THE BUMI FACTOR Newmont feels Batu Hijau copper gold project...

THE BUMI FACTOR
Newmont feels Batu Hijau copper gold project divestment being undermined

Newmont has asked for a time extension to sell 31 percent of the big Batu Hijau copper gold project to local government interests as it feels the sale process is being compromised by local company PT Bumi Resources.
Author: Newmont has asked for a time extension to sell 31 percent of the big Batu Hijau copper gold project to local government interests as it feels the sale process is being compromised by local company PT Bumi Resources.
Posted: Saturday , 01 Mar 2008

NEW YORK (Reuters) -

Newmont Mining Corp asked Indonesia on Friday to extend a deadline for selling shares in its local unit, even as it charged an Indonesian company was trying to "undermine" the divestiture process and grab a stake in Newmont's gold and copper mine.

"It would appear the integrity of the process has been undermined by private Indonesian business," said Blake Rhodes, Newmont's chief counsel, who just returned from Indonesia.

He told Reuters in a telephone interview from Denver that Newmont had asked for a one-month extension beyond the March 3 date Jakarta gave the company in a recent default letter. The local unit, PT Newmont Nusa Tenggara, which runs the Batu Hijau copper and gold mine in Sumbawa, is required to sell 51 percent of its share to local investors under its contract of work.

It has already sold a 20-percent stake to a local company, PT Pukuafu Indah, and has agreed to sell 31 percent gradually by 2010.

But the situation was complicated this week by the revelation that PT Bumi Resources Tbk, an Indonesian coal company, agreed last year with three local governments in Indonesia to buy the 31 percent of Newmont's local unit.

Newmont spokesman Omar Jabara said it appeared that under a Memorandum of Understanding (MoU), which was uncovered by the Financial Times newspaper and seen by Reuters, the governments would buy the shares but turn them over to Bumi.

"The MoU is clear evidence of an attempt to short-circuit the process," said Jabara, who pointed out that Newmont's contract calls for divestment to local governments first, and only if that failed, for private companies then to enter the bidding.

Chief Counsel Rhodes said now that the MoU has come to light, "there is a strong basis for an extension.

"The best-case scenario would be if the government withdraws its Feb 11 default declaration. The government now understands that (local) governments are not buying, but a private business."

The least Jakarta could do would be to give Newmont a further extension so both sides could find out what is going on, Rhodes said. "We don't mind selling to the (local) governments, but if it is a front for private business, that is inappropriate."

Rhodes said Newmont has had no discussions with Bumi or with two of the three local authorities party to the MoU. Indications from the head of the third are "that he would like his government to withdraw from the consortium with Bumi," Rhodes said.

Rhodes said the presence of Bumi in the process is "problematic. We have to divest in such a way that the shares remain in Indonesian hands. We have concerns that Bumi may not be majority Indonesian owned."

Bumi could not be reached for comment on Friday.

Newmont's Chief Financial Officer Russell Ball is expected to meet on Monday with Indonesian government officials.

Separately, Purnomo Yusgiantoro, Indonesia's energy and mineral resources minister, told reporters in Jakarta that the government would wait for the March 3 deadline.

"We have asked Newmont to talk with the local government. In the contract, the maximum deadline was 180 days, but we don't have to go by that," Yusgiantoro said. (Additional reporting by Mita Valina Liem and Yayat Supriatna in Indonesia, editing by Gerald E. McCormick)