Government denies policy changes in mining contract
JAKARTA (JP): State Secretary/Minister Moerdiono denied yesterday that new foreign mining contractors would have to give the government a 10 percent share of their ventures on a free carried-interest basis.
"Wholly foreign-owned companies are still allowed to operate in the mining sector," Moerdiono said about reports that the government was planning sweeping changes to its policies on foreign mining.
He said that if the government had enough money it would develop the country's mining resources itself instead of allowing foreign investors or contractors to do so.
"Mining ventures are capital intensive and highly risky," he said.
"Who said it was now compulsory?" Moerdiono asked reporters who were asking him about reports that the Ministry of Mines and Energy had asked foreign companies applying for seventh generation mining contracts to allocate at least 10 percent of their shares to the government.
Moerdiono said foreign investment was still badly needed to tap Indonesia's mineral resources because the government had very limited resources to do it.
He said the government would not invest its own funds in the risky mining sector.
Foreign companies applying for seventh generation mining contracts were reportedly briefed about new changes to their contracts early this week and yesterday by mining officials.
The proposed seventh generation mining contract changes have not been discussed with the House of Representatives, but would require contractors:
* To offer shares to local cooperatives or a company owned by the local administration.
* To increase the government's share proportionally if it discovers additional mineral reserves or increases its annual production above the already approved level.
* If shareholders of the company or its holding company make capital gains as a consequence of publishing information owned by the company on a stock market outside Indonesia, then the capital gains will be allocated to the shareholders in proportion to their equity.
* If the company wants to get additional capital from a public offering, the float must be on the Indonesian stock market. A public offering of the company may be made outside Indonesia.
* No data may be made public without the government's consent. All data must be checked by a third party appointed by the company with government approval.
* The contractor's reserves calculation/estimation must be made by an independent consultant appointed by the government but paid for by the company.
Industry sources said that if the government stood firm on the new guidelines, there could be a mass exodus of foreign mining investors.
The government recently demanded 10 percent of two major gold projects, the Busang gold mine in East Kalimantan which turned out to be worthless, and in the Newmont gold mine project on Sumbawa island, West Nusa Tenggara.
U.S. Newmont refused the demand. (rid)