Australia-based Indo Mines Limited will go ahead with plans to build a US$600 million pig iron plant in Kulon Progo, Yogyakarta, having secured the government's approval for a 30-year contract of work for the operation, an official says.
Simon Sembiring, the Energy and Mineral Resources Ministry's director general for geology and mineral resources, said Monday the approval had been given with the company having agreed to comply with all requirements set by the government.
One of these requirements is for the company, through its local unit, to go public after three years of operation, Simon said.
The local unit has been set up in the form of a joint venture with an Indonesian company.
"They also agreed to use the prevailing tax regime," Simon said.
Under this system, tax charges will follow the existing arrangements imposed by the government.
Simon said the government expected to earn as much as $19.25 million per year in tax revenue from the project.
The contract of work obtained by the company could be extended by 20 years, with the government's approval.
Simon said the company's investment also included plans to build a port and a 350-megawatt coal-fired power plant.
The government estimates Indo Mines will spend about $148.5 million for the mining operation, including $18 million for the development of the power project and $57 million for coal.
The project, which stands on 3,000 hectares of land, is projected to need up to 4 million tons of coal per year to support.
The plant is expected to produce 1 million tons of pig iron by 2011.