Local stock marts 'should assist mining firms more'
Local stock marts 'should assist mining firms more'
NUSA DUA, Bali (JP): Jakarta and Surabaya stock exchanges
should set special listing provisions for mining companies to
raise funds through the markets to tap the country's big
resources potential.
BMW Siagian, managing director of PT Timah Investasi Mineral,
an affiliate of publicly listed state-owned tin miner PT Tambang
Timah, said here yesterday that mining was extremely risky and
needed a lot of funding long before commercial operations began.
He said that in most cases, banks were very unwilling to
finance mining projects before the feasibility study stage was
completed.
"It is therefore clear that the only avenue for cost mining
companies is through capital markets," Siagian told the last day
of the two-day 24th Australia-Indonesia business conference here.
He said that almost all foreign mining companies which had
operations in Indonesia had raised funds by floating shares on
Canada's or Australia's stock exchanges.
They could not yet raise funds through the Jakarta or the
Surabaya stock exchanges because current listing provisions
require three years of operation and at least two years of
profitability.
Felia Salim, a Jakarta Stock Exchange (JSX) director, said the
exchange's management would continue to update listing rules to
assist the resources sector develop further.
But it would take time before JSX could develop additional
listing requirements for mining companies, as there were no
agreed international standards for reporting mineral resources
and reserves.
The Australian Stock Exchange (ASX) is currently pushing for a
set of agreed international definitions for reporting of mineral
resources and reserves.
Chairman of the International Accounting Standards Committee,
Norman Miskelly, said that the mining industry was also moving
toward international agreement on standards for reporting of
mineral resources and reserves.
Miskelly said that the recent Busang gold mine debacle in East
Kalimantan would accelerate the initiative toward international
uniformity in reporting mineral resources and reserves.
Recent testing by drilling and assaying by independent
geological consultant Strathcona Mineral Services Ltd on the
Busang gold deposit found that the 7.1 million ounces of gold
that Canadian junior mining firm Bre-X Minerals Ltd claimed were
there, were not.
"Under the Australian Code and reporting system, a deception
of the nature and magnitude of the Busang incident would not have
survived for almost two years," Miskelly said.
Siagian suggested the Jakarta and Surabaya stock exchanges
learn from ASX in defining listing requirements for mining firms.
"Indeed, Australia will soon become the second largest gold
producer in the world primarily because the domestic stock market
makes it easy for local companies to raise funds cheaply without
having to seek capital offshore," Siagian said.
He said that listing requirements for mining companies should
also provide the maximum possible degree of protection to public
investors.
The economic importance of the resources sector is not yet
reflected in its representation on either the Jakarta or Surabaya
stock exchanges.
Only three mining and resources companies, including PT
Tambang Timah, are listed on the domestic exchanges.
JSX and ASX have signed a memorandum of understanding to
cooperate to implement world best practice standards at JSX. ASX
is recognized as a world leader in listing procedures for mining
companies.
ASX vice chairman, Michael Shepherd, said the resources sector
represented about a third of the exchange's total market
capitalization.
Excluding oil, ASX has the greatest proportion of mineral
resources stocks of any major stock exchange in the world.
"This reflects the importance of the resources sector in the
Australian economy, where minerals and fuel represent nearly a
third of our merchandise exports," Shepherd said.
He said that when investors bought shares in a company in the
industrial sector, they were buying reasonably predictable
returns from known products or services.
But when they bought shares in an exploration company, they
were paying for something that did not produce anything, but
might do so in the future. What they were buying was the
expertise and reputation of those involved and the prospects of
its tenements.
These investors had a particular requirement for full, prompt
and frequent information about the operations of the companies in
which they invested.
"Our listing rules for all companies are based on continuous
disclosure of price-sensitive information, but we have specific
requirements for additional regular reporting by exploration
companies," Shepherd said. (rid)