ASEAN KEY DESTINATIONS
Aussie mining firm ‘INTREPID’ fighting an uphill battle in Indonesia
The move is seen as an attempt by Australia's Intrepid Mines to shore up its political weight and nudge Indo Multi Niaga (IMN) to the negotiating table. Intrepid has sunk US$95 million into the lucrative project and owns 80 per cent of the venture.
The developments are being watched closely as the course of the country's mining sector becomes increasingly uncertain.
The relationship between Intrepid Mines and its Indonesian investors, IMN, has been deteriorating for eight months. In fact, the Australian firm only realised IMN had changed hands when their staff of 660 was told to pack up and go by the new owners who descended on the site last month.
Resource-rich Indonesia has been selling itself as investor- friendly and an economic darling. In the last five years, it posted its strongest growth rates since the 1998 Asian financial crisis.
The country is one of the world's top metals miners and the sector accounts for about 12 per cent of gross domestic product in the Group of 20 economy.
However, cases such as Intrepid's are tainting its image. Investors fear that a raft of new mining regulations unveiled this year, including export taxes, a ban on unprocessed metals exports and limits on foreign ownership, smack of rising economic nationalism.
Indeed, Intrepid's case follows another high-profile one involving London-listed Churchill Mining. The firm has resorted to an international court of arbitration to fight over a share of a US$3 billion coal mine in East Kalimantan.
These developments also come as major international mining groups like Freeport McMoRan, which operates one of the world's largest copper and gold mines in Papua, and Newmont are holding off on multi-billion-dollar new investments until they have renegotiated their terms with the Indonesian government.
Unlike Churchill, Intrepid has managed to enlist a powerful ally in Paloh. The media tycoon owns Indonesia's first news channel, Metro TV, heads the prominent Nasional Democrat party, and is believed to be pitching for the presidency in 2014. He has large business stakes in property, hotels, oil and gas.
"We are delighted to be associated with Paloh, whose extensive networks and vast experience in navigating the waters of Indonesian business will greatly benefit the company both in safeguarding its existing interests in Indonesia and in expanding within the local resources sector," said Intrepid chief executive Brad Gordon.
Paloh's stake in Intrepid would make him one of the company's four biggest shareholders.
The markets have welcomed the move: the company's share price surged 32 per cent on Tuesday, a sharp reversal from a week ago when it plunged 55 per cent after the staff evictions.
But such business disputes are only the surface of other issues plaguing the mining sector, like overlapping licences and obtuse, lengthy and messy regulations.
The Roundtable on Sustainable Palm Oil's vice president Edi Suhardi says such problems make the prospect of developing natural resources "no longer appealing".
In the Jakarta Post yesterday, he wrote: "Interestingly, Indonesia is placed among the top 10 for mineral potential, but among the bottom 10 for policy potential. What a contradictory fact."
Analysts say that having bigwigs like Paloh is not a guarantee that disputes will be settled.
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