BHP wins two 3rd generation coal contracts in Kalimantan

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)