Indonesia forces miners into new deals

Tuesday, 20 Mar 2012

BHP Billiton and Newcrest will be forced to renegotiate their long standing mining leases under controversial new divestment laws in Indonesia.

A senior official in Indonesia's Department of Mines and Energy has confirmed that all companies without exception, must implement the new policy under which foreigners cannot own more than 49% of a mining project in the country.

But the details of the divestment for projects operating under existing contracts are subject to negotiation.

The regulation, which was signed by the Indonesian President, Susilo Bambang Yudhoyono, last month but only published last week, has caused turmoil in the global mining industry as companies that have billions in assets try to work out what it means.

The divestment must start taking place after a mine has been in production for five years, and be complete after 10 years.

BHP and Newcrest have both stated recently that they expect to be unaffected by the new rules, despite holding majority stakes in Indonesia's Indomet and Gosowong mines respectively.

But Mr Sujatmiko a senior adviser to Thamrin Sihite, the director-general of mines and energy, told BusinessDay that even existing miners working under older leases, called contracts of work, would be required to divest.

Mr Sujatmiko said that "In the case of contract of work like PT Nusa Halmahera Minerals [Newcrest's Gosowong project] and Coal Contract of Work like Indomet Project-BHP group, applying [the law] will depends on result of renegotiation between Government and company.”

"To adjust those contracts, government and companies [are] doing renegotiation now and agreement hasn't happened between both parties to date."

Source - www.watoday.com.au