Rio Tinto sings praises of RI mining investment outlook
JAKARTA (JP): The giant Anglo-Australian mining company Rio Tinto Group said on Monday that Indonesia remained one of the world's most attractive countries for mining investments despite the current economic and political turmoil.
Noke Kiroyan, president of PT Rio Tinto Indonesia, which coordinates all of Rio Tinto's business in the country, said that the country's appeal is its geological structures, which are believed to contain a rich variety of minerals.
Also, the contract of work (COW) system applied by the government to the mining industry gives assurances to investors over the future of their long term investments, Noke said.
"Thus far, the government has consistently honored all the COWs it has signed. As such, investors are convinced that no COW will be breached," Noke said.
Rio Tinto Group's chief executive officer Leon Davis, during a recent visit to Indonesia, also praised the COW system and the government's commitment to honor the contracts.
"Indonesia has acquired a favorable reputation in global mining circles because the administration has established a sound context for business operations ... the concept of the Contract of Work system is being copied by other nations," Davis said in his speech during the Indonesia Forum conference on Nov. 20.
Many foreign investors have been discouraged by the political turmoil which has been battering the country since the downfall of former president Soeharto in May.
However, Noke said, Rio Tinto, was still optimistic about the country's prospects, as it believed the current political turmoil was a necessary step the country must take to reach real democracy.
"We hope all (political) problems will be solved in due course. If this situation goes on for five years, the country will collapse," Noke asserted.
Noke said that Rio Tinto had thus far invested about US$10 million per year for exploration and would maintain a similar level of investment in the future.
Rio Tinto is the world's largest mining company with a market capitalization of $16 billion and operations in 40 countries. The company started exploration in Indonesia in the 1970s, and production began in the 1990s.
The company has a 50 percent stake in the country's largest coal mining company, PT Kaltim Prima Coal, based in Sangatta, East Kalimantan, in a partnership with British Petroleum, which holds the remaining 50 percent stake. The company currently produces 15 million tons of coal per year.
Rio Tinto also has a 90 percent stake in the country's largest gold mining company, PT Kelian Equatorial Mining, based in Kelian Long Iram, Kutai, East Kalimantan, in a partnership with PT Harita Jayaraya. The gold mining company currently produces 14 tons of gold per year.
Rio Tinto also has a 13 percent stake in the U.S. mining company Freeport McMoRan Copper & Gold, which is developing one of the world's largest copper and gold reserves in the Grasberg area of Irian Jaya.
In addition, the company holds a 40 percent stake in the Block A, Block B and Western Mining contract areas in Irian Jaya, in a partnership with PT Freeport Indonesia, which hold the remaining shares.
PT Rio Tinto explorations, which oversees the company's explorations in South East Asia, currently supervises eight subsidiaries exploring mineral and coal deposits across the country, including PT Rikit Alas Minerals in Aceh, PT Danum Kelian Minerals in East Kalimantan, PT Mitra Sumbawa Minerals in Sumbawa, PT Citra Palu Minerals in Sulawesi, PT Danum Bukit Minerals in East Kalimantan, PT Bukit Tiang Minerals in West Kalimantan, PT Mandar Uli Minerals in Sulawesi and PT Batubara Mesuji in South Sumatra.
Rio Tinto set up the Rio Tinto foundation in 1995 to increase the welfare of the communities living around its mining areas and to promote the teaching of mining at the country's universities. (jsk)