The Wall Street Journal-20080213-Indonesia Threatens to Cancel Newmont Mining Pact

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Indonesia Threatens to Cancel Newmont Mining Pact

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JAKARTA, Indonesia -- The Indonesian government has threatened to terminate Newmont Mining Corp.'s 30-year contract to run a huge copper and gold mine on Sumbawa Island unless the U.S. mining company divests itself of a 10% stake to local authorities.

Simon Sembiring, director general of mineral resources at Indonesia's Energy Ministry, said Newmont has until Feb. 22 to agree to unload the stake or face termination of its contract. Mr. Sembiring said the ministry sent a letter to Newmont on Monday informing it of the deadline.

Under terms of the 1986 contract, Newmont is obliged to sell a 51% stake to Indonesian owners in stages. The company has already sold a 20% shareholding to PT Pukuafu Indah, a local company. Newmont was supposed to sell an additional 3% stake in 2006 and 7% last year, but it missed the deadline amid protracted negotiations. "They have not stuck to the terms of the contract," Mr. Sembiring said.

Newmont spokesman Rubi Purnomo denied this, saying the company "was surprised and disappointed" by the government's threat to terminate the contract. Newmont offered to sell the central government a 3% stake for $109 million in 2006 and a 7% stake last year for $282 million, but the government didn't take up the offer, Mr. Purnomo said.