GOVT ADVISED TO ACQUIRE OVER 20 PCT OF NEWMONT STAKES

By Andi Abdussalam

Jakarta, April 27 (ANTARA) - The Indonesian government on Monday was urged to acquire over 20 percent stakes in PT Newmont Nusa Tenggara (NNT), or more than the mandatory 17 percent ruled by an international arbitration court last month.

        "The government should acquire more than 20 percent of the shares because if it buys less than 20 percent it would only be able to place one representative in the board of commissioners so that its supervisory power would be weak," Muhammad Said Didu, secretary of the Ministry of State Enterprises (BUMN) said here on Monday.

        The Indonesian government and NNT, the local unit of giant Newmont Mining Corp., are currently negotiating the divestment of 17 percent of its shares based on the decision of the international arbitration court on March 31, 2009.

        Based on a 1986 contract, the company is required to gradually sell a total of 31 percent of its stake to the government or local parties it appoints. The law requires a foreign company in the mining sector to transfer 51 percent of its shares to the government or local companies after five years of its commercial operation.

But since PT Pukuafu Indah, a local company, has owned 20 stake in it, NNT is required to divest only 31 percent.

        The Indonesian government and NNT, which operates the Batu Hijau mine, Indonesia's second-largest copper mine, located in Nusa Tenggara, have gone through the international arbitration procedure following a dispute on how to implement the divestment scheme.

        The court ruled Newmont must sell a mandatory 17 percent stake in PT Newmont Nusa Tenggara (NTT) to the government within 180 days.

        The 17 percent consisted of three percent shares in 2006, seven percent stake in 2007 and seven percent in 2008.

        According to Siad Didu, the government purchase of NNT shares should not be limited to 17 percent based on the decision of the international arbitration as it would only weaken the government position in the board of commissioners.

        The government should look at the NNT divestment comprehensively, and adjust it to the coal and mineral resources law where state companies should get priorities in the exploitation of mining resources in Indonesia.

        As regards, a scenario should be set which enables the government or a state-owned company to acquire the stake not partially but in a comprehensive scale with a look for a long term mining exploitation.

        In order to implement the divestment, the government has set up a team in charge of calculating NNT's share values. Earlier reports said that the mandatory 17 percent shares consisted of three percent stake in 2006 valued at US$109 million with assets worth US$3.63 billion.

        The remaining 14 percent included seven percent stake in 2007 worth US$282 million with assets accounting for US$4.03 billion and seven percent in 2008 valued at US$426 million with assets accounting for US$6.09 billion.

        In the meantime, foreign stakeholders in NNT have claimed the company has assets worth a total of US$4.9 billion.

        Mineral, Coal and Geothermal Affairs Director General Bambang Setiawan said after a meeting with the NNT management at his office the government would carry out a verification of the value of the company's assets as claimed by its foreign shareholders.

        With assets worth US$4.9 billion, the price of seven percent of the stake in the divestment of the firm in 2009 would reach US$348 million, he said.

        NNT president director Martiono Hadianto was reluctant to comment on the price of his firm's assets mentioned by Setiawan. Martiono said price calculation should not be based merely on the present assumption but also that of the future projection. Apart from commodity prices, other assumptions such as inflation and cost factors should also be taken into account.

        Mining observer Pri Agung Rakhamanto said the claim saying the value of PT Newmont Nusa Tenggara (NNT)'s assets reached US$4.9 billion was too high.

        "The value of NNT assets is not that high," Rakhmanto who is also executive director of ReforMiner Institute, said here on Monday.

        He said that based on the annual report of NNT in 2008, the value of total assets of Newmont Mining Corporation (NMC) --the holding company of NNT-- was only US$15.839 billion. The value of NMC's assets in Indonesia, including that of NNT and PT Newmont Minahasa Raya (NMR), is about 17 percent (of the US$15.839 billion).

        "With that reference, the combined value of NNT and NMR's assets is only about US$2.693 billion," Rakhmanto said. Thus, it is possible for the government to negotiate the divestment price of NNT stake for 2006 and 2007 because the agreement already reached has not yet been executed.

        Minister for State Enterprises (BUMN) Sofyan Djalil said he would meet with Energy and Mineral Resources (ESDM) Minister Purnomo Yusgiantoro to discuss further the divestment of NNT.

        "We will hold a technical team first with the ESDM ministry and we hoped that there would be options to be recommended by the meeting. We will study whether a state company would be required to acquire the firm or the government would directly purchase it," he said.

        Actually, there had been a state company which is ready to purchase the mining firm. The BUMN ministry, he said, is also studying the possibility of forming a consortium which would involve the local government in the mechanism of acquiring the NNT stake.***2*** (T.A014/A/HAJM/A/S012) 22:00/... ) (T.A014/A/A014/A/S012) 27-04-2009 22:20:23