Newmont Mining Corp's (NEM.N: Quote) Indonesian unit said one of the main obstacles to a share sale has been resolved, paving the way for a dispute with the government to be settled as set out by an arbitration court.

Indonesia had said that Newmont could not sell a stake in its PT Newmont Nusa Tenggara (NNT) unit, which operates the Batu Hijau copper and gold mine in Sumbawa, because the shares were pledged as collateral for a $1 billion loan.

Rubi Purnomo, Newmont spokesman in Indonesia, said Newmont's lenders have agreed to release the 31 percent stake in NNT as collateral because the company has repaid about $650-700 million of the loan.

We hope this confirmation (from lenders) will allow us to transfer the required shares free of any obligation within the 180-day period provided by the arbitration panel, Purnomo said, adding that the unit still needs to repay $300-350 million of the loan.

Last month, an arbitration court ordered the foreign owners of NNT to sell part of their stake to the government within six months, after a long-running dispute. [ID:nJAK503192]

Under the contract of works, foreign investors must sell 51 percent of the shares in the unit to local investors.

PT Pukuafu Indah, an Indonesian mining group, bought 20 percent. Newmont and Japan's Sumitomo Corp (8053.T: Quote) own 45 percent and 35 percent respectively.

The arbitration court also ruled that the shares must not be encumbered by any pledge.

A resolution on the case is seen by analysts as crucial for Indonesia which is keen to attract foreign investment to drive economic growth and create jobs.

The shares in NNT were pledged to a group of banks including the Export-Import Bank of Japan in 1997 as collateral.

Newmont began offering its NNT shares for sale in 2006, initially offering a 3 percent stake for $109 million. The following year it offered a 7 percent stake worth $282 million and another 7 percent stake worth $426 million in 2008.

Newmont has valued the whole of NNT at $4.9 billion and has started negotiations with the government over the price. (Reporting by Fitri Wulandari, editing by Sara Webb)

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