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December 12, 2008

Indonesian parliament ready to pass mining law
Indonesia moved ahead on Thursday with plans to ease the path of international mining companies to exploit its mineral wealth, reported Reuters.

An Indonesian parliamentary working committee agreed to pass a new bill on mining and coal, a legislator said on Thursday.

Parliament is due to hold a plenary hearing on December 16, when it is expected to pass the bill.

"All factions have agreed on all the sticking points so everything is clear. There won't be any voting at the plenary session because all issues have been settled," said Agusman Effendi, the chairman of the working committee.

The mining law has been under discussion for years, creating uncertainty for miners such as Newmont Mining Corp and Rio Tinto seeking to exploit Indonesia's resources.

Several leading international mining firms, including Freeport-McMoran Copper & Gold already have operations there.

Indonesia has some of the world's largest deposits of gold, tin, coal, copper and nickel.

The bill had been held up by the parliamentary special committee which had struggled to agree on whether to apply the law only to new contracts or to existing ones.

But some investors question whether the new law will do much to help attract fresh investment due to contentious items such as a provision in the draft that will shorten mining contracts to 20 years with an option to extend for 20 years.

The current working contracts are valid for 30 years with an option to extend by a further 20 years.

"All factions have agreed on mining permits," said Effendi, without elaborating.

Under the new law, investors will also be required to process all mining products into metal locally either by setting up their own smelters or using another smelter for processing, a requirement which investors say would inflate investment costs.

But government officials argue that the new law would boost revenue from the mining sector as Jakarta is keen to gain greater control of its natural resources.

All of Indonesia's existing mining contracts would be upheld under the new law, but contractors will have to process mining products into metal in Indonesia five years after the new law is passed, Effendi had said late on Wednesday.

The government said late last year that it expected investment in geothermal energy and mining to reach $1.55 billion in 2008, compared to $1.35 billion in 2007.

On November 4, the government signed a $1.1 billion mining contract with PT Jogja Magasa Iron, an Indonesian firm in which Australian miner Indo Mines Ltd has a 70 percent share, for an iron sand mining and pig iron smelter project.

It was the first mining contract to be signed since the economic crisis in 1998.

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