The stock market slowdown and drying up of banking liquidity may force mining firms to reduce their spending on exploration, causing commodity scarcity during the next four to five years, an official and a business association said on Wednesday.
Simon Felix Sembiring, the senior advisor for finance and economy at the Energy and Mineral Resources Ministry, said that firms would face difficulties in seeking financial resources from the market and banks for their expansion.
"The stock market has been a major financing source for mining firms to get cheap funds that are usually used for exploration investment," said Simon, who is the ministry's former director general of mining.
"Since we will not have an expansive exploration activity, there will be no new reserves discovered. As a result, there will be a shortage in mining commodities for the next four to five years that will eventually drive up the prices," he said.
The Indonesia Stock Exchange (IDX) has been haunted by the fear of global recession, losing 50 percent of its value since January this year.
Supriatna Suhala, the executive director for the Indonesian Coal Mining Association, said that havoc in other stock markets would exacerbate conditions for companies seeking funds from outside as well as for those seeking to invest in new mining projects and concerns.
The new comers cannot go public in Indonesia because the stock market regulation requires companies to gain profits for three consecutive years locally before selling their shares to the public, according to Supriatna.
"Most of the time, new and small coal producers form joint ventures with overseas firms so that they can be listed on the international bourse," he said.
Several companies providing mining construction services have even halted their operations.
The government has targeted investment in mining and the energy sector to reach US$21.7 billion this year.
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