Australian mining companies are still interested in digging minerals in Indonesia, despite uncertainties surrounding the country’s new Mining Law, social issues, and tax and fiscal regimes, Australian mining representatives said on Tuesday.
“Australia’s mining relationship with Indonesia is more than simply selling products and services. Australian companies are committed to the long term,” said Bill Farmer, the Australian ambassador to Indonesia, speaking on the first day of the OZMine 2009 conference on Tuesday. “They are looking at increasing their investment in this market and can bring real benefit to the development of the sector, especially in key areas like environmentally sustainable mining,”
However, Craig Senger, first secretary for the Australian Trade Commission, said on Monday that miners would have to wait and see before they began new work in the country as there were still legal uncertainties hampering investment in the sector.
The uncertainties over the new Mining Law, which will require several months of rewriting implementation regulations, and falling mining commodity prices, have meant that multinational mining companies are cautious.
The law doesn’t give a secure guarantee of tenure and other mining rights for large-scale projects, said Mitchell H. Hooke, chief executive of the Minerals Council of Australia. A provision of the law shortens the maximum length of mining contracts to 20 years, from 30 years previously, with an option to extend for 20 years.
“If you’re a chief executive officer looking to invest, you’re going to look at the uncertainty of all that, that’s the commercial reality,” Hooke said, speaking to reporters on Monday.
Speaking on Tuesday, Purnomo Yusgiantoro, the energy minister, said he realized that the new mining law could not make everybody happy, as it protected against resources from depleting rapidly, and provided investors with licenses instead of contracts of work. However, the ministry said it would invite and communicate with Australian mining investors so that their interests could be accommodated.
“When we are preparing this kind of draft, we don’t want to leave you behind,” Purnomo told the conference. “ It is very important to us that you understand and follow and agree with us. At least we have a common objective in this kind of subject.”
Investors, Mitchell said, prefer a country where the cost structure is favorable, tenure is secure and social issues are not a problem. Nonetheless, like the Australian Trade Commission’s Senger, Mitchell said he believed the industry had good prospects. Indonesia, he said, had competitive strengths because, among other things, mining companies’ revenues were in foreign currencies, while their operation costs were in rupiah.
But, he said, international investors would like to see a decree from the government that would change the Mining Law to allow for the easier flow of foreign direct investment as well as allowing overseas companies to take equity and enjoy security of title and tenure.
He added that he was optimistic that the mining industry would rebound.