Richard, everyone,
From the 12/31/98 K-1, this is what Newmont says about Indonesia:
INDONESIA
Introduction
Newmont has two projects in Indonesia -- Minahasa which is in operation and Batu Hijau which is under construction. The Minahasa project is 80% owned by Newmont and 20% carried interest owned by P.T. Tanjung Serapung, an Indonesian company. However, because Newmont funded 100% of the construction costs, it is entitled to 100% of the gold production until it recovers its investment, including interest. Newmont has a 45% interest in the Batu Hijau project which
it owns through a partnership with an affiliate of Sumitomo Corporation ("Sumitomo"). Sumitomo holds an indirect 35% interest in the Batu Hijau project through this partnership arrangement and the remaining 20% interest is a carried interest held by P. T. Pukuafu Indah, an Indonesian company.
In Indonesia, rights are granted to private parties to explore for and to develop the mineral resources within defined areas through Contracts of Work entered into with the Indonesian government. In 1986, Newmont entered into fourth generation Contracts of Work with the Indonesian government covering the Minahasa and Batu Hijau projects. Under the Contracts of Work, Newmont was granted the exclusive right to explore the contract area, construct any required facilities and extract and process the mineralized materials, and sell and export the minerals produced subject to certain Indonesian government approvals and payment of royalties to the Indonesian government. Once facilities are constructed and mining operations commence, the private party has the right to continue operating the project for 30 years, or longer if approved by the Indonesian government. Under the Contracts of Work, beginning in the sixth year after mining operations commence (and continuing through the tenth year) a portion of each project not already owned by Indonesian nationals must be offered for sale to the Indonesian government or to Indonesian nationals (collectively the "Indonesian Parties"), thereby potentially reducing the non-Indonesian parties ownership in each project to 49% by the end of the tenth year. The price at which such interest would be offered for sale to the Indonesian Parties would be the highest of (i) the then current replacement cost, (ii) the price at which shares of the project company would be accepted for listing on the Jakarta Stock Exchange or (iii) the fair market value of such interest as a going concern.
In April 1997, Newmont entered into a Contract of Work granting rights to Newmont to explore an area located near the Minahasa contract area through a new company, P. T. Newmont Mongondow Mining ("Mongondow"). Newmont has an 80% interest and the remaining 20%interest is a carried interest held by P. T. Lebong Tandai, an Indonesian company. This Contract of Work is a sixth generation Contract of Work. The major differences between the fourth and sixth generation Contracts of Work are a reduced income tax rate (from 35% to 30%), elimination of the requirement that non-Indonesian parties divest part of their 80% interest and changes in the method of royalty calculation.
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Minahasa
Minahasa, a multi-deposit project discovered by Newmont on the island of Sulawesi, began production in August 1996. It is approximately 1,500 miles northeast of Jakarta. Minahasa mines and processes ore from the open pit Mesel deposit and a number of smaller peripheral deposits . These deposits contain both oxidized and refractory gold mineralization.
Minahasa produced 261,000 ounces of gold in 1998 at a total cash cost of $127 per ounce as compared to 206,500 ounces of gold in 1997 at a total cash cost of $156 per ounce. Production in 1996 was 112,700 ounces of gold at a total cash cost of $222 per ounce. Tables presenting Minahasa mine and mill production data are set forth on page 47 in the 1998 Annual Report to Stockholders which is incorporated herein by reference.
The project's facilities include a dry grinding mill, a fluidized bed roaster facility and a conventional carbon-in-pulp gold recovery plant. Infrastructure facilities include a deep-water port, electrical power plant, water supply system and housing for workers. The ore's high mercury content necessitated installation of a $8 million mercury scrubber in 1997. The Minahasa project is in close proximity to the coast and does not have any significant logistical difficulties for transportation of materials, equipment or its product.
Batu Hijau
Newmont's second project in Indonesia, Batu Hijau, is located on the island of Sumbawa, approximately 950 miles east of Jakarta. Batu Hijau is a large porphyry copper/gold deposit discovered by Newmont in 1990. It is located seven miles from the south coast and nine miles from the west coast of the island and has access to a natural harbor which is being developed for transportation of materials, equipment and copper concentrate. Start up is expected to begin in late 1999.
Newmont owned an 80% interest in Batu Hijau until it entered into a general partnership arrangement in July 1996 with Sumitomo to develop and operate the Batu Hijau project. The partnership arrangement was approved by the Indonesian government and is controlled jointly by Newmont and Sumitomo. As a result of this ownership structure and certain rights held by Sumitomo, Newmont is accounting for its investment in Batu Hijau as an equity investment.
Newmont completed a final feasibility study for Batu Hijau in 1996. Based on the results of that study, and after obtaining the required approvals from the Indonesian government and entering into the partnership with Sumitomo, development and construction activities began in 1997. The project is expected to mine an average of 197 million tons per annum and the ore will be processed at the concentrator at an average rate of 150 thousand tons per day. Other facilities included in the project include a port, a coal-fired electrical generating plant, a townsite for the workforce, and other ancillary facilities. The total cost of the project is expected to be approximately $1.9 billion including cost escalations, capitalized interest during construction and working capital.
Long-term smelter contracts for approximately 70% of the project's average annual concentrate production have been signed. Production over the 26-year mine life is expected to average 115,000 tons of copper and 420,000 ounces of gold per year at an expected average cash cost of about $0.50 per pound of copper, including gold credits, over the life of the project.
In July 1997, agreements for $1 billion in financing for the Batu Hijau project were signed. The financing is guaranteed by Newmont and Sumitomo, 56.25% and 43.75%, respectively, until project completion tests are met, and will be non-recourse to Newmont and Sumitomo thereafter. Newmont and Sumitomo also entered into contingent support agreements related to this debt. As of December 31, 1998, $640 million had been used under this facility. See also Note 3 to the financial statements in the 1998 Annual Report to Stockholders at page 26 therein which is incorporated herein by reference.
Exploration
Exploration work continued through 1998 in areas surrounding Minahasa and Batu Hijau.
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MEXICO
******Again no reference to Ag Armeno's lawsuit****** |
