Timah expects big losses in 2002 due to low price

JAKARTA (JP): Publicly listed tin producer PT Timah Tbk has predicted a sharp decline in its net profit for this year and a possible huge loss for next year, due to a combination of massive illegal mining activity at its mining sites and low international price for the commodity.

Timah president Erry Riyana Hardjapamekas predicted on Wednesday that net profit was likely to drop by 80 percent to Rp 64 billion (US$6.6 million) this year, compared to Rp 332 billion last year.

He also cautioned on a possible huge loss of more than Rp 500 billion in 2002.

Timah said the 2001 net-profit forecast was based on sales of 43,216 tons of tin at an average price of $4,465 per ton, while the 2002 projection was based on 40,000 tons of tin sales at an average price of $4,000 per ton.

The government owns 65 percent of Timah while the remaining 35 percent is held by public.

"The reasons (behind the decline) are various, from an economic slowdown in industrialized countries to low prices of mining commodities in the international market.

"But rampant illegal mining and some dubious regional regulations in Bangka and Belitung are mostly to blame," he said on the sidelines of the company's public expose on Wednesday.

Erry said that illegal mining activity at the company's mines sites could produce as much as 42,000 tons per year, which is relatively equal to the company's yearly production.

"That huge number of production flooded the market, which certainly gave strong pressure to an already deteriorating price," he said, adding that the current price for tin metal in the international market was $3,630 per ton.

"That was the lowest price in the last three decades."

According to Erry, the Bangka regional administration proposed on August 23 a 20 percent tax on tin sales.

The new regional autonomy law launched by the government two years ago allows provincial and regency administrations to manage their own economic affairs.

"But we're appealing against the (tax) decision," Erry said.

"I recalled a clause of the regulation stating that we can appeal against (any regional) decision to the government within 30 days of its announcement. So, what we're doing here is legal," he said.

When pressed to comment on what if the appeal was rejected by the government, he said that he would consider stopping all mining operations and even closing down the company, including firing employees on the island.

"That's the worst-case scenario we have so far," he said.

Erry went on to say that there were over 5,000 illegal miners in Bangka alone with a relatively low production cost.

As an anticipatory move, the company is planning to ask a shareholders' meeting to delay payment of its second dividend from 2000 profits, which was due in December.(10)