Newmont Says Legal Wrangle Won't Deter Indonesian Investment
Dec. 5 (Bloomberg) -- Newmont Mining Corp.'s legal dispute with Indonesia over alleged pollution won't deter the world's biggest gold miner from investing $85 million in the nation next year, said Chief Executive Wayne W. Murdy.
``This is a nation that has huge potential from a geologic standpoint'' Murdy, 60, told reporters in Jakarta yesterday after meeting government officials on his four-day visit. ``It has a lot of mineral wealth, and it's a place we want to do business and make a long-term commitment.''
Indonesian Environment Minister Rachmat Witoelar on Nov. 25 said the government would sue the Denver-based company, citing a report that said dumping of waste from its Minahasa mine in North Sulawei province caused arsenic levels in a nearby seabed to rise to 10 times the levels allowed in the U.S.
``It's shocking thing to see these allegations,'' Murdy said. ``Some of these allegations... I don't know what the intent is.'' He said it's the first time Newmont has faced criminal charges in any country.
The dispute comes as Indonesia is trying to boost investment from overseas. Mining investment in 2003 declined for a sixth year, a drop companies operating in Indonesia blamed on conflicting regional and national laws and on illegal mining. Third-quarter production of gold, copper, nickel, aluminum and other precious metals fell 6 percent from a year earlier.
Murdy, who left yesterday, met Indonesian Coordinating Minister for Economic Affairs Aburizal Bakrie and Mines and Energy Resources Minister Purnomo Yusgiantoro during his visit.
Indonesia accounts for 30 percent of Newmont's net income, Murdy said. More than $2 billion has been invested in the company's operations there since 1985. About $735 million was directly invested by Newmont company and the balance by partners that include Sumitomo Corp. of Japan, he said.
Newmont's only working mine in Indonesia now is in Batu Hijau in West Sumbawa province, where 7,000 workers excavate copper and gold. The mine has resources to ensure production up to 2033, said Robert Gallagher, vice president for Newmont Indonesia.
Most of the company's 2005 investment will go toward development of the mine. Newmont invested about $20 million last year on exploration in Indonesia.
``We look long and hard before we go into a new country,'' he said. ``One of our strategies is to operate in relatively few places, in very large mines that can have very long lives because you can train the workforce.''
The Minahasa mine at the center of the legal dispute closed in August after gold reserves were depleted. It started operation in March 1996 with an investment of $135 million.
Villagers living near the mine complained to police about five months ago that they were suffering health problems after eating fish from nearby Buyat Bay. Newmont has said its waste- disposal processes are in line with legal limits. Police earlier detained and released five Newmont executives before formal charges were filed.
Bakrie gave assurances the company will get a fair hearing, Murdy said. Lawyers estimate the case may drag on for up to three years if the dispute goes all the way to the Supreme Court.
``We have a government that's just been elected and that's been very, very vocal about dealing with corruption,'' Murdy said of Indonesia. ``This case has gotten a lot of notoriety.''
In the quarter ended Sept. 30, Newmont's net income rose 12 percent to $128.7 million, or 29 cents a share, as revenue rose 32 percent to $1.16 billion. The company's shares closed up 51 cents, or 1.1 percent, at $46.38 in New York trading on Dec. 3.