The Indonesian government says Newmont Mining Corp dumped mercury and arsenic-laced pollutants into the Buyat Bay on Sulawesi island and is holding Richard Ness, a native of Ada, Minnesota, responsible.

If convicted, he faces up to 10 years in prison and a fine of $68,000. 

Ness, who has repeatedly denied any wrongdoing, smiled to reporters as he entered the courthouse in the North Sulawesi capital of Manado, 2000km northeast of Jakarta on Friday.

Villagers blame skin diseases and other illness on pollutants dumped in the bay.

Newmont says any health problems they face are due to poor hygiene and diet, as well as mercury pollution from the thousands of illegal miners that work in the hillsides along the bay.

Conflicting test results add to Newmont's worries.

The World Health Organization and an initial Environment Ministry report found the Buyat Bay to be unpolluted, and a government study released in May found that traces of heavy metals in villagers living close to the mine were within normal levels.

But the prosecution will present a police report showing the levels of mercury and arsenic are well beyond national standards.

Mining analysts say a guilty verdict could scare off foreign investors already anxious over the country's legal uncertainties, rising costs and excessive red tape.

Environmentalists say the trial offers the government, which for decades coddled investors, an opportunity to hold a foreign firm accountable.