Local gov't gets 3% stake in Newmont mineJakarta, August 10, 2006 (Sumbawa News)- PT Newmont Nusa Tenggara, which runs the only productive gold mine in Indonesia for Newmont Mining Corp., the world's second-largest gold miner, is divesting a 3 percent stake of the company. The Batu Hijau mine is one of the largest gold-copper mines in the world.
A local district regent is acquiring it on behalf of the people. "We have discussed with the Department of Mines and with Newmont that we will buy," said Zulkifli Muhadli, 48, in an interview on Aug. 1 in the town of Taliwang, Sumbawa Barat district. "We will try to pay using a loan agreement, repaid by dividends."
The 3 percent stake in PT Newmont Nusa Tenggara is valued at about Rp 1 trillion (US$110 million), he estimates. Batu Hijau, which produces copper and gold, contributes 95 percent of his region's gross domestic product, Zulkifli said. Agriculture, animal husbandry and tourism make up the rest.
Under Indonesian law, Denver-based Newmont Mining and foreign partners have to divest control of the mine over a long period of time, usually by selling shares to the government. Newmont Indonesia Ltd., Newmont Mining's local unit, has a 45 percent stake in the venture, among the most valuable assets in the Southeast Asian nation. Other valuable mining properties on the island are held by Southern Arc Minerals Inc. of Canada.
Sumitomo Metal Mining Corp.. Japan's second-largest copper smelter, controls 35 percent and a local investor has the balance, purchased in the first divestment.
Sumbawa Barat, or West Sumbawa district, was created in 2004 following the end of 32 years of military dictatorship in 1998 as more political power in the country was transferred from the central government to the regions. Comprising the western third of Sumbawa island, it has a population of 170.000 and is about 700 miles (1.120 kilometers) east of the capital, Jakarta.
The mine, located in Sumbawa's southwestern corner, is valued at about $3.6 billion, said Noke Kiroyan, president-director of PT Newmont Pacific Nusantara, a wholly owned unit of Newmont Mining and the services company for the Indonesian operations.
Newmont Nusa Tenggara recently offered the latest divestment to the central government, which has the first right to the stake, Kiroyan said in an interview in Jakarta on July 24. "The government has to respond on whether they are interested in the shares themselves or not," Kiroyan said.
The district can make a bid for the stake, and has approached the Ministry of Energy and Mineral Resources, said Zulkifli, a teacher who's been chairman of a local Islamic boarding school since 1984, and who helped found the Cordova University in Taliwang, the capital of Sumbawa Barat, in 2004.
The regent added that his government is eying to similarly acquiring 40% of Southern Arc Minerals, the Canadian-based mining firm, after the regional office of mines and energy confirmed to him the company had discovered a large gold deposit on the island adjacent to the Batu Hijau mine following completion of its recent drilling program. Contract of Work negotiations between Southern Arc and the Indonesian government are pending.