BHP Billiton told to divest 51% stake in RI coal assets

The Ministry of Energy and Mineral Resources (MEMR) has rejected a request by Australia?s BHP Billiton Ltd to maintain majority ownership at its Indonesian coal mining assets, Kontan reported on Friday.

The paper quoted Director General of Mineral and Coal at the ministry, R. Sukhyar as saying that BHP must divest up to 51 of its stake in the Indonesian operations as required by the mining law.

He said that at the mining contract renegotiation talks last week, BHP has requested for a relaxation in the divestment obligation as the company plans to develop a coal upgrading facility at the company?s Central Kalimantan mining operation.

Sukhyar, however, said that coal upgrading facility merely upgrades the calorific value of the coal, thus is not considered as a processing facility.

Existing regulation rules that an integrated mining operation is allowed to divest only up to 40 percent stake to the government or Indonesian investors.

BHP Billiton controls 75 percent stake of PT IndoMet Coal, which owns seven coal mining firms with concessions in Central Kalimantan. The remainder is held by Indonesia?s PT Adaro Energy. The seven IndoMet coal mining subsidiaries holding the PKP2B coal contracts of work include PT Ratah Coal, PT Juloi Coal, PT Lahai Coal, PT Pari Coal, PT Sumber Barito Coal, PT Kalteng Coal, and PT Maruwai Coal, with combined concessions of 331,630 hectares and coal reserves of 1.27 billion tons.

The divestment obligation issue has been seen as the main stumbling block for BHP Billiton to reach agreement on the amendment of its mining contract as proposed by the government. (*)