Jakarta drops civil suit vs Newmont in pollution row

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 Corp.is 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.

NOT WALKING AWAY

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)