Mining firms 2001 profit up but outlook gloomy
Mining firms 2001 profit up but outlook gloomy
The Jakarta Post
Jakarta
Net profits of major mining companies rose by US$200 million to
$4.96 billion throughout last year, a report said but warned that
a prolonged dry spell in investment spending had weakened the
sector's profitability outlook.
While world prices for most minerals remain sluggish, the
absence of substantial investments enabled mining firms to cut
debts and reduce interest payments, thus contribute to the higher
net profits, said the 2001 mining report by consultancy firm
PricewaterhouseCoopers (PwC).
The rise in profits "was mainly due to a decrease in financing
costs," PwC mining executive Marc Upcroft said in a statement on
Wednesday.
PwC surveyed 38 mining companies, of which 22 are at their
exploration stage, in a report covering Indonesia's major mineral
products, namely coal, gold, copper, nickel and tin.
World prices of these commodities remains largely weak. In
2001, prices of nickel fell by 27 percent, tin by 12.5 percent
and copper by 8 percent.
Gold prices weakened slightly, whereas prices of thermal coal
began moving northwards following a two-year-long slump, the
report said.
On the production side, the industry recorded an increase on
most mineral products with Indonesia's share as against global
output also climbing, except for coal which share fell by 0.1
percent.
"Production in coal, copper, and nickel continued a trend of
rises over the previous four to five years," said PwC's report.
In 2001, gold production surged by 24 percent to a record high
of 4.7 million ounces. Tin production hit a five-year record high
at 56,200 metric tons, which PwC attributed to a 9 percent jump
in output from the "informal sector".
Nickel output rose 14 percent to 160.8 million pounds on the
back of improved production capacities, the report said.
But PwC raised doubt over the industry's medium outlook even
as mining companies recorded better earnings and production is
seen as growing.
"Despite Indonesia being highly prospective for minerals,
spending on greenfields operation is now a fraction of the levels
seen in recent years," Upcroft said.
Total industry spending in 2001 fell by 42 percent to $1.43
billion compared to 2000, said the report citing a 67 percent
drop in investment spending and 27 percent in new purchases.
Analyst have pointed to Indonesia's volatile business climate
behind the drop in mining investment and from other sectors.
Legal uncertainties, lately the introduction of a forestry law
that puts a ban on some existing mining operations, an assertive
labor union and security problems as the government lacks law
enforcement capacity, have driven out scores of companies and
locked out capital.
"The long lead time and success rate from exploration to
development means that there will not be significant mine
development in Indonesia for several years," said Upcroft.
Mining activities throughout last year contributed some $813
million in total tax and royalties payments, the report said.