Newmont Divesting Indonesian Mining Interest (NEM, FCX, CVX)

A ruling by an international arbitration court will lead to the divestiture by Newmont Mining Corp. (NYSE:NEM) of a portion of the company’s stake in an Indonesian mining firm. Newmont has 180 days to transfer the shares to the Indonesian government. Newmont owns 45% of the Indonesian firm, called Newmont Nusa Tenggara (NNT).

According to Reuters, the ruling could affect mining ventures by other foreign companies, such as Freeport McMoRan Copper & Gold Inc. (NYSE:FCX) and Chevron Corp. (NYSE:CVX). It is also possible that the government would reject the offer of shares because it does not have the money to pay for them. If that happens, the investors must find an alternative Indonesian buyer.

The ruling forces the sale of 17% of NNT, with 10% required to be sold to local governments and 7% to the central Indonesian government. The Indonesian government also claims that Newmont must pay $1.8 million to the government for its costs in the arbitration case.

Indonesia is famous for demanding a blizzard of red tape wrapped around a package of inefficient government. But the country is rich in natural resources and virtually every big oil and mining firm has interests there. The country can’t afford to expropriate the resources because it could never operate the businesses at a profit. But it surely can make life difficult for any foreign-owned firm willing to invest.

Paul Ausick
April 1, 2009