UPDATE 2-Indonesia to buy shares in Newmont unit

(Adds details, Newmont's comment)

By Muklis Ali

JAKARTA Aug 12 (Reuters) - Indonesia will buy nearly $500 million of shares in a unit of Newmont Mining Corp. (NEM.N), which the U.S. firm has to sell under a divestment rule, Finance Minister Sri Mulyani Indrawati said on Wednesday.

The decision should speed up the resolution of a divestment dispute between the government and foreign owners of PT Newmont Nusa Tenggara, which runs the Batu Hijau copper and gold mine in Sumbawa island.

An arbitration court in late March ordered the foreign shareholders of PT Newmont Nusa Tenggara to sell part of their stake to local investors or to the government within six months, resolving a long-running dispute over ownership.

The Newmont case is seen as a key test for Indonesia, which needs to attract foreign investment into sectors such as mining to drive economic growth and create jobs.

"The Indonesian government is in the position to buy. We expect it will give maximum benefit for the state and the regional government," Indrawati told reporters.

The government will buy a 14 percent stake which is due to be sold in two tranches in 2008 and 2009 and worth $493.6 million, Indrawati said. She declined to say how the government would finance the purchase.

Under the terms of the contract, foreign investors in Newmont Nusa Tenggara Newmont must sell 51 percent of their shares to local investors.

PT Pukuafu Indah, an Indonesian mining group, previously bought 20 percent of the unit, while Newmont and Japan's Sumitomo Corp (8053.T) own 45 percent and 35 percent respectively.

Energy minister Purnomo Yusgiantoro said earlier on Wednesday if the government went ahead with the purchase it could assign state-owned PT Aneka Tambang Tbk (ANTM.JK) or the government investment body Pusat Investasi Pemerintah (PIP).

"It's the privilege of the finance minister whether to give it to Antam or to PIP," Yusgiantoro told reporters.

Newmont had not been notified which party appointed by the government would buy the shares, spokesman Rubi Purnomo said in an email, adding the firm remained "committed to divestiture requirement".

The governments of West Nusa Tenggara province, West Sumbawa regency and Sumbawa regency, the three areas where the mine is located, and financing firm Multicapital have agreed to form a joint venture company to buy 10 percent of the shares in Newmont Nusa Tenggara worth $391 million.[ID:nJAK78636]

But the local governments said they wanted to buy more shares in Newmont Nusa Tenggara. [ID:nJAK499835]

"We still hope to be able to buy more shares. A bigger shareholding will ensure bigger benefits for the region," Muhammad Zainul Majdi, West Nusa Tenggara's governor, told Reuters by telephone, adding he planned to meet the finance minister to discuss the issue.

(Additional reporting by Fitri Wulandari; Editing by Ed Davies)