Forcing KPC to divest 51 percent stake could trigger capital outflow

Forcing the East Kalimantan coal mining giant PT Kaltim Prima Coal (KPC) to divest 51 percent stake this year could trigger a capital outflow, according to a company senior official.

Irawan Purwo of KPC management was quoted by the local Radar Kaltim daily as saying that Rio Tinto, the Australia mining giant which controls KPC, would find other countries with better investment climate if KPC was forced to make the 51 percent divestment.

Irawan was speaking a seminar in Sangatta, the mining town of KPC.

KPC is currently involved in a row with the local East Kalimantan administration and parliament since last year over its divestment program. The local administration insists that KPC must divest a 51 percent stake this year. But KPC insists that according to its mining contract with the central government, it is only required to divest 37 percent stake. Some reports have said that KPC was willing to divest up to 44 percent stake.

Reports also said that East Kalimantan would report KPC to the Attorney General's Office over corruption and intentional delay in its divestment program amid rumors that KPC would bring its case to the international court.

KPC is Indonesia's second largest coal producer with annual output of 14million tons, equally owned by Anglo Australian miner Rio Tinto and Anglo American energy giant Beyond Petroleum (BP). (*)