JAKARTA, Indonesia—Indonesia has threatened to terminate Newmont Mining Corp.’s license to extract copper and gold on the eastern island of Sumbawa unless the U.S. company sells a 10 percent stake in the mine to local authorities, a news report said Tuesday.
Simon Sembiring, director general of mineral resources at Indonesia’s Energy Ministry, said Newmont has until Feb. 22 to sign an agreement to sell the stake or face termination of its contract, according to The Wall Street Journal. The ministry sent a letter to Newmont on Monday informing the company of the deadline, the report said, citing Sembiring.
Under the terms of its 1986 contract of work Newmont and its Japanese partner are obliged to sell a 51 percent stake to Indonesian owners in stages. Newmont has already sold a 20 percent stake to PT Pukuafu Indah, a local company.
Denver-based Newmont was supposed to sell another 3 percent stake in 2006 and 7 percent last year but missed the deadline amid protracted negotiations.
“They have not stuck to the terms of the contract,” Mr. Sembiring said, according to the report.
Newmont spokesman Rubi Purnomo denied this. He said the company offered to sell the central government a 3 percent stake for $109 million in 2006 and a 7 percent stake last year for $282 million, but the government did not take up the offer, according to the newspaper.
Since then, Newmont says it has launched talks with the local government to sell the stakes. Newmont on Jan. 28 signed an agreement with the Sumbawa local government to sell a 2 percent stake—the first part of the 7 percent stake—Purnomo said.
Newmont holds a 45 percent stake in the Batu Hijau mine in Sumbawa, about 950 miles east of Jakarta, through its shareholding in PT Newmont Nusa Tenggara. A local unit of Japan’s Sumitomo Corp. has a 35 percent share.
Newmont and its partners have invested about $1.9 billion in the mine. The reserves are expected to last until 2034, making Batu Hijau one of the largest copper mines in the world.
Newmont spokesman Omar Jabara in Denver said the company was “puzzled” by the ministry’s letter because of the progress that has been made toward divestment, including the agreement last month to sell the 2 percent stake.
“The Ministry of Mines was informed of this development, as well as our pending good-faith offers to the other local goverments,” he said. “As we have done all along, we remain committed to a fair and transparent divestiture of shares that preserves Batu Hijau’s high standards and industry leading performance.”
Last year, Indonesian courts cleared Newmont unit PT Newmont Minahasa Raya and company executive Richard Ness of charges that another mine run by the company on Sulawesi island had polluted local waters with mercury and poisoned villagers.
