UPDATE: Indonesia Hopes To Agree On Newmont Unit Value This Week

Indonesia's government hopes to finalize negotiations over the price of stakes it plans to buy in the local unit of Newmont Mining Corp. (NEM) by the end of this week or early next week, and has set a maximum total value on the unit much lower than that set by Newmont, the mines minister said Monday.

Purnomo Yusgiantoro, Minister for Energy and Mineral Resources, said the government hopes to finalize the sale of stakes in PT Newmont Nusa Tenggara, or PTNNT, by September. He said local governments may buy the stakes in PTNNT if the central government chooses not to. The central government has first refusal on the stakes.

The government values PTNNT at a maximum of $3.7 billion. Newmont has said the unit is worth $4.9 billion. The overall valuation of PTNNT will be used to negotiate the purchase price of stakes in the unit.

Under the contract of work, the foreign shareholders in PTNNT - Newmont and minority partner Sumitomo Corp. - must divest 51% of the unit to Indonesian buyers by next year. A local firm has already bought 10% of PTNNT, and a further 10% of the unit has been earmarked for sale to a consortium comprising the West Nusa Tenggara provincial government and the districts of Sumbawa and West Sumbawa.

PTNNT operates the large Batu Hijau copper and gold mine on Sumbawa island in east Indonesia. The central government has said it wishes to buy the remaining 21% of PTNNT due for divestiture. However, it must first obtain approval from the finance ministry. The government has also mooted buying the stake in PTNNT via state-owned resources companies, including nickel miner PT Aneka Tambang (ANTM.JK). It may also allow private firms to buy the stakes.

Purnomo said the government hopes the finance ministry will make a decision by August on whether it may buy the stake.

Local media Monday cited officials from the local governments as saying they may try to purchase the entire 31% stake in PTNNT.

Newmont expects Batu Hijau 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 with 269,000 ounces in 2008.

-By Deden Sudrajat, contributing to Dow Jones Newswires; 62 21 3983 1277; [e-mail]