the stake price.

Bambang Setiawan, director general of mineral, coal and geothermal energy at the Ministry of Energy and Mineral Resources, said the government on Friday proposed a single price for the value of Newmont?s assets in 2008 and 2009. But the sides have yet to reach any decisions, he said.

An international arbitration panel in Geneva on March 31 ordered Newmont to honor its obligation to sell a 17 percent stake in NNT to the government or its designee within 180 days in three stages ? 3 percent in 2006 and 7 percent in both 2007 and 2008 ? or face the possible termination of its contract of work.

Now, Newmont and Japan?s Sumitomo, which holds 35 percent of the NNT-operated Batu Hijau copper and gold mine, by 2010 must divest 51 percent of their shares in the project on the island of Sumbawa, West Nusa Tenggara province.

As 20 percent of the stake is already owned by a local company, PT Pakuafu Indah, Newmont and Sumitomo have to divest just 31 percent of their stake before 2010. (*)