Indonesia To Issue Decree To Boost Mining Sector

Indonesia to issue decree to boost mining sector

Reuters

March 11 2004

JAKARTA, - Indonesia will issue a government decree allowing 13 mining firms to continue operations despite violating the country's forestry law, government officials said on Thursday.

The move is seen aimed at boosting the mining industry after a controversial forestry law banned open-pit mining in forested areas, forcing some firms to suspend projects even though the statute has generally not been enforced.

Among those affected by the law have been the nickel operations of PT Inco, controlled by Canada's Inco Ltd in South Sulawesi province, and Freeport McMoRan Copper & Gold Inc. and its huge operations in Papua province.

"The cabinet has agreed that the government will issue a decree to revise the forestry law. After the decree, the president will issue a decision on which mining companies will be able to continue operations in Indonesia," chief economics minister Dorodjatun Kuntjoro-Jakti told reporters.

The revised decree would state that mining contracts approved by the government before the forestry law was ratified in 1999 could remain in effect even if they conflicted with forestry rules, Justice Minister Yusril Ihza Mahendra said.

Forestry Minister Muhammad Prakosa said President Megawati Sukarnoputri would announce the decision soon and it would allow 13 mining companies, including Gag Nickel and Nusa Halmahera, to continue their operations.

Nusa Halmahera Minerals, majority owned by Newcrest, had recently suspended gold mining activities in the North Moluccas because the forestry law forbids that area to be mined, an Indonesian mining official has said.

Gag Nickel, on Gag Island in Papua province, has a contract approved before the law, but has yet to start operations.

Indonesia has said mining firms, mostly foreign, could have grounds for suits against the Indonesian government worth $31.5 billion for violation of contracts after ratification of the forestry law.

Mines and energy minister Purnomo Yusgiantoro has said 22 mining firms with Indonesian operations violate the forestry law.

The law's defenders say Indonesia is rapidly losing tropical forests from illegal logging and a variety of other factors, including mining, and the legislation is needed to protect the forests.

Indonesia nickel and gold producer PT Aneka Tambang Tbk (Antam) was also affected by the law, postponing the development of nickel resources on Gag island.

Mining analysts have said the forestry law was so broad that should it be enforced fully it could apply to virtually all mining operations in Indonesia.

Indonesia has an abundance of coal, gold, copper, nickel and tin along with natural gas and oil. Most of the metals and some of the energy resources are located in the eastern part of Indonesia.

Industry executives have said it would be highly unlikely long-standing projects would be affected, but the law was a worry for firms in the early production or exploration stages.

Copyright 2004, Reuters News Service