Summary
Newmont Mining Corporation (NEM) has filed an 8-K report detailing a significant adverse ruling by an economic court in Uzbekistan concerning its 50%-owned Zarafshan-Newmont Joint Venture (ZNJV). The court ruled in favor of Uzbek tax authorities, potentially requiring ZNJV to pay approximately $36 million in back taxes and penalties for the period 2002-2004. This decision challenges the protections afforded by Decree 151, which ZNJV believed guaranteed tax stability and other benefits for the life of its operations. Despite ZNJV's belief that the ruling is in error and its possession of official confirmation that Decree 151 was in effect during the period in question, the tax authorities have begun restricting ZNJV's bank accounts and may seize assets. Furthermore, other government actions are threatening material project agreements and operations. Newmont has stated that the ultimate outcome is uncertain and is pursuing an appeal. The book value of Newmont's interest in ZNJV was approximately $92 million as of May 31, 2006.
Key Highlights
- 1Uzbekistan court rules against Zarafshan-Newmont Joint Venture (ZNJV) in tax dispute.
- 2ZNJV faces a claim of approximately $36 million in back taxes and penalties for 2002-2004.
- 3The ruling challenges Decree 151, which provided tax protection and operational benefits to ZNJV.
- 4Tax authorities are restricting ZNJV's bank accounts and may attach assets.
- 5Other government actions threaten material project agreements and operations in Uzbekistan.
- 6Newmont Mining Corporation (NEM) has a 50% ownership interest in ZNJV, with a book value of $92 million as of May 31, 2006.
- 7ZNJV intends to appeal the court's decision and pursue available legal mechanisms.