A consortium of three local governments in Indonesia have appointed PT Multicapital to help finance the purchase of a 10 percent stake in a unit of Newmont Mining Corp, a local mining official said on Saturday.

The governments of West Nusa Tenggara province, West Sumbawa regency and Sumbawa regency, the three areas where the mine is located, and Multicapital would form a joint venture company to negotiate a price with Newmont, Heryadi Rachmat, the head of West Nusa Tenggara provincial mining office, said.

Out of six potential investors, we find Multicapital to have the best interest for the local government and a good track record in investment, Rachmat told Reuters by telephone.

There was an initial agreement for the local governments and Multicapital to split revenue 25 percent and 75 percent respectively, Rachmat said without elaborating.

Local media has reported Multicapital is a subsidiary of PT Bumi Resources, Indonesia's biggest coal miner. A Bumi spokesman could not immediately be reached for comment.

Bumi has previously tried to buy shares in PT Newmont Nusa Tenggara, which operates the Batu Hijau copper and gold mine in Sumbawa island, eastern Indonesia.

Last year Bumi, which is linked to the family business of Indonesia's welfare minister Aburizal Bakrie, entered an initial agreement to buy 31 percent of Newmont's local unit.

Under a memorandum of understanding, the governments of Sumbawa regency, Sumbawa Barat regency and Nusa Tenggara Barat would buy the shares but turn them over to Bumi. The deal did not materialize.

The new investment plans follows a prolonged dispute between foreign shareholders at PT Newmont Nusa Tenggara (NNT) and the government over divestiture obligation.

In late March, an arbitration court ordered the foreign owners of PT NNT to sell a 17 percent stake to the Indonesian government within six months, of which a 10 percent stake should go to the local governments.

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

PT Pukuafu Indah, an Indonesian mining group, previously bought 20 percent of the unit, while Newmont and Japan's Sumitomo Corp own 45 percent and 35 percent respectively.

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

A resolution of the case is seen by analysts as crucial for Indonesia's plans to attract foreign investment into sectors such as mining to drive economic growth and create jobs.

But following the arbitration court's ruling, the two sides have failed to reach an agreement on a valuation for the unit.

Newmont has valued the whole of NNT at $4.9 billion and has started negotiations with the government over the price. The government said it planned to use an independent appraiser to value the unit.

(Reporting by Karima Anjani; editing by Ed Davies)

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