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Newmont's Indonesian problem

Sunday, March 27, 2005

"When I first came to Indonesia, if anybody would have said that I'd be locked up in an Indonesian jail I would have said they're crazy, it couldn't happen. We're good people, it couldn't happen. But it did happen."

Ali Moore has an extraordinary story about how Indonesian authorities jailed five Newmont Mining executives, including an Australian, over allegations of pollution at a gold mine in the north east of the country. The five have been released, but months later are still banned from leaving the country, despite no charges being laid.

It's a story of power, bureaucracy and intimidation, with the executives' plight becoming a litmus test for Indonesia's troubled investment climate.


This story begins here, in Buyat Bay, on the island of Sulawesi, two thousand, four hundred kilometres north east of Jakarta. For eight years, Newmont ran a gold mine in these hills, an open pit operation called Minahasa. Last year, the mine closed most of the gold gone. The job now is rehabilitation. It was when Minahasa stopped producing that the "problems" began.

Just six weeks before the mine was shut, a group of local villagers claimed Newmont had poisoned them. They filed a 700-million dollar law suit against the company.

MANSYUR LOMBONAUNG: Since '2000 we found diseases such as lumps, cramps, headaches, this one was once paralysed, she couldn't walk. And this one has lumps you can see it yourself.

ALI MOORE: Depending which side you take, this story is either a travesty of justice, or a justifiable holding to account of a big foreign corporate.

That's a judgment for others to make. Certainly Newmont says it's done nothing wrong, but mining giants the world over are no saints. What is far clearer cut that is the first time individual employees of a mining company have been targeted by the Indonesian authorities. Those employees have already been locked up once and at any moment, could be locked up again. This morning we look at how the allegations of pollution against Newmont have been investigated, and what that says about doing business in a place, like this. Indeed Buyat Village is divided. There are those who say Newmont has poisoned their bay and there are those who say not. The slogan on the T-shirts says "Buyat Bay Good".

"They're not worried about pollution in the bay, not like other villagers."

ALI MOORE: Directly below this boat is the pipe that carried the waste or tailings from the Minehasa Mine into the bay, It's the impact of that waste that's at the heart of the pollution allegations. Newmont admits it contains both arsenic and mercury, but says the amount is well within acceptable limits, and exactly as predicted when the mine was approved. Whoever is right, the allegations that began, here on the beach in North Sulawesi, started a ripple that turned into a wave. The case against Newmont now involves teams of lawyers across the Pacific and it's embroiled people who had thought of Buyat Bay as a second home. Phil Turner is an Australian. He arrived at Minahasa a decade ago.

ALI MOORE: So what was this Phil?

PHIL TURNER: This was the site of the old exploration camp.

ALI MOORE: Did you think then, that you'd still be here now?

PHIL TURNER: I came here on a three year assignment originally.

ALI MOORE: Turner helped build Minahasa; he converted to Islam, married a local, bought a house and was set to spend part of his retirement in these hills. But, things have changed. Seven months ago, Phil Turner and five other Newmont employees, two Americans and three Indonesians were summoned to Jakarta for questioning about the allegations of pollution.

PHIL TURNER: I was very surprised, I had no indication prior to that I would be questioned.

ALI MOORE: A week later, Turner was called to Jakarta again. This time he was thrown in jail, locked up in this police detention facility in the centre of the city. When you went back for that second questioning, did you have any inkling that that was what was going to happen?

PHIL TURNER: Before I was going to be interrogated for the second time, I was made aware that these four people had been detained. So I expected to be detained during that second interrogation.

ALI MOORE: So that night you could have left?

PHIL TURNER: I could have.

ALI MOORE: But you didn't & why not?

PHIL TURNER: I guess I thought I'd be letting the team down.

ALI MOORE: Turner is a 35-year- veteran of the mining industry.

PHIL TURNER: The detoxification tanks are down at the end &..

ALI MOORE: His title when he was detained was Operations and Maintenance Manager, he doesn't wear a suit and he doesn't make the big decisions.

PHIL TURNER: The most difficult thing for me was telling my daughter that I was being detained.

ALI MOORE: This is your daughter in New Zealand? (Turner nods)

ALI MOORE: And what was her reaction?

PHIL TURNER: Can we cut. I basically had to tell her that the next phone call she got would be from the Embassy, to say that I was in jail.

ALI MOORE: It was thirty two days before Turner and the others were released, more than a month spent in the company of, among others, the suspects in the bombing of the Australian Embassy in Jakarta.

PHIL TURNER: Although the cell doors weren't locked on us on several occasions I did rope the door.

ALI MOORE: You locked yourself in?

PHIL TURNER: Yeah.

ALI MOORE: Phil Turner is now banned from leaving the country until at least January 2006, but no charges have been laid. He's devastated. And he's not the only one.

BILL LONG: I have no understanding why we're targeted as individuals. We weren't part of the planning process for this operation, but yet we're the ones being targeted here.

ALI MOORE: Back in Jakarta, Bill Long is one of the other two expatriate Newmont employees questioned, then detained, locked up the night before Phil Turner.

BILL LONG: The cell door was closed, it was a solid door, it wasn't a barred door, and oh, after a period of time maybe ten or fifteen minutes they opened the door and they threw this thin pad into the cell.

ALI MOORE: Meant to be a mattress?

BILL LONG: Meant to be a mattress. When we opened it up it was on fire and smoldering, lots of smoke and here's the door we're locked in there. After a while they opened the door but the message was loud and clear, it was certainly an intimidation effort on their part.

ALI MOORE: Bill Long arrived at the Minahasa site ten years ago. His last role was Project Manager. He too is banned from leaving the country.

BILL LONG: A year ago, in fact a year ago this month, my wife and I lost a seven year old son to brain cancer and this past Christmas would have been the first Christmas without him and we're a close family, and at the time we needed to be together we couldn't because of this travel ban and I'm quite angry.

ALI MOORE: They didn't come here?

BILL LONG: Well again, I wasn't real trustful but they should be here, I don't want them in danger.

ALI MOORE: The third expatriate among the six initially questioned is Rick Ness, the boss of the Minahasa Mine. Ness escaped detention because he has a heart condition, but he too is banned from leaving Indonesia. A ban that's taken a terrible toll.

RIC NESS: My granddaughter passed away last January. We made every effort possible to try to see if we could get an exemption so I could travel back to the funeral & I mean you get calls from home eh. Dad please come home, we sure could use you here. And you say you can't do it.

ALI MOORE: So your granddaughter dies and you can't go home for the funeral?

RIC NESS: No.

ALI MOORE: Rick Ness, and the others, are confused.

PHIL TURNER: I fish in this bay down here, I catch fish and I share those fish with my family, and I believe there's nothing wrong.

ALI MOORE: Newmont points to a World Health Organisation study last year, which found the level of mercury in Buyat Bay was within acceptable limits.

In fact, the WHO found the level of contamination was much higher in the bay next door, because of the larger number of illegal miners. Did you pollute Buyat Bay?

RIC NESS: Buyat Bay, absolutely not.

ALI MOORE: What's happening now in the Newmont case seems little connected to life in Buyat Bay.

RIC NESS: It's taken on a different life and its very hard to speculate what has happened.

ALI MOORE: The original lawsuit by local villagers has actually been withdrawn, with the Buyat residents admitting they lack evidence. But police are still pursuing their own case in earnest, and at any moment, the Newmont employees could be detained again.

ALI MOORE: At Newmont's Indonesian headquarters in Jakarta, there's a virtual war room. A team monitoring every word that's written or said about the pollution allegations. The man in charge of running Newmont's legal case is Luhut Pangaribuan. He wrote the university textbook on the Indonesian Criminal Code.

LUHUT PANGARIBUAN: This is really strange this case, and you see the law is very obvious but the law enforcers avoid you know the law.

ALI MOORE: So the law has not been followed?

LUHUT PANGARIBUAN: No not being followed.

PHIL TURNER: It's very confusing and the rules of the game don't always seem to be clear.

ALI MOORE: Bob Gallagher is the head of Newmont in Indonesia.

ROBERT GALLAGHER: We were really, truly shocked that basically six guys who've done nothing but their jobs ended up in jail.

ALI MOORE: Gallagher is now dealing with two legal cases, while his six employees are being pursued under the criminal code, Newmont itself has just been hit with a 170-million dollar lawsuit by the Jakarta Government

ROBERT GALLAGHER: The number one thing for us is to get our people out from underneath these criminal charges, that's that is point number one.

ALI MOORE: If this was just a corporate criminal issue Newmont could deal with it?

ROBERT GALLAGHER: That's right.

ALI MOORE: A few days ago Phil Turner returned to Jakarta, like the others, his days are now spent waiting.

PHIL TURNER: The whole experience I've found humiliating and it's been a very emotional and stressful time for me.

ALI MOORE: Thirty years in the industry you could never have pick that this would happen?

PHIL TURNER: It wasn't supposed to finish this way, no.

PART 2

ROBERT GALLAGHER: The police will physically take them to the prosecutor's office and say "they're yours". Now the prosecutor starts this detention thing all over again, he has the ability to detain those people.

ALI MOORE: So they may not come home?

ROBERT GALLAGHER: They, right now, are sitting there wondering if on Tuesday they'll be back in the jail.

ALI MOORE: Are you going on Tuesday with any expectations?

PHIL TURNER: I will have a return ticket to Jakarta.

ALI MOORE: Do you expect that the next step will be that you be charged and it will go to trial?

PHIL TURNER: I expect that will be the procedure yes.

ALI MOORE: In Jakarta, the case against Newmont is being driven from here. The Indonesian Ministry for the Environment. And the Minister, Rakmat Witoelar.

ALI MOORE: Has Newmont broken the law?

RACHMAT WITOELAR: According to what I have studied they have, yes, that is why we are serving a court case against Newmont.

ALI MOORE: How bad do you think the pollution is in Buyat Bay?

RACHMAT WITOELAR: If people get sick because of that then its pretty bad right?

ALI MOORE: It was Witoelar who filed the civil suit against Newmont. And the company says in reality, Witoelar and the Government will also determine what happens next in the criminal case. Despite it being in the hands of the local Sulaweis Prosecutor.

ROBERT GALLAGHER: We feel this whole procedure is being run by the government from Jakarta so I don't think it really matters what he wants to do, it's what the people in Jakarta want to do.

ALI MOORE: We've been to Buyat Bay, we've seen the people fish, we've seen them eat the fish, and we've seen their children swim in the water, if it was that polluted would they do that?

RACHMAT WITOELAR: Yes well, if they didn't know any better they wouldn't do it.

ALI MOORE: In terms of submarine tailings, Newmont have another mine which also has submarine tailings, is that also an issue?

RACHMAT WITOELAR: No it has not become an issue but it will be an issue if we cannot resolve this problem.

ALI MOORE: Do you feel confident the rule of law is being followed, the correct process is being followed?

RACHMAT WITOELAR: Yes.

ALI MOORE: But not everybody is so sure about the rule of law in Indonesia. The country has a reputation for corruption and a notoriously unpredictable legal system.

MARC UPCROFT: It's been watched closely by all mining companies here, by most foreign investors regardless of what industry they're in and certainly by mining executives around the world, there's a lot of attention being put to it.

ALI MOORE: Is it enough at this point to make others either stop or second guess their plans?

MARC UPCROFT: I think they were already second guessing before this happened.

ALI MOORE: Marc Upcroft has surveyed the Indonesian mining sector for the past six years. And it's a dismal story.

MARC UPCROFT: Indonesia is viewed almost unilaterally by mining executives around the world as one of the most prospective countries for mineral wealth. Yet I guess from an exploration perspective over the last three years it's been attracting less than one per cent of exploration budgets globally.

ALI MOORE: The numbers are staggering. Foreign direct investment has dropped to a mere 170-million US dollars from 2.6 billion in the late 90's, down some 80 per cent. More mines are closing than opening.

NOKE KIROYAN: Certainly the fact that executives of a mining company are detained by the police and even jailed for some time is very disconcerting to say the least, and that's not something that would promote investment because if it can happen to Newmont it can happen to anyone.

ALI MOORE: Noka Kiroyan is President of the Indonesia-Australia Business Council, but he's also non executive Chairman of Rio Tinto's Indonesian operations. With your Rio Tinto hat on, how closely are you watching the Newmont situation.

NOKE KIROYAN: Well, let me put it like this, it's not only you, but all mining companies are closely watching the Newmont situation and how it unfolds.

ALI MOORE: Kiroyan says the key issue for Indonesia is the rule of law..

NOKE KIROYAN: The basic issue is the absence of a mining law, because the law of 1967 was declared to be no longer in keeping with the times, and that needs to be replaced. But we have been waiting for a replacement since '98, until now, so it's seven years.

ALI MOORE: Indonesia's Minister of Mineral Resources, who's offices are decorated with pictures of Newmont's Indonesian operations says the wait is over. New legislation will be introduced this year & and when the new laws come, so will the investment.

DR PURNOMO YUSGIANTORO: I do believe you know when we set up the legal certainties by setting the new law and also giving the attractive fiscal policy, if those things are there I believe they're going to come because the investor come here and told me, you know ministers, this country has use of deposits, mining deposits. But you also have to compensate with the regulations, with the fiscals.

ALI MOORE: So they are saying to you "fix the regulations, fix the law, and we will come"?

DR PURNOMO YUSGIANTORO: Yes, and we are going to do it, we are going to do it.

ALI MOORE: But it may not be so easy to attract the big players back to Indonesia. Mining, more than any other sector, involves billions of dollars, legal clarity is a must.

MARC UPCROFT: I don't see it coming back in the short term no, and I don't see it coming back until Indonesia either replaces the current system with something that does provide more certainty, whether it's via a contract or other means, or until such time as particularly foreign investors and foreign lenders become very comfortable with Indonesia from a stability perspective.

ALI MOORE: How far away is that?

MARC UPCROFT: Realistically you're talking ten, fifteen, twenty year before a country would achieve that.

ALI MOORE: For Phil Turner & and Bill Long & and Ric Ness & the long term future is of little interest. Right now, they just want out

BILL LONG: I've been in Indonesia ten years and when I first came to Indonesia, if anybody would have said that I'd be locked up in an Indonesian jail I would have said they're crazy, it couldn't happen, we're good people, it couldn't happen, but it did happen.

ALI MOORE: And it could happen again?

BILL LONG: Could happen again. Anything's possible now I've been in jail for 32 days, so I'd say anything's possible.

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