UPDATE: Indonesia Min: 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.

Under its contract of work with the Indonesian government, Newmont was scheduled to sell 3% of the local unit, known as PTNNT, 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. However, Newmont has yet to comment on the matter. Newmont officials have said the share pledge arrangement is legal and isn't an obstacle to divestiture. Newmont officials couldn't be reached for comment Tuesday.

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.

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