'Govt explanation on mining should satisfy investors'

JAKARTA (JP): The Indonesian Chamber of Commerce and Industry believes that the government's clarification of its mining policy should help bring in investors.

Chamber chairman Aburizal Bakrie said yesterday that the government's confirmation that it would honor mining contracts of work (COW) should convince investors of the government's commitment to welcoming foreign participation in the sector.

"The government's confirmation that it will honor the COWs it has already signed will ease investor concerns," Aburizal told journalists at his office.

Bakrie warned that foreign investors would abandon Indonesia's mining sector, and possibly other sectors, if the government terminated or arbitrarily changed the provisions of the already signed COWs.

"It is alright if the government introduces new clauses for new COWs. But if the government changes the content of the contracts already signed, it surely will create problems," Bakrie said.

Minister of Mines and Energy Ida Bagus Sudjana explained Wednesday that the government would not change its policy concerning COWs in which the government acts as the principal and the private entity as the contractor.

Such contracts of works, Sudjana said, serve as an agreement between the government and an investor or investors, in which the latter is allowed to mine certain minerals in designated areas.

Sudjana's explanation came amid mounting pressure on the government to increase its stake in the giant copper and gold mining company PT Freeport Indonesia Co. and the Busang gold mine in East Kalimantan.

The government controls a 9.36 percent stake in Freeport and has asked for a 10 percent share in the joint venture that mines the Busang gold deposits.

The government is currently evaluating 179 applicants for seventh generation COWs. The applicants are interested in exploring and mining for gold, copper and coal in various locations, including Sumatra (30 firms), Maluku (four firms), Sulawesi (nine firms), Irian Jaya (six firms) and Nusa Tenggara (three firms).

The House has approved 70 applications, including two gold mining projects in Busang, East Kalimantan (Busang II and III), though the President has yet to sign his approval.

The 70 applications are for sixth generation COWs.

Indocopper

Aburizal, chairman of the Bakrie Group, dismissed any speculation that PT Bakrie & Brothers was pressured to sell its stake in Indocopper Investama Corp., a company holding a 9.36 percent stake in Freeport, to the politically well-connected Nusamba Group.

"We sold our shares of Indocopper entirely on the basis of business considerations, not because of any pressure or anything else," Aburizal said.

Bakrie & Brothers has agreed to sell 49 percent, or 10.5 million shares, of Indocopper for US$302.7 million. The share sales, however, are still subject to approval from Bakrie & Brothers' independent shareholders.

Aburizal said Bakrie received nearly $15 million in dividends yearly from its investment in Freeport, which he said was less than expected. If the money had been invested in Bakrie's core businesses, Aburizal said, it would have yielded more than $50 million a year.

He also confirmed that Bakrie & Brothers was selling its 20 percent stake in coal mining company PT Arutmin Indonesia. There are two foreign investors interested in the stake, one from Japan and another from the United States.

"We would prefer to sell it to domestic investors as long as their bids are at least the same as those offered by foreign investors," Aburizal said.

He said Bakrie & Brothers had asked for $50 million for its Arutmin shares and another $50 million for coal marketing rights. (rid)