Oslo- Norway's state pension fund has dropped its holdings in mining group Rio Tinto over environmental concerns linked to a mine in Indonesia, the Finance Ministry said Tuesday.

"Exclusion of a company from the fund reflects our unwillingness to run an unacceptable risk of contributing to grossly unethical conduct," Finance Minister Kristin Halvorsen said.

A special ethics panel had advised the government to sell its holdings in Rio Tinto over concerns of how the Grasberg mine in Indonesia was operated, Halvorsen said, adding "there are no indications to the effect that the company's practices will be changed in future."

The fund in 2006 sold its shares in Freeport McMoRan Copper and Gold Inc that operates a joint venture with Rio Tinto at the Grasberg mine.

Concerns included discharges of waste, known as tailings, from the mining operation, and the "high risk that acid rock drainage from the company's waste rock and tailings dumps will cause lasting ground and water contamination."

The mine was potentially profitable until 2041, suggesting the potential of "severe long-term environmental damage in the area," the Finance Ministry said.

The now divested holdings in Rio Tinto Plc. and Rio Tinto Ltd were worth some 4.85 billion kroner (865 million dollars) at the end of 2007.

The Government Pension Fund, Global, includes the huge Petroleum Fund.

The Petroleum Fund, managed by the central bank, was created to pay for Norway's future health and pension expenditures through investments outside the Norwegian economy. (dpa)