Newmont sells mine stake to Trakindoadmin
Newmont Mining and other foreign owners are selling a combined 3 percent stake in a big copper and gold mine in Indonesia to local firm PT Trakindo Utama for about $100 million, two sources told Reuters on Friday.
“They will sell 3 percent to Trakindo. That is quite certain,” said one source who is familiar with the transaction.
Privately owned PT Trakindo Utama, the authorised dealer in Indonesia for Caterpillar products, declined to comment. Trakindo supplies equipment to the mine.
U.S.-based global mining giant Newmont, and other foreign stakeholders, including Japanese trading firm Sumitomo Corp. , are cutting their stakes in Batu Hijau, Asia’s second-largest copper mine.
Foreigners now own about 80 percent of the mine, with Newmont, the world’s second-biggest gold producer, holding a 45 percent stake.
Under a working contract signed with Indonesian authorities, foreign owners of the mine are obliged to cut their stakes gradually to a combined 49 percent — which some industry sources estimate could raise about $1.2 billion based on current valuations.
The obligation kicked in this year, requiring them to sell a 3 percent stake in 2006, 7 percent in 2007 and reduce it to 49 percent in about six years from now, sources told Reuters last week. They have also said the sale of the 3 percent stake was underway. Buyers must be Indonesian entities.
Nunik Maulana, spokeswoman for Newmont in Indonesia, said that under the working contract, Newmont and other foreign partners must offer the stake to the Indonesian government first. If the government does not want it, they can then offer it to other Indonesian entities.
“There are some Indonesian companies that have shown interest in buying but we haven’t given any response yet as we are still waiting for the government’s response,” she said.
One of the sources said on Friday that Trakindo would also buy the 7 percent stake next year.
“They are doing a deal for 3 percent. And they have some kind of handshake or some understanding they will sell the 7 percent to them as well.”
Trakindo was established in 1970 by AHK Hamami, according to Trakindo’s Web site. The company became the authorised dealer for heavy machinery maker Caterpillar in 1971 and now has more than 50 branches throughout the country.
A Jakarta-based investment banker, who is not involved in the deal, said he would not be surprised if Trakindo buys into Batu Hijau. “This would deepen its relationship and partnership with the mine,” he said.
With gold and copper prices flying high, investment bankers are lobbying Newmont and other investors to reduce the rest of their stakes to 49 percent in one go rather than a gradual sell-off, sources have told Reuters.
“They have reached the point where they have to decide to invest or to sell. They can’t just sit there and hold it for six years because they are actually hurting the value of the project,” said one banker, who asked not to be identified.
Located on the remote island of Sumbawa in the south central portion of the Indonesian archipelago, Batu Hijau produced 718 million pounds of copper and 719,000 ounces of gold last year.
The Batu Hijau copper-gold deposit was discovered in 1990 and began commercial production in 2000. The mine’s life is expected to last until 2034, according to Newmont.
The operation is a venture with Nusa Tenggara Mining Corp of Japan, majority owned by Sumitomo Corporation, and an Indonesian firm, PT Pukuafu Indah. Newmont is the operator.