BHP wins two 3rd generation coal contracts in Kalimantan

JAKARTA (JP): The government awarded on Monday two contracts of work (COWs) to subsidiaries of the Australian giant mining company Broken Hill Proprietary (BHP) to explore and develop coal resources in Central and East Kalimantan.

Minister of Mines and Energy Kuntoro Mangkusubroto said the signing of the COWs demonstrated that Indonesia was still attractive to mining investors and that its contract system provided legal certainties for the development of mining resources.

"I am expressing my highest appreciation (to BHP) since this (the signing of the contracts) has indirectly become a campaign to lure foreign investors into the country," Kuntoro said in a ceremony to sign the two COWs, the third generation of contracts of work issued for coal exploration and production.

BHP Indonesia's president Harriet Richards said despite the current political and monetary crisis, the country remained attractive as an investment destination due to its natural wealth and contract system.

"Indonesia enjoys tremendous advantages from its natural resource wealth and a generally favorable mining regime.

"The COW system has been crucial in encouraging investment and we hope this system will continue," Richards said.

Director of coal at the ministry Soedjoko Tirtosoekotjo said the two COWs were awarded to PT Pari Coal for a 98,910 hectares contract area in East Kalimantan and to PT Sumber Barito Coal for a 100,300 hectare contract area in Central Kalimantan.

Both Pari Coal and Barito Coal are 99 percent owned by Australia-based BHP Mineral Holding Pty Ltd.

Pari Coal's remaining 1 percent share is owned by Indonesia- based PT BHP Kendilo Coal Indonesia, while Sumber Barito's remaining 1 percent share is owned by United States-based BHP International Exploration.

Soedjoko said the House of Representatives had been consulted on the content of the two COWs in September 1997 and gained approval from President B.J. Habibie on Oct. 21, 1998.

He said under the new COWs, Pari Coal and Sumber Barito were obliged to return a large part of their contract areas to the government after explorations. They are only allowed to extract coal from a maximum 20,000 hectare contract area if the coal deposit is concentrated and from a 25,000 hectare contract area if the coal deposit is scattered.

Both contractors are obliged to give the government 13.5 percent of its free-on-board sales in royalties and in contributions to the coal development fund.

As far as tax payment is concerned, the two companies have to pay income and property taxes as stipulated in the 1994 Tax Law.

Aside from the royalties, taxes and contributions to the coal development fund, they also must pay a dead rent (annual rent payment), the amount of which depends on the measure of their contract areas.

The central government will give 80 percent of the dead rent to local administrations.

The contractors must also pay property taxes to the government at an equal rate with the dead rent during the general survey, exploration, feasibility study and construction phases. During construction, property taxes will rise to the dead rent's level plus 1.5 percent of their gross revenue.

BHP has been operating in Indonesia for 25 years in various sectors, including mining, steel, information technology and transportation.

The company's mining subsidiaries PT Arutmin and PT Kendilo, based in Kalimantan, are among the country's major coal companies with a combined output of over seven tons per year. The company is also developing nickel resources on Gag Island off Irian Jaya in a joint venture with publicly listed general mining company PT Aneka Tambang. (jsk)