Jakarta. Government approval on the shares sale of Indonesia's second largest gold and copper mine in Sumbawa to local energy firm Medco Energi International would hinge on whether it could get a small portion of shares in the mine, a senior official said.
Mine operator Newmont Nusa Tengara (NNT) works under a 1986 working contract that requires its parent company, US mining giant Newmont Mining, to relinquish 51 percent interest to central government, local governments or local firms. Since then, Newmont Mining has sold off 44 percent.
But, with the remaining 7 percent still on offer to the government, Newmont Mining entered a deal to sell its entire interests which would put tycoon Arifin Panigoro's Medco as the new ultimate controlling entity in the country's second largest gold and copper producer.
It is Medco's responsibility now to carry out the contract obligation, Energy and Mineral Resources Minister Sudirman Said said on Friday (15/07).
"The new shareholder is still required to offer the shares to the government," he said.
Under a series of deals put in motion last month, Newmont Mining has agreed to sell 48.5 percent interest in NNT to Amman Minerals International.
Japan's Sumitomo and Multi Daerah Bersaing, a joint venture between Bakrie family's Bumi Resources Mineral and local governments, also agreed to sell their shares, leaving Amman to become the controlling entity in NNT with 82 percent shares.
In a corresponding deal, Medco is teaming up with AP Investment, a company controlled by former banker Agus Projosasmito, who will take over the entire stakes in Amman for $2.6 billion.
The transactions still require approval from the government, which besides wanting its portion of the shares, is also seeking proof of commitment from NNT to carry out development of smelter locally.
Ahmad Redi, a law lecturer at Tarumanagara University, said divestment requirement was included in the working contract because government seeks to ensure the country would benefit the most from the natural resources.
Now that the mine would be under Medco control, it would "be illogical" to require the company to carry out the divestment, Ahmad said.