Newmont Mine in Indonesia A Case Study

To,

Mir Semon Haider, Lecturer North South University Banani, Dhaka. Subject: Submission of case analysis of Newmont Mining in Indonesia. Dear Sir, We the group assigned by you in your MGT 372 course have prepared a case analysis about Newmont mining in Indonesia and We have tried the best of our ability to complete the case analysis properly and to produce a meaningful paper within our limit. Above all, this case study has helped us to gain valuable information and knowledge required for a case analysis. In spite of the various difficulties faced in preparing the case analysis, we have given our utmost care to be as thorough as possible. Now, it is our performed pleasure to put forward our effort for your prudent perusal. Yours truly,

Table of Contents Topic 1. Executive Summary 2. Part 1 3. Part 2 4. Part 3 5. Part 4 Page No

Part One

What were the key political problem facing Mr. Lahti and Newmont Mining in Asia?

Mr. Lahti and Newmont Mining Corporation were facing many political Indonesia, problems including in a

changing political landscape. From the Japanese invasion and subsequent occupation during World War II ended Dutch rule, and encouraged the previously suppressed independence War II, the Indonesian in World

movement. In May 1940, early Netherlands was occupied by Nazi Germany. The Dutch East Indies declared a state of siege and in July redirected exports for Japan to the US and Britain. Negotiations with the Japanese aimed at securing supplies of aviation fuel collapsed in June 1941, and the Japanese started their conquest of Southeast Asia in December of that year. That same month, factions from Sumatra sought Japanese assistance for a revolt against the Dutch wartime government. The last Dutch forces were defeated by Japan in March 1942.In July 1942, Sukarno accepted Japan's offer to rally the public in support of the Japanese war effort. Sukarno and Mohammad Hatta were decorated by the Emperor of Japan in 1943. However, experience of the Japanese occupation of Indonesia varied considerably, depending upon where one lived and one's social position. Many who lived in areas considered important to the war effort experienced torture, sex slavery, arbitrary arrest and execution, and other war crimes. Thousands taken away from Indonesia as war laborers (romusha) suffered or died as a result of ill-treatment and starvation. People of Dutch and mixed Dutch-Indonesian descent were particular targets of the Japanese occupation.

In March 1945 Japan organized an Indonesian committee (BPUPKI) on independence. At its first meeting in May, Supomo spoke of national integration and against personal individualism; while Muhammad Yamin suggested that the new nation should claim Sarawak, Sabah, Malaya, Portuguese Timor, and all the pre-war territories of the Dutch East Indies. The committee drafted the 1945 Constitution, which remains in force, though now much amended. On 9 August 1945 Sukarno, Hatta, and Radjiman Wediodiningrat were flown to meet Marshal Hisaichi Terauchi in Vietnam. They were told that Japan intended to announce Indonesian independence on 24 August. After the Japanese surrender however, Sukarno unilaterally proclaimed Indonesian independence on 17 August. Ahmed Sukarno emerged as the countrys first president and quickly established his authoritarian regime, labeled guided democracy. In the mid-1960s, a failed coup began by the Indonesian communist party (PKI), which Sukarno empathized with, was stamped out by the national military that was led by the army chief of staff, General Suharto. The PKI was the largest communist party in the world outside the Soviet Union or China. Penetrating all levels of government, the party increasingly gained influence at the expense of the army. On September 30, 1965 six of the most senior generals within the military and other officers were executed in an attempted coup. The insurgents backed a rival faction of the army took up positions in the capital later seized the national radio station. They claimed they were acting against a plot organized by the generals to overthrow Sukarno. Within a few hours, Major General Suharto, commander of the Army Strategic Reserve, mobilized counteraction, and by the evening of 1 October, it was clear the coup, which had little coordination and was largely limited to Jakarta, had failed. Complicated and partisan theories continue to this day over the identity of the coup attempt organizers and their aims.

According to the Indonesian army, the PKI were behind the coup and used disgruntled army officers to carry it out, and this became the official account of Suharto's subsequent New Order's administration. Most historians agree that the coup and the surrounding events were not led by a single mastermind controlling all events, and that the full truth will never likely be known. While the PKI's role in the events of the night of 30 September-1 October remains debated, the effects on it were devastating. The PKI was blamed for the coup, and anti-communists, initially following the army's lead, and encouraged by Western embassies, went on a violent anticommunist purge across much of the country. The PKI effectively destroyed, and the most widely accepted estimates are that between 500,000 and one million people were killed. The violence was especially brutal in Java and Bali. The PKI was outlawed and possibly more than 1 million of its leaders and affiliates were imprisoned. Throughout the to 1965-66 restore his periods, political President Sukarno attempted position and shift the country back to its pre-October 1965 position destroyed destruction. Although he remained president, but with the his the Guided PKIs Democracy balancing act was weakened

Sukarno was out-maneuvered and forced to transfer key political and military powers to General Suharto, who by that time had become head of the armed forces. In March 1967, the Provisional People's Consultative Assembly (MPRS) named General Suharto

acting president. Suharto was formally appointed president in March 1968. Sukarno lived under virtual house arrest until his death in 1970. Suharto established his political new order by massing power in the central government and military. The economy improved dramatically under Suhartos rule, although corruption filtered through the military, government, and legal system. He is known for using an iron fist to impose his will on the countrys vast array of religious growth. When the Asian financial crisis of 1997 hit, Indonesias flawed economic structure and corruption sent the country spiraling downward. Inflation hit 80 percent at one point, and the economy contracted by 14 percent. Demonstrators turned against ethnic Chinese, and conflicts arose between Christians and Muslims. Companies owned by ethnic Chinese or foreign companies using ethnic Chinese in management positions were the targets of demonstration and incurred serious property damage. Protesters and rioters demanded Suhartos resignation, and he eventually gave in after 32 years of rule. On May 21, 1998, President Suharto announced his resignation and asks Indonesian Vice President DR BJ Habibie to become the new Indonesian President. From 1998 to 2005, the country had four presidents: Bacharuddin Jusuf (BJ) Habibie (1998 to 1999), Abdurrahman Wahid (1999 to 2001), Megawati Sukarnoputri (2001 to 2004) and Susilo Bambang Yudhoyono (2004 to Current). Although Suharto caused many problems in Indonesia, his political helped stabilize the mining industry. Newmont worked directly with the central government rather than deal with the different local governments. All this changed once Suharto resigned. and ethnic groups. Suharto invited major foreign investment, which produced substantial, if uneven, economic

In October 1999, the People's Consultative Assembly (MPR), which consists of the 500-member Parliament plus 200 appointed members, elected Abdurrahman Wahid (commonly referred to as "Gus Dur") as President, and Megawati Sukarnoputri as Vice President, for 5-year terms. Wahid named his first Cabinet in early November 1999 and a reshuffled, second Cabinet in August 2000. President Wahid's government continued to pursue democratization and to encourage renewed economic growth under challenging conditions. In addition to continuing economic malaise, his government faced regional, interethnic, and interreligious conflict, particularly in Aceh, Maluku Islands, and Irian Jaya. Another political issue facing Indonesia was the independence movement by east Timor. Since 1975, when Portuguese rule left the territory, east Timor engaged in a civil war between advocates of integration with Indonesia and those who wanted an independent nation. In West Timor, the problems of displaced East Timorese and violence by proIndonesian East Timorese militias caused considerable humanitarian and social problems. After UN intervention, the Indonesian military withdrew from the territory and east Timor became the worlds newest nation on May 20, 2002. An increasingly assertive Parliament frequently challenged President Wahid's policies and prerogatives, contributing to a lively and sometimes rancorous national political debate. During the People's Consultative Assembly's first annual session in August 2000, President Wahid gave an account of his government's performance. On January 29, 2001 thousands of student protesters stormed parliament grounds and demanded that President Abdurrahman Wahid resign due to alleged involvement in corruption scandals. Under pressure from the Assembly to improve management and coordination within the government, he issued a presidential decree giving Vice President Megawati control over the day-to-day administration of government. Soon after, Megawati Sukarnoputri assumed the presidency on July 23. In 2004, the largest one-day election in the world and

Indonesia's first direct Presidential election was held and was won by Susilo Bambang Yudhoyono, commonly referred by his initials SBY. Faced with lots of changing political landscape, Newmont decided to close the Minahasa Raya mine in 2003.

Part Two

How has the legal Situation in Indonesia contributed to Newmont Minings dilemma?
Legal system is one of the most important dimensions of the external environment that influence international business. It is necessary to be aware of the legal system in the country in which they operate the business. Legal system differs in terms of the nature of the system. Indonesia becomes an independent nation in 1945. Since its independence it never face a well suited and stable legal situation .The ruler were always intended to change other s view and policy and tried apply newer one, no one continued the previous system. As a result the condition never become stable and the foreign and local companies who wanted to do business in Indonesia had to face lots of legal problems.

According to the case, after achieving the independence in august 17 in 1945 many political party has come into power and ruled the

country according to their policy. In this type of condition many international company who are doing business there faced a lot of problem s in doing business. At the same time they got some facilities for the change in policy. Indonesians political situation was very unstable for running effective business operation. Here political environment is changing dramatically. After a certain time period new political party is coming into power and establishing new rules and regulation and demolishing the older one. So, it was a very tough situation for continuing international business there because international companies who are willing to do business in Indonesia they dont have any specific information about the political situation of the country. It is continuously changing. So, operating business in such a country the world famous organization Newmont mining faced a very fluctuating political situation in Indonesia including changing political and legal landscape, illegal mining, and environmental protest and declining gold price etc. An Indonesian court acquitted Newmont Mining Corporation, the American mining giant, charges of polluting a bay here with toxic waste from a now defunct gold mine, in a case that became a litmus test of foreign investor confidence in Indonesia. Environmental activists had expressed their disappointment with the verdict. About 1,000 anti-Newmont protesters gathered for the verdict outside the court, which was cordoned off and had a heavy police presence. Newmont was found not guilty because of legal procedures, but not on the substance. Newmont the second largest gold producer worldwide come to expand their business in Indonesia and had to shut their operation due to unavoidable circumstances. When Suharto has elected as a president of Indonesia he tried to stabilize the mining industry. In that time Newmont mining worked directly with the central government rather than deal with the

different local government but this situation was not longer any more after Suharto resigned from his power. As a result, new president has come and he established a new political frame in the country and this system has made a tough condition for doing business in the country including raising tax, environmental barriers etc. According to new government policy, they decentralized the structure and made more powerful the local government which is more challenging for Newmont mining as they had a well understanding with the central government. Finally Newmont become very confused because they even didnt know whether they will follow the central government or local government policies. In fact, the new president thought that the earlier presidents policies only benefited the multinational enterprises. Eventually they changed earlier policies and formed new rules and regulation which was really challenging for MNE like Newmont Mining Corporation. Though in Suhartos time Newmont exempted from paying any tax on mining waste,

Newmont was hit head on the defective court system million in back pay of taxes for waste

and local

aggression in 1999, when the local Minhasa district demanded 8.2 material . The local parliament passed a law allowing to collect this money from Newmont. A corrupted and unstable legal system can make it impossible to do business for any company. This truth is proved by Newmonts dilemma in Indonesia.

Part Three

What are the environmental dimensions to gold mining in Indonesia, and whose responsibility is it to protect the environment?

There are several environmental dimensions to gold mining in Indonesia. They are: Political Corrupted Legal System Mercury and Arsenic Spillage Financial Crisis Illegal Mining

Gold Economy

The political situations in Indonesia went from bad to worse. Discussing it requires some information on Indonesias political history. Political Dimensions - History

Indonesia has a population of about 210 million people. Indonesians fight extreme poverty, with per capita income at $570 and a 15-20% unemployment rate. This unemployment rate contributes to most of the poverty and the population as well. For years to come, Indonesia was autocratically ruled by the Netherlands. These events were before World War II happened then Indonesia was known as Dutch East Indies. The Japanese invaded and took control of the country for three years. During this time and the invasion, an independence movement was seen by the Indonesian nationalists. By the early 20th century Dutch dominance extended to what was to become Indonesia's current boundaries. The Japanese invasion and subsequent occupation during WWII ended Dutch rule, and encouraged the previously suppressed Indonesian independence movement. Two days after the surrender of Japan in August 1945, nationalist leader, Sukarno, declared independence and was appointed president. The Netherlands tried to reestablish their rule, but a bitter armed and diplomatic struggle ended in December 1949, when in the face of international pressure, the Dutch formally recognized Indonesian independence. An attempted coup in 1965 led to a violent army-led anti-communist purge in which over half a million people were killed. Politically, General Suharto, out-manoeuvred President Sukarno, and was

formally appointed president in March 1968. His New Order administration garnered the favour of the West whose investment in Indonesia was a major factor in the subsequent three decades of substantial economic growth. In the late 1990s, however, Indonesia was the country hardest hit by the East Asian Financial Crisis which led to popular protests and Suharto's resignation on 21 May 1998. The Reformasi era following Suharto's resignation, has led to a strengthening of democratic processes, including a regional autonomy program, the secession of East Timor, and the first direct presidential election in 2004. Political and economic instability, social unrest, corruption, natural disasters, and terrorism have slowed progress. Although relations among different religious and ethnic groups are largely harmonious, acute sectarian discontent and violence remain problems in some areas. How much has this affected Gold Mining? Newmont Mining is faced with many problems in Indonesia, including a changing political and legal landscape, illegal mining, environmental protests, and declining gold prices and reserves. President suharto caused problems of course, but his policies helped stabilize the mining industry. Newmont used to work directly with the central government instead of working with the local governments of different locales. However all this changed as Suharto left his chair; he resigned. The central government then lost much of the power to the regions. This has caused much confusion among business investors and industry sectors. They have no idea which to followAs this wasnt Suhartos strict regimeit was Wahids time to plough the field. That set ambiguous doubts to gold mining. Should they follow the central or the regional government?

Corrupted Legal System

Indonesias legal system was in great mayhem tooThe corruption of the Suharto regime filtered into the courts, making it even riskier for foreign firms like Newmont Mining to operate. There is deterioration of the court system, stemming from the political conflicts between local regulations, parliamentary decrees, ministerial decisions and presidential orders. How has this affected Newmont? Newmont was hit head on from the defective court system and local aggression in September 1999, when the local Minhasa district demanded millions of dollars back for taxes and waste materials. Even though Newmont had a contract with Suhartos governance from paying any levies, the local government wanted levies. Mercury and Arsenic Spillage

Newmont Mining co-owns the mine with Buenaventura Mining of Peru and the World Banks International Finance Corporation (IFC), spent $12 to 14 million on the clean-up, but was unable to account for nearly 15 percent of the spilled mercury. In exchange for agreeing not to sue the mine, some of the spill victims were offered small cash settlements and medical care. But many residents continue to report health problems and some have attempted to press their case against Newmont in US courts. The Company is accused of allegedly polluting the Buyat Bay with its tailings disposal processes, which included the dumping of mercury and arsenic into the bay. In the high-profile environmental case, witnesses took the stand

last week to say that they fell ill after drinking the water of the Buyat River, which is in the area of the mine. The Buyat River was the main water source for the surrounding village of Buyat Pante. Presiding judge Ridwan Damanik decided that the prosecutors and the defense should go together to Buyat for a direct observation, in order to get a clear view of the charges. Financial Crisis

Newmont Mining had to force to shut down Minhasa. After being ordered to pay back for levies and taxes, Newmont was again, under local courts pressure, to pay $500,000 and it paid another $2.5million to be added into employee programs and community development projects. Local problems have caused Newmont to shut down the project several times. Former landowners blockaded the entrance to the min at least 3 times. They forced Newmont to pay more for the land Newmont was using. Newmont tried arguing it had compensated well while purchasing the land. illegal Mining

Another major problem was that Newmont was the fact that many illegal miners were starting to steal gold from the mine. The numbers of illegal gold stealers were tripling since it stated. However this had its own reasons the unemployment rate in Indonesia. That created recession. In the Minhasa mine alone there were 3000 illegal miners! Mr. Lahti thought of taking a creative approach. He made a contract with the government to clear out the miners and he would reward them some of the gold the illegal miners.

However the deal fell, because they could not implement their side of the bargain. Poor Lahti bargained and beggedbut could not get rid of the looters. Gold Economy

The price of gold and gold reserves in the mine has been declining. From a February 2000 to March 2001, the price of gold declined 13% and has devalued a third since 1997. There are only 1/5th of the reserves of gold left in the mine. Once they are over, Newmont has to close down the Minhasa mine. Responsibilities Managers of foreign firms in Indonesia like Mr. Lahti wonder if all the risk involved with operating in the country is worth all the riskThey have been trying to change the policies the regulations the norms the government culture itself. However the political and the legal uncertainties remain.. There is much to be done. It is the environmental governors responsibility to take care of all the environmental problems. The Indonesian legal systems should take a major change if they want to save their country.

Part Four

Evaluate Mr. Lahtis approach to solving Newmonts problem. Could he have done anything differently?

We will evaluate Lahtis approach to solving Newmonts problems in several categories. They are as follows: Evaluating Company Sustainability: Newmont Mining in Minahasa, Indonesias long-term success is aligned with creating value for its shareholders, employees, and the communities in which they operate, and by managing their broader social responsibilities. It focuses on five key areas that are critical to the companys social responsibility: Health and safety of its employees; Fair and equitable treatment of employees their working conditions, human rights, professional development and remuneration; Its record on local employment, training, health, education and infrastructure; Its environmental performance; and Their economic benefits to the communities where they operate, with a focus on building long-term value. To this end, Newmont developed its own comprehensive internal Five Star Assessment system, a management system to drive social, environmental, and health and safety performance at each of its sites. Independent external assessors review each sites management system performance for the Five Star Assessment annually. The assessors use a series of defined levels (or stars) to indicate ranking against the management system criteria. Newmont requires its sites to strive for the five star level representative of a documented management system that drives continuous improvement and is part of the sites culture. The Five Star Management System is intended to create consistent institutional discipline, with the idea that improved systems result in improved performance.

The criteria by which Newmonts operations are evaluated through the Five Star Assessment are aligned with the International Organization for Standardization (ISO) for Environment (ISO14001) and Health and Safety (ISO9000). For external relations, Newmont uses the Institute of Social and Ethical Accountabilitys AA1000 accountability standard, designed to improve accountability and performance through stakeholder engagement, reporting and auditing. Newmonts The Five Star Management System depends on the following criterions: Newmonts Management Standards: No system or process developed Informal or incomplete system Formal system developed and implemented Review and continuous improvement Industry best practice demonstrated

Newmonts Performance Standards: Significant improvement required Require improvement Performance meets standards Hazard/risk being managed Industry best practice

Evaluating the decision about closing the mine: Newmont Minahasa is approaching closure as the mineable ore deposit has been depleted. In 2003, we continued implementing the

mine closure plan approved by the government of Indonesia in 2002. The closure plan, which incorporates stakeholder views, is technically sound and sets the standard for mine closure in Indonesia. With sustainable development values at the heart of the plan, we are committed responsible, to a closure program viable and that is environmentally economically socially

equitable. Designed to protect human health and the environment, the program will assist local communities to become economically independent. Although the final ore extraction from open pit operations ceased in October 2001, gold production will extend to July 2004. Some closure projects, such as decommissioning and removal of major facilities, cannot start until processing ceases. Evaluating Newmonts Achievements, challenges, and

opportunities: Each year, Minahasa achieves successes and encounters challenges and opportunities. A summary of these is provided below: Achievements: Safety: Recorded lower work injury, property damage and safety infringement due to continuous improvement in safety skills and awareness of employees and contractors. Employee Well-being: Employees demonstrated focus and commitment to production and safety. Community: Newmont mining of Minahasa met goal of creating sustainable development program in 2003 closure plan. It transferred community development projects to governments and community organizations. It also established partnership with various stakeholders to ensure smooth transition. Environmental Stewardship: The mine met reclamation and water management targets. It completed construction of 85 percent

of water management structure. Also continued close partnerships with local communities and monitoring by government institutions.

Challenges & Opportunities: Safety: Newmont Mining in Minahasa, Indonesia maintaining employee focus on safety during closure. Its conducting refresher training, intensifying safety meetings and inspections, and providing more safety awards. Employee Well-being: Its implementing employee redundancy program. In 2003, 63 people accepted severance packages. Its also employing contractors for specific projects. Community: Its fulfilling commitments to a growing number of stakeholders, and in environmental, community and sustainable development with respect to mine closure. Environmental Indonesia is Stewardship: Newmont Mining in Minahasa, closure criteria set for environmental meeting

programs. Its monitoring stakeholder engagement in environmental stewardship, and managing differing views and opinions from diverse stakeholders. Its also educating stakeholders on closure criteria. Evaluating Human Resource Performance: Minhasas year-end staff total was 167 Newmont employees and 248 contractors. More than 70 percent of employees are from the Minahasa region, with preference given to the nearby villages of Ratatotok and Buyat, where Minahasa workers account for a quarter of all households.

To mitigate the economic impact of closure on the villages, PT NMR announced its closure schedule and offered vocational training, jobsearch assistance, and career counseling. Agreement on redundancy package content occurred in 2001 after negotiation with the employee union. An employee redundancy program was rolled out in three phases in 2003. Sixty-three workers took advantage of layoff packages. All pre-closure training programs and re-employment projects are to be completed by mid-2004. Minhasas management team continued to communicate specific closure plans, building trust between the local workforce and community. Employees also are involved in the sustainable development initiatives with the community. The technical experience and professionalism of the Minahasa staff have been widely recognized in the area, as shown by the high reemployment rate of Newmont workers, particularly at the Batu Hijau operation in Sumbawa. Moving forward, the challenge at Minahasa will be to continue motivating employees amid closure.

Evaluating Mr. Lahtis health & safety approach: In 2003, Minhasas health and safety program focused on a safe and responsible mine closure. The operation reduced property damage costs by nearly 60 percent from 2002, and reported only one Lost Time Injury. Its Total Reportable Injury Frequency (TRIF) rate was 0.87 per 200,000 hours worked. A Lost Time Injury is any work-related injury or illness that prevents the employee from working the next day or shift. A Reportable Injury is any injury or disease that requires more than simple first aid. In addition, Minahasa significantly reduced occupational health diseases at the site, as industrial hygiene programs were implemented. The mine assisted a local health community center in

examining blood for malaria and typhoid tests, and provided a tuberculosis control program with the North Sulawesi Health Department. By establishing a public sanitation program at the community level, in addition to SARS, tuberculosis and malaria control programs, the operation also reduced the amount of epidemic diseases in the areas near the mine. As part of Newmont's effort to globally formalize and standardize its risk management program among its operations in 2003, Minahasa began developing its formal risk Management program. This effort will help the operation identify workplace hazards and risks, especially related to closure.

Key risks identified in 2003 include: Water management: Water coming from the site has the potential to affect water quality after closure if not managed properly. Minahasa developed a post-closure plan to ensure proper water management, thereby protecting the health and safety of residents and employees. Water management structures are being built to route water through the site in a controlled manner without degrading water quality. This construction poses a safety risk, as most builders are local contractors with limited safety training and experience. Newmont is requiring the contractors to uphold its safety standards to help minimize risks. Reduced attention to safety: The mine recognizes that declining motivation of employees amid closure may lead to lower safety awareness. More safety meetings and inspections were conducted despite declining operational activities. Safety refreshment training also was conducted to increase awareness, and awards were given to employees who promote safety awareness. Increased community interaction: Road traffic is increasing as closure activities increase. To reduce traffic accidents and road hazards, Minahasa created a company policy and coordinated its

efforts with local police. The mine also installed additional traffic signs and began monitoring speed limits on site. Road conditions were inspected regularly and corrective measures were taken in problem areas. To address hearing loss associated with noise, Minahasa conducted a hearing conservation program. No hearing loss cases were reported in 2003. Dust monitoring also was conducted and workers were advised to wear proper dust masks in certain areas. Annual medical checkups revealed no lung disorders or occupational health diseases. In addition, monthly monitoring for mercury exposure in urine and vapors found workers were not exposed to elevated levels. Training programs were implemented in 2003 to maintain health and safety awareness and education. Thirty volunteers of the Emergency Response Team received firefighting and emergency response training. All employees participated in a safety refresher course. Other training was provided to the mines food handlers. In 2004, the operation will continue its efforts to reduce injuries and property damage and improve attention to safety. Minahasa was recognized for its commitment to safety in 2003. For assisting and participating in firefighting and medical emergency service training, it received an Emergency Response Award from the North Sulawesi Indonesia 811 Ambulance Committee. The operation also received an Industrial Health and Safety Achievement Award from Sam Ratulangi University for sponsoring and facilitating an occupational health course.

Evaluating Mr. Lahtis approach towards Environmental issues:

Managing environmental impacts during mine closure was the sites focus in 2003. Key challenges relate to water management, disposal of tailings and land reclamation. Without appropriate water control structures, site water has the potential to affect off-site water quality after mine closure. To protect the health of people and the environment, the site built water management structures using local employees from surrounding villages. The structures included channels, culverts, pipes and drop structures engineered to handle a 100-year flood. Nearly 85 percent of the structures were finished in 2003, with project completion set for 2004. Whenever land is cleared for mining activity, there is a potential for erosion. To prevent this, cleared areas are replanted with native plants and trees. In most cases, reclamation at Minahasa involves visual improvement along with soil stabilization and replanting. Specific components include re-grading and contouring, topsoil spreading, replanting, erosion control and water management. Topsoil that had been stripped from the site during mining was stockpiled and now is being used in reclamation. By the end of 2003 79 hectares (195 acres) were reclaimed and met closure criteria. Another 39 hectares (96 acres) are being restored. Minhasas reclamation program is monitored by a multi stakeholder team consisting of experts from the forestry, mining, and environmental departments from the local, provincial and national levels of government, as well as the communities and the company. Minahasa disposes of its tailings (the finely crushed rock that remains after gold has been removed) using submarine tailings placement. The tailings are placed in Buyat Bay, more than 80 meters (87.5 yards) below the sea surface, 1 kilometer (0.62 mile) offshore. Reducing tailings impoundments on land and the amount of forest and habitat affected are the key benefit of ocean disposal of

tailings. The islands rainy climate and the areas high seismic activity also made sub-sea tailings a good alternative to land disposal. Tailings from Minahasa are both non-toxic and nonhazardous. Submarine tailings placement will continue until the end of mineral processing in 2004. Routine marine environmental monitoring of coral reefs, fisheries, seawater and sediment continued in 2003. Studies indicated there has been no detrimental impact on the coral reefs or reef fish. The site will monitor water quality and marine life up to three years after site closure. A survey conducted in 2003 examined tailing placement and determined that most of the tailings are deposited in an asymmetrical cone-shaped mound in the immediate vicinity of the discharge point. The tailings mound measures about 500 meters (one-third mile) by 750 meters (nearly one-half mile) with the thickest point approximately 11.5 meters (about 12.5 yards). These studies demonstrate the tailing is being deposited as predicted by mathematical modeling.

Evaluating Mr. Lahtis approach towards Economical issues: At Newmont, being a good corporate citizen means re-investing back into every host community where the company operates. This philosophy of sharing the wealth comes in the form of contributing to local health-care agencies, educational programs, service organizations and more. PT NMR retained 167 employees in 2003, down from 700 at the height of operations, with a payroll of $3.7 million. The mine paid $3.3 million in taxes and $602,000 in royalties. About 250 contractors were paid $4.6 million in 2003, mostly for mine reclamation and water-management projects, construction materials and food. Newmont Minahasa paid a total of $19.1 million for outsourced goods and services in 2003.

Minahasa has been a major economic contributor to the area for the past decade and helping the community survive the operations closure is a top priority. In 2003, the mine spent $20,000 on small and medium economicdevelopment programs focused on the fishing and coconut farming industries. More than 3,000 fingerlings of high-value fish were introduced at facilities sponsored by Newmont. In 2004, fish farmers are expected to reach commercial-grade production levels. Minahasa also spent $10,000 to help local merchants develop a niche coconut oil product, virgin coconut oil. In 2003, Newmont Minahasa bought four coconut milk expellers and cream separators to produce better quality coconut oil. Additional Newmont support Minahasa to the business community and involves to the the registration of 45 local businesses as suppliers and contractors. provides coaching training businesses so they can meet contractor criteria and become more competitive. Even companies that do not do business with the mine have received financial and technical training. Newmont Minahasa invested $300,000 on community development projects in 2003. That included $115,000 to improve roads, bridges and a clean water system; $68,000 for education-related programs; and $41,000 for health and sanitation programs. Another $107,000 worth of in-kind contributions was donated to community groups in the form of labor, training, seminars and materials, including a donated building, furniture and books. Conclusion: At the time Newmont established its mining operations in Indonesia, the central government was very much in control of the country, and the future seemed reasonably predictable. However, the effects of political and economic turbulence are largely beyond the control of firm managers, particularly in the short run, and certainly so in this case. Although Mr. Lahti was both locally responsive and

proactive in his attempts to solve Newmonts problems at the Minhasa Raya mine, it appears the relationship between Newmont and the local activists was largely an adversarial one. If Mr. Lahti had been able to find a way to work in collaboration with the firms employees and local community leaders and activists to address perceived problems with its operationand to promote its benefits perhaps he could have achieved greater progress. In addition, Newmont may need to rethink its method of operating in countries with relatively high economic and political risk. Entering into joint ventures with local firms may be a viable alternative.