Indonesia update

Indonesia update

23rd February 2007

Miners in Forest Areas to be Required to Pay Up-Front Compensation

The Jakarta Post

23rd February 2007

In the latest effort to improve protection of the country's rain forests, the government will require mining firms operating in both plantation and protected forests to make an up-front compensation payment for the destruction of forest cover and to cover any environmental damage their activities might cause.

It will also revoke a mining company's lease -- which is renewable every five years-- and rehabilitate the area if the firm is found to have abandoned the site, Forestry Minister M.S. Kaban said after a Thursday meeting on the issue with Vice President Jusuf Kalla, Energy and Mineral Resources Minister Purnomo Yusgiantoro, and Investment Coordinating Board (BKPM) chairman M. Lutfi.

The new policy comes against the backdrop of the House of Representative's deliberations of the draft mining law, and the upcoming signing of a new investment deal worth US$1.2 billion in Pomala, South Sulawesi, with Anglo-Australian mining giant Rio Tinto.

It may also be seen as a compromise between the divergent interests of the Energy and Mineral Resources Ministry -- which wants to encourage more mining -- and the Forestry Ministry and State Ministry for the Environment -- both of which are concerned with protecting Indonesia's forests.

"I think this is a step forward. We've all agreed that those involved in mining in forest areas will have to take conservation and environmental aspects into consideration. Previously there was no mechanism requiring them to pay for this," Kaban said.

Further explaining the new policy, which will be put into effect through a regulation of the forestry minister issued in line with the proposed new mining law, Kaban said the amount of the forest compensation payment would be assessed on a case-by-case basis depending on how much forest was destroyed by each mining operation.

Those operating in protected areas will be required to pay more than those mining in forestry plantations, he said. Finance Minister Sri Mulyani Indrawati had earlier proposed that the compensation payments be treated as local taxes for accounting purposes. Kaban declined to say how much the compensation payments might amount to.

Purnomo said that assessments would be conducted by an inter-ministerial team under the coordination of the Vice President and senior government officials so as to avoid conflicts of interest. Last year, the Forestry Ministry issued a regulation requiring every mining firm that wishes to operate in forest areas to provide compensatory land amounting to twice the area of the site on which it proposed to establish its mine.

Those failing to comply with the requirement within a period of two years are required to pay a penalty amounting to 1 percent of their production values. Mining firms and associations objected to the regulation, arguing it would impose too much of a burden on top of the royalties they already had to pay.

Protesters Rally Against Newmont Expansion

The Jakarta Post

22nd February 2007

Dozens of environmental protesters rallied in Mataram, West Nusa Tenggara, on Wednesday against the issuance of a permit to expand mining company Newmont's operations, an accusation which the company denied. The protesters, members of the Community of Environment Messenger group, gathered at the office of West Nusa Tenggara Governor H.L. Serinata.

They demanded that the administration reject the application of PT Newmont Nusa Tenggara for a permit to expand its operations, citing the potential for environmental damage. "We demand that the governor does not issue the permit. We don't want this just for the sake of money, people are being sacrificed," said protest coordinator M. Tohri.

The group claimed the company planned to use the permit to bury leftover mining materials in the Batu Hijau copper and gold mine in West Sumbawa. They said the proposed area constituted 38 hectares of land in Latar forest.

"The problem is that the location is part of a protected forest, and we suspect the expanded area will not only be used to buy leftover mining materials but will also be exploited," Tohri said. "There are many protected species in the forest, including deer and rare birds."

As the governor was in Jakarta, the protesters met with the governor's assistant on the economy and development, Abdul Malik, who promised to deliver the group's comments to the government. After the meeting Abdul told journalists that the company had made a proposal for a permit, but that the administration had not yet given an official response.

"The proposal has been made but the administration is still studying it. We'll see if (the permit) is against the existing law and whether it will disadvantage people. But so far, no permit has been issued, it's still being reviewed," he said, adding that the company's latest permit application pertained to land already within the agreed contract.

Meanwhile, the company has denied it planned to expand the Batu Hijau mine, and said it had not put forth an application to the provincial administration to do so. "This is a misunderstanding. There is no proposal for an expansion permit," Kasan Mulyono, the company's public relations manager, told The Jakarta Post.

Kasan said the company's recent proposal for a permit was routine for mining operations and was part of its contract. He did not elaborate on exactly when old permits required renewal. Furthermore, he said the proposal was sent to the Forestry Ministry in Jakarta and not to the provincial administration. "So it's not true that there are mining activities outside the area agreed to in the contract. This is just a misunderstanding," he said.

According to its 2004 report, the company is a joint venture with the Nusa Tenggara Mining Corp. of Japan, the majority of which is owned by the Sumitomo Corp. and an Indonesian firm, PT Pukuafu Indah. Newmont is the operator and holds a 52.9 percent interest. Copper and gold porphyry deposits in Batu Hijau were discovered in 1990, and commercial production began there in 2000. Under the current plan, the mines resources are predicted to last until 2034.