2nd UPDATE: Indonesia Government Aims To Buy 21% Of Newmont Unit

The Indonesian government aims to buy a 21% stake in Newmont Mining Corp.'s (NEM) local unit that is due for divestiture, possibly as early as this year, the minister for state-owned enterprises' affairs said.

"If we can legally acquire that much (of the unit), we will take it," Sofyan Djalil told reporters Tuesday.

He added that the Finance Ministry is reviewing possible methods by which the government can buy the stake in PT Newmont Nusa Tenggara, which operates Batu Hijau, one of the world's largest copper and gold mines, located on Indonesia's Sumbawa island.

Meanwhile, a spokesman for Newmont said the company is working to nullify a pledge agreement on the unit, known as PTNNT, which the Indonesian government has said is an impediment to the divestiture and over which the two parties sought arbitration last year.

"The foreign shareholders of PTNNT are working together...to try and get the (shares) released by the senior lenders. We're trying our best to make it happen," Rubi Purnomo, public relations manager at Newmont Indonesia, told Dow Jones Newswires.

Purnomo was unable to comment on progress in removing the pledges, or on whether Newmont might have to pay the senior lenders or pledge other assets in place of the PTNNT shares.

Under its contract of work with the Indonesian government, Newmont was scheduled to sell 3% of the local unit to Indonesian parties in 2006, and a further 7% every subsequent year to 2010.

The 3% stake due for divestiture in 2006, and 7% in 2007, are earmarked for local governments near the mine site, with the central government holding first right of refusal over the remaining 21% to be divested by next year.

The government "will exercise our rights up to 2010," Djalil said. He said the government has requested that Newmont this year divest its 7% due in 2010.

Djalil didn't elaborate on a time frame for the purchases. However, international arbitrators on March 31 gave Newmont a 180 day deadline to complete the sale of the 17% of PTNNT that was due in previous years.

Djalil said the government is looking at the possibility of forming a consortium of state-owned enterprises to buy the Newmont shares.

He said such a consortium could seek loans in order to fund the purchase, but didn't elaborate.

Djalil has said in the past that nickel miner PT Aneka Tambang (ANTM.JK), coal miner PT Tambang Batubara Bukit Asam (PTBA.JK), tin producer PT Timah (TINS.JK) or other state-owned firms could buy the stake in PTNNT.

Government Wants Pledge Arrangement Removed

Djalil said the government has requested Newmont to remove a pledge agreement from the shares before they are divested. Under the agreement, shares in PTNNT are pledged as collateral to Newmont's senior lenders on the Batu Hijau project.

Newmont filed for arbitration in 2007 to avoid being found in default of its contract, after it missed the deadline to sell 3% of PTNNT in 2006 and 7% of the unit in 2007, claiming the government had blocked the sales.

It then filed for further arbitration last year claiming the government was again blocking sales of the unit - including the further 7% scheduled for divestiture in 2008 - on the basis that the pledge agreement with Newmont's lenders meant the shares couldn't be sold.

Newmont and the Indonesian government said last month the arbitrators had ruled Newmont and minority partner Sumitomo Corp. were in default over the delayed stake sales and must move quickly to divest them.

At the time, Minister for Energy and Mineral Resources Purnomo Yusgiantoro indicated the arbitrators had overruled Newmont's request to be allowed to leave the share pledge in place.

Newmont originally pledged 100% of PTNNT to the Export Import Bank of the U.S., Japan Bank for International Cooperation, and German bank Kreditanstalt fuer Wiederaufbau, which lent it about $1 billion to develop Batu Hijau. As it pays off the loans, a proportionate amount of shares are removed from pledge. Purnomo, the Newmont spokesman, was unable to clarify exactly how many shares remain under pledge.

Local media reported that Newmont has offered the 7% of PTNNT due for sale last year at $426 million and the 7% stake due to be divested this year at $348 million.

Newmont expects the Batu Hijau mine to produce 455 million pounds of copper concentrate this year, up from 284 million pounds in 2008, and 486,000 troy ounces of gold this year compared to 269,000 ounces in 2008.

Under Newmont's 1986 contract with the Indonesian government, it is required to sell 51% of PTNNT to local investors by 2010. A 20% stake in PTNNT has already been sold to privately-held local firm PT Pukuafu Indah.

-By Reuben Carder and Linda Silaen, Dow Jones Newswires; 62 21 3983 1277; [e-mail]