We want predictability, say mining firms

Ika Krismantari, The Jakarta Post, Jakarta

If one asks a mining firm what it wants more than anything from the upcoming new mining law, the likely answer will be "predictability".

"We want predictability. If something is predictable, we know the risks we will be taking. If you don't have predictability, your business is not going to move forward," Australian senior trade commissioner Rod Morehouse told The Jakarta Post on Tuesday.

He was speaking on the sidelines of a seminar on the future of Indonesia's mining industry, organized by the Australian Trade Commission.

According to Morehouse, however, the mining bill, which has been under deliberation by the House of Representative for more than a year, fails to address investor concerns over predictability and certainty, leaving them unable to forecast the costs and risks they are likely to face.

"Will the law be lex specialis or not? ... Will the license system guarantee both exploration and exploitation rights?

"If the country demands complete downstream manufacturing, will this include smelting, refining or even component manufacturing ... These are not yet a hundred percent clear," Morehouse said.

The seminar was held as part of the Australian Mining and Petroleum Exhibition and Conference 2007 (Ozmine 2007), which took place on the same day, and was participated in by 27 Australian mining and oil companies showcasing their latest projects and technologies.

Morehouse said that nine major Australian mining companies, representing a combined investment of more than US$10 billion, were currently waiting to see whether the new mining law -- in addition to the investment and taxation laws -- would address their concerns.

Among the nine firms were mining giant Rio Tinto, which was currently engaged in negotiations with the government for a Contract of Work for a nickel project in Sulawesi worth some $2 billion.

The others included mining heavyweight BHP Billiton, which had invested $77 million since 1998 on seven coking coal plants here, and Oxiana, an international mining and exploration company that was due to set up a joint venture with the Indonesian Kalimantan Gold Company.

Responding to the debate over the issuance of licenses and permits by local governments, as proposed under the new bill, Rio Tinto managing director Charlie Lenegan suggested the adoption of the system applied by the Western Australian government.

"If it involves small-scale projects, then the permits could be handled by the local government. But if it involves large-scale and long-term projects, the permits would be arranged by the central government," Lenegan said.

Many investors have voiced similar concerns over the granting of a bigger role to local government, fearing it would only further complicate the bureaucracy they have to go through to get their businesses going.

The government has set itself the target of having the new mining law on the statute books by March.