DENVER—Newmont Mining Corp., one of the world’s largest gold producers, is working to resolve a contract dispute with Indonesia but said Thursday it may seek outside arbitration if negotiations collapse.
The Indonesian government has accused a Newmont subsidiary of failing to meet a requirement to sell interest in the Batu Hijau mine on the island of Sumbawa, about 950 miles east of Jakarta, to Indonesian government officials.
Indonesian officials have set a Friday deadline for meeting the terms of the contract or they have threatened to terminate it.
During a conference call with analysts Thursday, Newmont Chief Executive Officer Richard O’Brien denied the breach-of-contract accusation and said they are working with government representatives to resolve the dispute.
“We’re doing everything we can to get that done,” he said. “I hope we can continue to work constructively to try to avoid a situation where we would otherwise have to invoke international arbitration to protect our interests at Batu Hijau.”
O’Brien called that a “last resort” that he would prefer not to take. “I would say it is day to day as to what happens,” he said.
One of the world’s largest gold producers, Denver-based Newmont has a 45 percent stake in the Batu Hijau mine and a local unit of Japan’s Sumitomo Corp. has a 35 percent share.
Under terms of a 1986 contract with Indonesia, the subsidiary is required to sell 51 percent to the Indonesia government or nationals by March 31, 2010.
O’Brien said the subsidiary offered to sell a 3 percent interest to the Indonesian government for $109 million in 2006 and an additional 7 percent for $282 million last year. Government officials declined the offers and advised the subsidiary to negotiate with local governments, he said.
In November, the subsidiary offered 7 percent interest to local governments. It signed an agreement in January to sell a 2 percent carried interest to the Sumbawa local government.
The Indonesian government issued the notice of default on Feb. 11 and set the deadline for Friday.
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.
Newmont also has mining operations in the United States, Canada, South America, Australia, Ghana and Mexico.
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