MANADO, Indonesia-
Newmont Mining Corp. said Wednesday it was considering expanding its investment in Indonesia following the acquittal of the company and an executive accused of dumping dangerous amounts of toxic waste into a bay off Indonesia’s Sulawesi Island.
But analysts say they don’t expect foreign investors—who remain wary about corruption, poor infrastructure, red tape and legal uncertainties—to flock to the resource-rich nation as a result of the high-profile verdict.
Mining companies are likely to wait for revisions to closely-watched legislation that would force them to sign agreements with regional authorities instead of the central government and make it impossible to bring disputes before international arbitration.
Robert Gallagher, Newmont’s vice president for operations in Indonesia, said Tuesday’s decision to acquit Richard Ness on pollution charges meant the compnay could go ahead with plans to boost capacity at its Batu Hijau copper and gold mine on Sumbawa Island by 50 percent.
“That would result in about a 30 percent to 40 percent increase in metal production,” he said, putting the mine’s present output at around 500,000 troy ounces of gold a year, and just over 270,000 metric tons of copper.
“Much depends on how we feel about the political risks, the legal risks, etc., and this (court) decision is certainly a tick in the right box for that,” Gallagher said.
Earlier, the Denver-based company said it would rethink future investments in Indonesia if Ness, the president-director of Newmont’s local subsidiary, was found guilty. He had faced up to 10 years in prison and, together with Newmont, a $160,000 fine.
Presiding Judge Ridwan Damanik said documents and testimony presented during the 21-month criminal trial proved that waste rock dumped into Buyat Bay by the company’s now-defunct Sulawesi mine did not exceed government standards.
“There also is not enough evidence that people suffered from health problems,” Damanik said, referring to claims that villagers living near Buyat Bay, which is about 1,300 miles northeast of Jakarta, were suffering from skin disease, unexplained lumps, breathing difficulties and dizziness.
Prosecutors said they would appeal.
Environmental groups protested the decision—saying mining corporations are getting away with polluting Indonesia’s threatened rainforests and rivers with practices that are illegal at home. But some government officials and business executives expressed relief.
Analysts said a guilty verdict would have had a chilling effect on foreign investors, who all but abandoned the mining sector after the 1997-98 Asian financial crisis.
Though Indonesia boasts some of the world’s largest gold, tin, copper and nickel deposits it is also considered among the most corrupt nations. Rising prices, political instability and labor problems add to their concerns.
“I don’t think someone is going to fly in here tomorrow because of this decision,” said James Castle, who runs the Indonesian-based consultant company CastleAsia. “But it certainly avoids another round of negative headlines and in fact has generated some positive headlines in the business media, so that’s all to the good.”
More important is the draft mining bill moving through Indonesia’s legislature, he and others said.
“If it’s a good law that provides some security for investors, then it will have a very immediate and positive effect,” said Castle. “If it doesn’t provide that, then we’ll be in the place where we’ve been for about five years, that is a country with very good prospects in mining and very low exploration investment.”
The proposal has been in the works for around a decade and would replace a system of regulating mining companies, under which contracts were signed between the central government and corporations.
It would require companies to negotiate joint ventures with local partners and mediate operations with regional authorities which, like plans to take international arbitration out of the agreement, has caused great concern among foreign mining companies.
“It’s still under discussion,” said Witoro Soelarno of Indonesia’s energy and mineral resources department, noting that some of the most worrying points could change.
Newmont began operations in Sulawesi in 1996 and stopped mining in 2002 after extracting all the gold it could. It continued processing ore until 2004 when the mine was permanently shut.
