BHP nickel plan in doubt

BHP nickel plan in doubt

By Sian Powell in Jakarta, Finance News (Australia)

July 09, 2005

INDONESIA'S Constitutional Court has banned open-pit mining in protected forests for all but six companies that have already begun operations, potentially outlawing BHP Billiton's plan for a $1 billion-plus nickel mine in Papua.

According to a coalition of Indonesian environmental organisations, the ruling could also stymie two other Australian projects in the country.

However, the environmental coalition's interpretation of the ruling has been disputed by BHP. A spokeswoman said yesterday the ruling had not forbidden the mine, but the Gag Island operation nevertheless remained dormant.

"BHP obviously hasn't read the full judgment," responded Chalid Muhammad from the Walhi environmental organisation.

The Constitutional Court on Thursday rejected the request to ban all open-pit mining in protected forests, allowing seven firms that had begun work to continue, the environmental coalition said in a statement.

However, the coalition added that six other firms affected by the ruling were required to follow the Forestry Law, which forbids open-pit mining in protected forests.

In the complex 420-page judgment, the Constitutional Court judges ruled that "the six companies which are still at the stage of exploration or feasibility studies, at such time as they enter the exploitation stage must comply with the requirements in Clause 38 (4) of the Forestry Law (which prohibits open-pit mining in protected forests) as long as their licences for exploration and exploitation are not combined licences".

In general practice, mining companies are only awarded so-called exploitation licences once environmental impact assessment plans are approved. According to the environmental coalition, the court's ruling prevents open-pit mining in protected forests by BHP's Gag Nickel and two other Australian-backed companies - Aberfoyle Mining's Sorikmas Mining and Pelsart Tambang Kencana.

"Transnational mining companies such as BHP Billiton have nothing to celebrate," said Siti Maimunah, national co-ordinator of the Mining Advocacy Network, Jatam. "The Constitutional Court ruling stresses to the Government, especially the Minerals and Energy Department, that open-pit mining in protected forests is still prohibited for all but the seven companies that have already begun exploitation."

The BHP spokeswoman said the Constitutional Court's ruling permitted the Gag Island mine in Papua to go ahead.

"At this stage BHP Billiton does not have any firm development plans for Gag Island; we are evaluating a range of potential options and will continue to consult with the local community and relevant stakeholders," she said.

The laterite nickel find at remote Gag Island, in Indonesia's Papuan province, is touted as one of the richest in the world.

However, it has been stalled by opposition from environment groups based on BHP's plan, which may not meet the company's own environmental standards, to dump tailings into the ocean.

Originally hailed as a win for the mining lobby, the latest ruling honoured the contracts of companies that already had mining licences and had begun operations. These include Newcrest, with its mine in northern Sulawesi, and the giant Freeport operation in Papua. Chief Judge Jimly Asshiddiqie said overturning the law permitting 13 firms to operate could have created legal uncertainty in Indonesia.