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December 23, 2008

Indonesia mulls adjusting mining contracts

Indonesia will evaluate existing mining contracts to see whether they need adjusting particularly on royalties and the size of mining areas after the passage of a new mining law, Reuters quoted the energy and mines minister as saying Monday.

Indonesia's parliament passed a new law on coal and mining last week that promises more certainty for investors although it has raised concerns that it may deter major new foreign investment.

Minister Purnomo Yusgiantoro said existing contract of works would not be changed into newly introduced mining permits but the government would be seeking to maximise revenue for the state including the possibility of raising royalties.

Officials have previously said that existing Indonesian mining contracts would be upheld.

"For companies that have given maximum revenue to the state they won't need to change, but some may have to do it," he said, without elaborating.

"We will also talk to companies about increasing royalties."

The minister said the government would also review mining concessions held by existing mining contractors.

"There are many huge mining concessions. We now ask mining firms to submit their plans for those areas," Yusgiantoro said.

The new law will limit mining areas for exploration and production.

Investors will be granted a maximum of 100,000 hectares (247,100 acres) for metal mining and 50,000 hectares for coal mining during the exploration staged.

During production, the area will be reduced to 25,000 for metal mining and 15,000 hectares for coal mining.

Yusgiantoro did not say whether firms would be required to return mining concessions that have not yet been explored.

The new mining law states existing mining contractors must submit plans on their concession for approval.

Their areas can be adjusted if they fail to submit plans within one year after the law is passed, according to the bill.

The new coal-mining law, which replaces a 41-year-old mining law, had been held up as lawmakers wrangled over whether the law should cover existing deals, or just new ones.

Government officials have said the new law will boost revenue from the mining sector.

Indonesia has some of the world's largest deposit of gold, nickel, tin coal and copper with several leading international mining firms, including Freeport-McMoran Copper&Gold, already have operations in the country.

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