The case had been seen as a key test of attitudes towards foreign firms and environmental protection in the country.
 
Conflicting studies
 
Chief judge Ridwan Damanik told Manado's provincial court: "Pollution charges against Newmont Minahasa Raya and Richard Ness cannot be proven."
 
The US embassy in Jakarta also welcomed the decision, saying: "This positive resolution will undoubtedly have a beneficial effect on Indonesia and foreign investor confidence."
 
Analysts had said a defeat for Newmont would have deterred investors from the mining sector, which has not seen fresh investment for years.
 
Villagers living around Buyat Bay said they had suffered tumours, headaches and skin rashes.
 
The allegations led to a police inquiry and charges against Newmont in August 2005.
 
Studies of waters around the bay have shown conflicting results.
 
A World Health Organisation-backed report and others found no evidence of pollution, but government tests showed high levels of toxins.
 
'Unjust'
 
Around 100 environmentalists, who had gathered outside the court, chanted slogans against the decision while armed riot police stood guard.
 
Some 100 villagers, both supporters and opponents of Newmont, were also on hand.
 
"This is unjust," said one, Janiah Ompi, who claims the pollution caused her tumour and eye problems.
 
"This is proof that justice is difficult to enforce for small people like us in our own country," said Anwar Stirman, a villager.
 
Richard Ness, in court with his wife and son to hear the verdict, said he was "delighted that justice and truth had prevailed".
 
Prosecution call
 
Newmont had denied the charges, saying it disposed of toxins safely and levels of mercury and arsenic were within acceptable levels.
 
"I am thrilled that after two-and-a-half years of false allegations, my name and that of my fellow employees have been cleared and our reputation restored," Ness said.
 
He called for organisations that levelled claims of pollution against Newmont to be prosecuted.
 
"I do feel that there was a crime committed and many people in the community suffered because of that crime," he said.
 
Newmont's operations in Indonesia account for 6 per cent of its worldwide gold sales and 8.5 per cent of its reserves, according to its website.