KPC refuses to lower price of its 51% stake

JAKARTA (JP): East Kalimantan-based coal mining company Kaltim Prima Coal (KPC) insisted on Monday that the local administration should pay US$448.8 million for its 51 percent stake.

Anglo-Australian mining firm Rio Tinto, one of the coal producer's major shareholders, said that KPC had no intention of cutting the price, as demanded by both the local and central governments.

"We don't have any plan to lower the price," Rio Tinto Indonesia spokeswoman Nunik Maulana told The Jakarta Post.

Nunik said the price tag for the 51 percent stake was fair because its calculation considered several factors, including the size of the existing coal reserve and future prices for the commodity.

After tough negotiations, KPC, which operates a huge coal mine in Sangatta, Kutai Timur regency, East Kalimantan, agreed early this year to sell 51 percent of its stake to local investors in order to meet the mandatory divestment program imposed by the government on foreign mining companies.

The East Kalimantan provincial administration is the only party who has bid for the stake.

KPC's valuation of its 51 percent stake is much higher than the $309.94 million calculated by the Ministry of Energy and Mineral Resources and the $319 million appraisal of the East Kalimantan administration.

Both the ministry and the local administration demanded that KPC lower its price but the company has so far refused.

The three parties have conducted several meetings, the last of which was chaired by Minister for Energy and Mineral Resources Purnomo Yusgiantoro last Thursday in Jakarta, in an attempt to renegotiate the price of the stake. However, no resolution to the stalemate was reached.

Nunik said that KPC had asked the government to appoint two separate appraisers for each party to determine a fair price of the stake, but the government has not yet responded to the request.

The provincial administration has reportedly objected to the establishment of a joint independent appraiser, describing it as a tactic of KPC aimed at delaying its divestment program.

Local councillors at the provincial level have asked the government to terminate KPC's mining contract, but their colleagues in the Kutai Timur regency have opposed the move.

Nunik said that KPC had not persuaded any councillors of the Kutai Timur regency to reject the proposal.

"We have a good relationship with the regency's legislature as well as other institutions because we do business there, that's all," she said.

KPC, which has about 10,000 workers, produces an average of 50,000 tons of coal a day, or 15 million tons a year.

KPC is jointly owned by Anglo-Australian mining company Rio Tinto and British-American oil and gas company Beyond Petroleum (BP).(05)