MAC: Mines and Communities

Newmont to pay $30 million to end civil law suit

Published by MAC on 2006-02-16

Newmont to pay $30 million to end civil law suit

16th February 2006

Denver-based Newmont Mining Corporation, the world's biggest gold miner, has agreed to pay the Indonesian government $30 million in an out-of-court settlement to end a $134 million civil lawsuit over pollution allegations, but a related case involving criminal charges against the company remains ongoing.

The Environment Ministry had submitted the civil lawsuit to South Jakarta District Court in March 2005, demanding the company's subsidiary PT Newmont Minahasa Raya (NMR) and its president director Richard Ness pay compensation of $117.68 million for lost income and environmental damage and Rp150 billion ($16.3 million) for damaging Indonesia's reputation.

South Jakarta District Court threw out the lawsuit last November, ruling that under the terms of the government's contract with NMR, any dispute must be settled through international arbitration or conciliation. But the government refused to give up and appealed to a higher court.

Separately, NMR and Ness have been on trial since August on charges of polluting a bay in North Sulawesi province with toxic tailings waste from a now exhausted gold mine. The charges are based on police accusations that the company pumped potentially lethal amounts of mercury and arsenic into Buyat Bay, near its mining site in Minahasa regency, causing local villagers to suffer skin diseases, neurological disorders and other health problems.

If convicted under the 1997 Environment Law's Article 41 on intentionally or negligently polluting the environment Ness could face up to 10 years in prison and NMR could be fined up to Rp500 million ($78,000). Chicken feed compared to the $30 million to end the civil case - except for the possible jail sentence hanging over Ness.

Newmont has consistently denied any wrongdoing, saying its waste was treated in accordance with Indonesian government regulations and suggested the Buyat villagers could have fallen ill due to malnutrition and poor sanitation. It has also been said that the operations of thousands of illegal miners, who use mercury, could be to blame for any mercury-related illnesses.

Separate studies by the Environment Ministry, Health Ministry, World Health Organization, Japan's Minamata Institute and the Australian CommonwealthScientific and Industrial Research Organization have all concluded that Newmont did not pollute the bay.

But a police investigation found significant levels of mercury. A subsequent joint probe by government officials, university professors, activists and police also concluded the bay was polluted with excessive levels of arsenic and mercury.

Although the trial is still taking place at Manado District Court and a verdict not due until later this year, the settlement of the civil lawsuit will be a weight off NMR's mind.

Under the deal, details of which were announced in a joint statement issued Thursday (16/2/06), NMR will pay $30 million over 10 years - to fund environmental monitoring and community development around the gold mine - in exchange for the government dropping the case.

Coordinating Minister for People's Welfare Aburizal Bakrie, who had been pushing for an out-of-court settlement since last year when he was chief economics minister, said the lawsuit would be withdrawn after the government receives proof of transfer of the initial $12 million.

But he warned the payment would not halt the criminal charges. "This agreement doesn't end the criminal case at Manado District Court. It only resolves the commercial issues," he said.

NMR and the government said "goodwill agreement" to end the civil case reconfirms their commitment "to work together to improve the lives of the people of North Sulawesi".

Bakrie said the agreement puts the people first and demonstrates commitment to sustainable development and proper care of the environment. "We believe this reiterates that our joint commitment to responsible mining is more than just words. Newmont has undertaken extensive community development and environmental programs over the life of the mine. In moving forward together, our priorities are the welfare of the communities around the mine and the long-term health and safety of the environment."

Robert Gallagher, Newmont's vice president of Indonesia operations, was equally upbeat. "Our commitment to being good stewards of the environment remains as strong as ever. Together, we believe this goodwill agreement helps resolve this matter in a way that is beneficial to the communities where we operate and helps assure them of a healthy environment," he said.

"We expect this 10-year monitoring program will support several recent scientific studies and our continuous mine monitoring, which already have shown no environmental impact on Buyat Bay and no health issues related to our activities. With today's announcement we reaffirm our long-term presence and investment in Indonesia and our commitment to the communities where we operate. We look forward to a productive partnership for years to come."

Under the deal, environmental monitoring reports will be issued annually to provide the communities with "transparent and objective scientific information" about the condition of the environment. NMR has also agreed to collaborate with the government and local communities to develop the programs' specifics and to provide resources to assist in implementation.

The funds will be managed by a soon-to-be-created foundation with multiple stakeholders from the national and local governments, the community and the company. "Accountability and transparency of the fund will be ensured through yearly reports available to the public," said the statement.

The NMR mine commenced operations in 1996 with an investment of $135 million. Mining ceased in 2003 after all the gold was extracted but the company continued to process ore until August 2005, when then mine was closed. Reclamation work is now taking place and expected to finish by the end of 2006.

Jakarta drops civil suit vs Newmont in pollution row

by Adriana Nina Kusuma, JAKARTA (Reuters)

16th February 2006

The world's biggest gold miner, Newmont Mining paying Indonesia $30 million to settle a civil suit over pollution, but will still face criminal charges in a case closely watched by foreign investors.

Economists said Thursday's settlement could help lift foreign investor sentiment toward Southeast Asia's largest economy, which is rich in gold, copper and oil.

"This is slightly positive for investors' perceptions, especially foreigners, in the sense that it has provided certainty over the case," said Citibank economist Anton Gunawan.

More important, though, are the outcome of the criminal case or a resolution of a dispute between Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) and Indonesia's state oil company over a major new oil field, economists said.

"This is a good sign to show that the government is moving in the right direction," said Standard Chartered economist Fauzi Ichsan. "However I don't think this is a monumental moment."

Newmont had been charged with polluting a bay and causing villagers to fall ill in the eastern Indonesian region of Sulawesi. The company has vigorously denied any wrongdoing and reiterated that position on Thursday.

The deal disappointed environmentalists, who had applauded the criminal and civil cases against Newmont because they think Indonesia has been too soft on polluters.

"It will weaken the government's bargaining power in the criminal process as it shows that the government is powerless if dealing with a big international company," said Siti Maimunah, national coordinator of Jakarta-based mining & environmental watchdog Jatam.

"And I see that the settlement is too small. It's nothing compared with the destruction in Buyat."

Newmont, which is expected to rack up $5 billion in revenues this year and has a market value of $25 billion, said it would pay $30 million to settle the case over 10 years.

The Environment Ministry had lodged the civil case in 2005, seeking damages of around $133 million. In November, a lower court dismissed the case, but lawyers for the ministry appealed.

"This will not stop the ongoing criminal case," said chief social welfare minister Aburizal Bakrie, adding the government would drop the civil suit after it received proof of transfer of an initial $12 million payment.

Todung Mulya Lubis, a leading commercial and human rights lawyer, said the government should work toward a comprehensive solution.

"I understand that the criminal case could not be stopped but the government should help Newmont in solving both the criminal and civil case," he said.


The criminal and civil cases both relate to Newmont Minahasa Raya's disposal of waste from a gold mine near Buyat Bay, 2,200 km (1,400 miles) northeast of Jakarta. The mine opened in 1996 and closed in August 2004 due to depleted reserves.

Newmont has said its disposal processes were properly approved by the government.

The deal signed on Thursday covers scientific monitoring and enhanced community development programs in North Sulawesi.

The government and the unit will nominate members to an independent scientific panel that will develop and implement a 10-year environmental monitoring and assessment program.

The panel's responsibility would be to make a definitive, scientific conclusion in regard to the condition of Buyat Bay, the statement said.

"We are not walking away from Buyat Bay," said Robert Gallagher, Newmont's vice president of Australia and Indonesia Operations.

Prosecutors handling the criminal case allege the waste disposal process involved dumping mercury and arsenic into the bay, making villagers sick as a consequence.

In the criminal trial, Newmont Minahasa Raya President Director Richard Ness, from Minnesota, could face a jail term of up to 10 years and be fined around $68,000 if convicted.

A government-commissioned probe and a police study have concluded that the bay was polluted, but several other studies, including one by the World Health Organization and the Indonesian Health Ministry, did not support that charge.

Newmont's operations in Indonesia accounted for 6 percent of its global sales in 2004. The Denver-based company operates Asia's second-largest copper mine, Batu Hijau, on eastern Sumbawa island.

(With additional reporting by Harry Suhartono and Yoga Rusmana)

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