The Indonesian government will sue PT Newmont Nusa Tenggara (NNT) in an international court of arbitration for failing to follow local divestment laws, Energy Minister Purnomo Yusgiantoro said Monday. "As a big sovereign country, Indonesia is taking the arbitration option because Newmont has not displayed good faith," Yusgiantoro told reporters.
He said if the court of arbitration rules in favour of a letter of default issued by the Indonesian government on February 11, NNT's contract of work to mine copper and gold on Sumbawa island could be cancelled. "All these steps and efforts are within the agreement set out in the contract of work. We regret that we have to resort to this action but this is the best way to ensure that the matter is decided through international arbitration," said Yusgiantoro.
According to the contract of work signed on December 2, 1986, NNT's foreign owners were required to sell part of their stake in NNT to local parties from 2006. On February 11 this year, the government declared that the joint venture between Newmont Mining Corp and Sumitomo Corp that owns NNT, known a Nusa Tenggara Partnership, had defaulted on the agreement by not reducing its 80 percent stake in the company. Indonesian company PT Pukuafu Indah holds the remaining 20 percent.
The government had set a February 22 deadline for the sale of part of Nusa Tenggara partnership's stake, extending it again to February 25 and March 3. According to the contract, foreign ownership in NNT must be reduced to not more than 49 percent by 2010.
The first divestment of a 3 percent stake was originally scheduled for 2006 and the second sale of 7 percent was slated for 2007. The next divestment of a further 7 percent should have been done this month. A further 7 percent is scheduled be sold in 2009 and another 7 percent in 2010. NNT paid 2.29 trillion rupiah (251.9 million dollars) to the Indonesian government in 2007 in the form of taxes and royalties, up from 1.3 trillion rupiah paid in 2006.