Jakarta, Indonesia – U.S. gold mining giant Newmont Mining Corp.’s future operations in Indonesia hinge on the verdict in a criminal prosecution of one its senior executives, a company representative said today.
“(Future investment) depends on the outcome,” said Noke Kiroyan, president of local subsidiary PT Newmont Pacific Nusantara.
Kiroyan’s statement is the most explicit indication yet that Newmont might reconsider its Indonesian investments if senior executive Richard Ness is convicted on charges of illegally dumping mercury from the company’s now-defunct Minahasa Raya mine into Buyat Bay, on the northern tip of Sulawesi.
Ness faces up to 10 years in jail if found guilty of the charge.
A verdict is not expected for months.
The criminal case is just one of a series of high-profile problems that have plagued Denver-based Newmont over the past two years and have raised questions about the attractiveness of Indonesia’s investment climate for foreign mining companies.
In February, Newmont reached a $30 million out-of-court settlement with the Indonesian government to defuse a separate attempt by the government to sue the company over alleged toxic pollution at Buyat Bay.
The company suspended exploration on Sumbawa Island, a separate location, in March after about 50 people from nearby villages torched Newmont’s remote Elang camp.
Miners have frequently run into protests from local communities which resent the large amounts of money earned from what they feel are their natural resources, and complain that mining companies don’t do enough to prevent environmental damage.
Another U.S. miner, Freeport-McMoRan Copper & Gold Inc., has also experienced recent production stoppages because of protests at its massive Grasberg mine in Papua province.
Kiroyan reiterated Newmont’s position that the charges against Ness were unjustified.
“(The charges) aren’t fit for court proceedings,” he said.
Kiroyan said the social problems mining companies are facing in Indonesia are “temporary” difficulties that large foreign corporations face when operating in developing countries.
Investment in Indonesia’s mining sector has been stagnant in recent years because of a lack of legal certainties and social unrest.
Parliament has debated a proposed new mining law for months, with some proposing tighter restrictions on foreign mining companies.
Analysts have expressed concern about a lack of new exploration, despite Indonesia’s high mining potential.
“In Indonesia, the low level of exploration activity is a cause for concern as the long-term success of the industry … depends on continued exploration,” PriceWaterHouseCoopers said in January.
“If positive changes are not made, then Indonesia’s mining industry may be smaller in 15 years’ time as (existing) reserves are depleted and not replaced” by new finds, it added.
However, the profitability of Indonesian mines compares favorably with other countries, PWC said.
In 2004, the average net profit margin of mining companies in Indonesia was 19.3 percent, compared with 15.2 percent for the top 40 companies globally, PWC said.
