Newmont Mining has been warned by the Indonesian government not to go ahead with any plans for a partial share market listing of its local gold and copper mine.

The US company is required to gradually sell down its stake in the $4bn Batu Hijau mine and has canvassed the option of doing that via an initial public offering.

However, the government said in a statement this week that an IPO would break the conditions of Newmont’s “contract of work” or local mining licence, which was issued in 1986.

It insisted that Newmont sell shares in the mine directly to the three regional governments that surround its operations.

Both the government and Newmont filed for international arbitration over the share sell-down in March.

The issue flared up again this week after a local newspaper, Bisnis Indonesia, reported that the company was looking at selling up to 49 per cent of its mine via a share market listing.

“Based on the facts, Newmont’s IPO process cannot be done and must be stopped,” said Muhammad Lutfi, the head of the country’s investment co-ordinating board.

Newmont said that it was still looking at “all legal and responsible options for completing divestiture”, including an IPO, and any final decision would be “made with government approval”.

This marks the latest in a string of battles between the government and Newmont, which fears that rival Bumi Resources, Indonesia’s largest coalminer, will end up with control of its mine.

It was revealed in February this year that Bumi had agreements in place to finance the share purchases of the regional governments and eventually gain control of their stakes. However, Bumi told the Financial Times at the time that it was no longer pursuing the Newmont shareholding.

Bumi is controlled by the family of Abruzal Bakrie, Indonesia’s welfare minister.

The government is accusing Newmont of failing to meet the deadline to sell a 17 per cent stake in the mine by the end of this year.

Newmont and Japan’s Sumitomo Corporation, its partner in the mine, are required to complete a 51 per cent sell-down to local investors by 2010.