TORONTO (miningweekly.com) – Newmont Mining continues to hold talks with the government of Indonesia, ahead of a November 12 deadline for the sale of a total of 24% of the Batu Hijau copper/gold mine, CEO Richard O'Brien said on Thursday.

The company understands that a local government will buy the initial 10% (the 3% and 7% stakes which were to have been sold in 2006 and 2007 respectively), and a price has been fixed for the transaction.

“We are ready to do that today,” O'Brien said.

Newmont has been told that the central government itself will buy the other two 7% stakes (2008 and 2009) in Batu Hijau, and negotiations are still continuing on those transactions.

“But there is still time to figure out the agreement with the central government and I think we are making progress on both of those,” O'Brien said.

“So we stand ready to do what we have told the government, and we are really just waiting for them to get the agreements in place, and provide the funds necessary to make the transactions.”

On March 30, an international arbitration panel ruled that Newmont and its partner in the giant copper/gold mine, a subsidiary of Japan's Sumitomo Corp, must complete the overdue divestitures within 180 days.

In September, that deadline was extended by mutual agreement to November 12, to coincide with the deadline for the 2009 divestiture.

Newmont owns 45% of PT Newmont Nusa Tenggara (PTNNT), which owns the Batu Hijau mine, and Sumitomo owns 35%. The balance is now owned by an Indonesian company.

PTNNT entered into a contract of work with the government of Indonesia in 1986, in which the international partners agreed to sell a total of 51% in PTNNT to local entities, in stages, over an agreed timeframe.

However, the stakes which should have been divested in 2006, 2007 and 2008 have yet to be transferred.

Although Newmont had offered the shares to various levels of government for sale, it was not able to find buyers for the 2006 and 2007 tranches in time to meet the deadlines set out in the contract.

Since the arbitration ruling, the 2006 and 2007 shares (totalling 10%) have been reoffered to the local and regional governments for $109-million and $282-million, respectively.

In July, Newmont and Sumitomo and the government also agreed to value the 14% interest in PTNNT, associated with the 2008 and 2009 divestiture shares, at approximately $494-million (or $3,53-billion for 100%) of PTNNT, and the 2008 and 2009 divestiture shares were reoffered to the government.

WALL FAILURE

Newmont also said on Thursday that it expects that a slope failure reported last month at Batu Hijau will have “minimal” impact on the mines' production this year.

Mining operations were temporarily suspended during the remediation process, but the operation continued to process lower grade ore from stockpiles, said operations chief Brian Hill.

Mining resumed on October 11, he said.

The company is still assessing the implications of the event, but expects delays accessing ore previously anticipated in 2010 and 2011.

There will be a “marginal decrease” in ore mined from eventual phase 6 of the pit.

Newmont's share of sales from Batu Hijau in the third quarter amounted to 93 000 oz and 64-million pounds, at costs applicable to sales of $178/oz and $0,50/lb respectively.

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