In a US$30 million settlement, the Indonesian environment ministry has agreed to withdraw a civil case against Newmont Minahasa Raya, the local business of US company Newmont Mining.
The cases have been closely watched by foreign investors and environmentalists.
The environment ministry had lodged the civil case in 2005, seeking damages of around $133 million. In November, a lower court dismissed that case, but lawyers for the ministry appealed.
"This agreement reaffirms our commitment to environmental responsibility"
Robert Gallagher, Newmont
Separately, Newmont Minahasa Raya and its American director, Richard Ness, have been on trial since August on charges that the organisation polluted a bay in the eastern Indonesian region of Sulawesi, causing villagers to become ill.
Aburizal Bakrie, the chief social welfare minister, said after the settlement was signed in Jakarta: "This will not stop the ongoing criminal case."
Newmont reiterated in a statement on Thursday that it had not undertaken any wrongdoing.
It said would pay $30 million over 10 years as part of the settlement.
Bakrie said that the civil suit would be withdrawn after the government received proof of transfer of the initial $12 million.
The criminal and civil cases both relate to Newmont Minahasa Raya's disposal of waste from a gold mine near Buyat Bay, 2,200km northeast of Jakarta. The mine opened in 1996 and closed in August 2004 because of depleted reserves.
Newmont has said its disposal processes were approved by the government.
The deal that has been signed covers scientific monitoring and community development programmes in North Sulawesi.
The government and the unit will nominate members to an independent scientific panel that will develop and implement a 10-year environmental monitoring and assessment programme.
The panel's responsibility would be to make a definitive, scientific conclusion in regard to the condition of Buyat Bay.
Robert Gallagher, Newmont's vice-president of operations in Indonesia, said: "We are not walking away from Buyat Bay. To the contrary, this agreement reaffirms our commitment to environmental responsibility and our confidence that we have fulfilled that commitment."
Prosecutors in the criminal case allege that the waste disposal process involved dumping mercury and arsenic into the bay.
If found guilty Ness could be jailed for 10 years and fined about $68,000.
An investigation commissioned by the government and a separate police study concluded that the bay was polluted, but several other studies, including one by the World Health Organisation, did not support that charge.
Newmont's operations in Indonesia accounted for 6% of its global sales in 2004. The Denver-based company operates Asia's second-largest copper mine, Batu Hijau, on eastern Sumbawa island.