Newmont Exiting Indonesia in $1.3 Billion Sale to Local Firm

Updated on
  • U.S.-based miner says Sumitomo Corp. is also part of the deal
  • Transaction contingent on government and valid export license

Newmont Mining Corp., the largest U.S. bullion producer, agreed to sell its Indonesian copper and gold assets for $1.3 billion to a local consortium, as the country pushes miners to build smelters rather than exporting raw materials.

PT Amman Mineral Internasional, a closely held Indonesian company backed by three local banks, will buy Newmont’s 48.5 percent interest in the operator of the Batu Hijau mine, the Greenwood Village, Colorado-based company said Thursday in a statement. Sumitomo Corp. also agreed to sell its stake in an asset that Newmont says has a gross valuation of more than $2.5 billion.

The arrangement ends months of negotiations that began after Indonesia banned raw ore shipments and put a progressive tax on concentrates, a semi-processed ore that’s shipped to smelters for turning into finished metal. The move was part of a wider policy to boost revenue by turning the country into a manufacturer of higher-value products and encourage construction of domestic smelters and refineries.

For Newmont, the deal will reduce its dependence on copper, narrow its geographic focus to the Americas, Africa and Australia, lower debt levels and provide funding for projects.

Shares Gain

Newmont shares gained 3.8 percent in New York, extending their rally this year to 117 percent as gold-producer stocks respond to rebounding bullion prices. The deal has a “good price tag” and improves Newmont’s risk profile, Andrew Kaip, an analyst at the Bank of Montreal, said in a research note Thursday.

The $1.3 billion figure consists of $920 million cash and $403 million tied to gains in copper prices and development of the Elang mine project on Sumbawa Island. Batu Hijau on Sumbawa is the biggest copper and gold mine in Indonesia after Freeport-McMoRan Inc.’s Grasberg. The open pit, whose name means “green rock” in Bahasa Indonesia, was discovered in 1990 in the southwest region of the island.

In January, people with knowledge of the matter told Bloomberg that a consortium led by veteran investment banker Agus Projosasmito was preparing a $2 billion offer for control of Newmont’s Indonesian operations.

Tax Matters

Medco Energi Group, an oil and gas company, and AP Investment bought controlling stakes in Amman Mineral for $2.6 billion, Medco said in a statement Thursday. AP Investment is led by Projosasmito, it said. The purchase is backed by PT Bank Mandiri, PT Bank Negara Indonesia and PT Bank Rakyat Indonesia, the three largest state-owned lenders, and completion is subject to approval from the government and Medco Energi shareholders, it said.

The deal is also subject to PT Multi Daerah Bersaing or PTMDB selling its 24 percent stake in the mine’s operator PT Newmont Nusa Tenggara to the buyers concurrently, and the government approving the transfer, as well as a valid export license, Newmont said. PTMDB signed a conditional sale and purchase agreement with Amman Mineral on Thursday, PT Bumi Resources Minerals, which controls PTMBD, said in a statement to the Indonesia Stock Exchange.

In an interview in April, Chief Executive Officer Gary Goldberg said the Indonesian government has had the right to buy 7 percent of Newmont and Sumitomo’s stake since 2010 but had shown no interest.

The deal is conditional upon the resolution of some tax matters “and no material adverse events that would substantially impact the future value of Batu Hijau,” according to the Newmont statement.

The Energy & Mineral Resources Ministry hasn’t received a report on the transaction, spokesman Sujatmiko said by phone Friday. The government will evaluate the deal before giving approval, he said. “If they have sold more than 51 percent to the national investors, then they have met their divestment obligation,” said Sujatmiko, who goes by one name.