BHP Billiton expects gov?t to give final say on nickel project in September

Australian mining giant BHP Billiton said over the weekend that it expected government to issue final decision on Gag Island forestry status, where its US$ 1.2 billion nickel project is located, before the end of September.

BHP Billiton, which owns 75 percent shares in PT Gag Nikel, the prospect?s operator, had been requesting the ministry of forestry to change the island?s current status of protected forest to allow it to develop the nickel-cobalt resources.

Gag Nikel was granted Contract of Work in 1998, which gave the company the right to explore for nickel in Gag Island in Sorong regency, Irian Jaya. At that time the status of Gag Island was limited production forest.

However, in September 1999 the government enacted Law no. 41 which banned open pit mining on protected forest and one month later, ministry of forestry changed the island?s status to protected forest without consulting Gag Nikel, ministry of energy and mineral resources or Irian Jaya local governments.

Since then, Gag Nikel had tried to lobby the government to change the island?s protected forest status into another form of land status that permits open mining.

In January 2001, ministry of forestry said that in order to change the island?s status it must be first evaluated by integrated team under coordination of the ministry, and supported by the Sorong regency government and local council.

?We have completed all the requirements,? said Wilson.

Andrew Wilson, president director of PT Gag Nikel and also president director of BHP Billiton Indonesia said that the project participants expected to receive a final answer before the end of September. He however, did not comment what would happen if the government did not grant BHP Billiton?s request by that time.

Wilson said BHP Billiton and its partner state miner PT Aneka Tambang Tbk, which owns 25 percent share of Gag Nikel, had spent some US$ 43.1 million on the project.

Currently, he said, 216 million tons of ore, which contain 1.35 percent nickel and 0.8 percent cobalt, had been discovered in the prospect.

Earlier BHP had reached an agreement with Falconbridge of Canada allowing the latter to inject US$75 million to finance the project ' s bankable feasibility study in exchange for BHP ' s 37.5 percent shares in the project. Falconbridge, however, refused to disburse the money before the protected forest issue was resolved.

Wilson said the conversion of Gag Island protected forest status would allow project to progress to bankable feasibility study and to eventually proceed with the construction and operation

However, said Wilson, if permission was not granted, Indonesia would loss a potential investment of US$ 1.2 billion. He even said BHP Billiton would ask Indonesian government to pay compensation on the investment it had spent on the project if the government stick to its current stance. (alex/godang)