With the sharp increase in the world commodity prices, Indonesian miners have become the most profitable companies in the country this year.
PT Timah, the world's second biggest tin miner and refiner, could be a good example to prove this trend. The state-owned company recorded a 12-fold jump in its third-quarter profit thanks to the sharp increase in the tin metal price
The tin price hit a new record of US$17,050 a ton in August, the highest since 1989. The average price along the year reached $13,899 a ton, 59 percent higher than last year's average.
The nickel price also rose significantly during the early year before it dropped to about $30,415 a metric ton in the third quarter. It was still 15 percent higher than the same period last year, despite the fall.
The condition leads to the country's largest nickel producer, PT International Nickel Indonesia (Inco), doubled its profit in the third quarter of this year.
A similar trend also occurred in coal mining.
PT Bumi Resources, Indonesia's biggest coal producer, has also recorded a significant increase in its profit thanks to the surge in the coal prices in the world market. Its net profit rose by 423 percent to $800 million in the January to September, this year from the same period last year.
The company's shares has jumped six fold since Janaury, making it Indonesia's second biggest company by value.
The rising commodity prices have not only made the shares of the mining companies listed on the stock exchanges among the most sought, but also has encouraged more companies to enter the mining sector.
With its rich mineral resources, Indonesia should be able to use the momentum in attracting more foreign miners to enter the sector.
For a rough figure, based on the data from the Energy and Mineral Resources Ministry, Indonesia ranks No. 5 at the world tin reserve with tin resources are estimated around 622,000 tons with mine-able reserve approximately at 462,000 tons.
It ranks no 7 at the global copper and gold reserve with the metal resources are estimated around 68.11 million tons and 6,369 tons, respectively.
Its coal resources, which reach around 61.3 billion tons, are in the no. 15 of the world coal reserve.
However, these big resources have failed to attract mining companies to come to Indonesia and invest their money here with the government has yet to give what the investors want: market-friendly regulations.
Indonesian Mining Association executive director Priyo Pribadi Soemarno has said that a total of 13 mining companies, including the London-based Rio Tinto group, could cancel their investment plans worth $9 billion due to legal uncertainty and tax problems.
The most frequently cited problems encountering mining companies are the overlapping regulations between central and local governments, a conflict with Forestry Ministry regarding the mining areas located in conservation forests and inflexible fiscal policy.
The controversial new mining bill, which is expected to be passed into a law at the end of this year, could also worsen the investment climate in the mining sector.
The currently-deliberated mining bill will end the Contract of Work system and replace it with a mining permit, which will be issued by either central or local governments, subject to the where the mining concession will be located.
These requirements, miners said, would only lengthen the bureaucratic process they have already endured in order to secure the mining permits, as they have to deal with different tax policy, imposed by different regional administrations.
Under the new law, the government will also introduce two kinds of permits -- exploration and exploitation --, which will be granted separately.
The proposed licensing system has concerned investors because they fear that they would not be able to get an exploitation permit after finding mineral reserves in their concession areas.
They said that they need a single permit for conducting a feasibility study, exploration, construction, exploitation to ensure their long-term investment.
Despite critics, the government is upbeat that the new law will help the country to face the future challenge in the mining sector.
The Energy and Mineral Resources Ministry's director general of geology and mineral resources, Simon Sembiring has said that the country was expecting a robust mining business next year with the enactment of the new law.
In the ministry data, the government expects a 23-percent growth in the mining investment next year to $1.4 billion in 2008.
However it is doubtful, whether the 2008 target can be achieved given the investment problem. This year alone, the new investment is expected only to reach $1.13 billion, down from $1.3 billion last year.
The most important question now is "Can Indonesia use the momentum to attract new investments in the mining sector". The answer will be in the hands of the government, whether it will choose to listen or ignore the investors' voices.
Indonesia's mineral potential 2007
Mineral Unit Resources Reserves Production
1. Tin (metal) ton 622,402 462,402 60,697
2. Nickel ore ton 1,338,182,200 627,810,000 4,095,478
3. Copper (metal) ton 66,206,347 41,473,267
4. Gold (metal) ton 5,297 3,156 20.8
5. Silver (metal)_ ton 36,013 11,417 43.7
6. Iron sand ton 47,169, 416 9,557,846 89,644
(concentrate) 7. Bauxite (metal) ton 207,931,993 23,999,901 1,330,827
8. Manganese (metal)ton 866,795 105,000
9. Diamond carat 539,800 93,565 5,761