Timah expects big losses next year

Timah expects big losses next year

by Dadan

JAKARTA: 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)