INDONESIA: U.S. mine to pay Jakarta $30 million to settle suit

Newmont Mining agreed Thursday to pay $30 million to Indonesia in a settlement of a civil lawsuit in which the government argued that the company had polluted a bay with arsenic and mercury.

The settlement would have no effect on the criminal trial against the company and its Indonesian director, now under way in the province of Northern Sulawesi, Indonesian officials said.

Under the terms of the "good will agreement" the government will drop a $135 million suit filed against Newmont last year after villagers near the company's gold mine at Buyat Bay in Northern Sulawesi complained of illnesses they said were caused by waste from the mine.

The accord does not address the question of pollution straight on and does not state whether the company's mine, which deposited waste through a pipe into equatorial waters, polluted the bay. The company vigorously denies the pollution charges.

The only reference to pollution in the accord said that "although Newmont maintains that its operations did not cause environmental pollution, both parties recognize that other parties have expressed different views."

Mahendra Siregar, deputy coordinating minister for economic affairs, said pollution was not the focus of the agreement and, referring to the criminal proceedings, added, "We would prefer the court proceed without any reference to what we have signed."

The government contends in the criminal case that Newmont polluted the bay and deposited its waste, laden with heavy metals, without a proper permit.

The importance of the agreement for Newmont, one of the world's largest gold miners, with operations in the United States, Africa, and Latin America, was evident in the presence at the announcement Thursday of the chief executive, Wayne Murdy, who flew from company headquarters in Denver.

The gold mine above Buyat Bay closed in 2004 after eight years. The company operates a far larger and more valuable gold and copper mine on the Indonesian island of Sumbawa.

The mine at Buyat Bay was the subject of an internal company audit in 2001 that showed tons of toxic mercury vapors had been put into the air when a pollution control device failed to operate. The company did not dispute that the emissions occurred over four years but said they were not harmful to the environment or the people.

Neither the Indonesian government's civil suit nor the criminal suit addresses the mercury emissions.

The vice president for Indonesian and Australian operations at Newmont, Robert Gallagher, said the accord announced Thursday called for a six-person scientific team to monitor the environment around the mine for 10 years. The $30 million to be spent over the next decade would be dedicated to monitoring the environment around the mine and to community development in the province of Northern Sulawesi, Gallagher said.

He also described the accord as "independent" of the criminal proceedings. He said he believed that the company's scientific studies would "exonerate us from the charges" at the trial.

The question of whether arsenic and mercury contained in the mine waste polluted the sediment in the bay is highly contentious, as both the government and the company have marshaled evidence to buttress their arguments. Both sides agree that tests showed the water quality in the bay met Indonesian standards.

The Ministry of Environment contends that the waste from the gold mine left high levels of arsenic and mercury in the sediment on the floor of the bay. The arsenic entered bottom-feeding organisms known as benthos that provide food for fish, the ministry said in a study in late 2004.

Newmont denies that the arsenic entered the food chain, saying that it was a kind that would not dissolve in water.

A report commissioned by Newmont and performed by the Australian government's Commonwealth Scientific and Industrial Research Organization noted elevated levels of arsenic in the sediment near where the mine waste was deposited. But the company argues that the fish in the bay were not contaminated.

The arguments over pollution have focused on whether the system of waste disposal, known as submarine tailing disposal, worked as safely as the company argues. The method is essentially banned in the United States.

In the past, neither side has trusted each other's scientific results. The accord stipulates that the new six-person team to monitor the bay will be chosen equally by Newmont and the government, with each side having a veto over nominations.

"In order for this process to have any credibility, it will be imperative that the six-member scientific team be truly independent of Newmont's influence," said Robert Moran, an American hydrogeologist who advises the mining industry and environmental groups.

Under terms of the accord, Newmont will make a payment of $12 million in the next 10 days, Gallagher said. The government would then withdraw the civil law suit, he said.

Mahendra, who helped negotiate the deal, said the agreement marked a victory for the local people.

"The people and the environment are the winners, nobody else," he said.

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