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NEWS UPDATES 9 October 2009

Indonesia expects to draw $6bn into mining sector

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Indonesia’s mining sector could expect investment of up to $6 billion in the 2010-2012 period, in part because of a greater degree of certainty following the enactment of the mining law, the Jakarta Post quoted the Investment Coordinating Board (BKPM) as saying.

“The investment will come from all activities in mining including smelting,” BKPM chief M. Lutfi said, adding that the lion’s share would come from several large mining projects.

Those projects include a $4.6 billion nickel smelting plant in Halmahera, North Maluku, being built by a consortium of the state-owned PT Aneka Tambang (Antam) and three foreign companies.

Another project is a nickel project on Gag Island off Papua, which is also partly owned by Antam, Lutfi added.

Indonesia, the world’s largest archipelago, is rich in various mining resources including gold, copper, tin, coal, bauxite and nickel. However, investment in this sector has not fully recovered from the regional financial crisis of the late 1990s.

Last year, investment reached about $1.35 billion, 2.5 percent more than the $1.25 billion booked one year earlier. This year, the government expects mining and geothermal projects to attract $2.15 billion worth of investment.

Of this target, around $250 million was secured in the first quarter of this year.

However, things would improve gradually in the following years with the enactment of the 2009 Mining Law, which has provided certainty for investors in the sector, Lutfi said.

Among other things, the law requires miners to process their metals domestically. For the existing contracts, miners have been given five years to prepare smelters.

Bambang Setiawan, the director general for coal, minerals, and geothermal energy, said the regulation would develop the sector’s downstream businesses.

“Smelter operators do not need to mine the minerals by themselves. They can source them from other areas and process them in Indonesia. “This will help small miners, because they have no capacity to build smelters by themselves,” Bambang said.

The government plans to issue a ministerial regulation setting out specific levels of processing required for each commodity, he added. “Not all commodities can be processed to become end products. It would not be economically viable to build smelters for commodities that we only have small reserves of,” Bambang said.


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