Government completes contract renegotiation with 11 miners: Official

Petromindo|Thomas

The government has completed contract renegotiation with 11 mineral mining companies holding the so-called mining contract of work (COW), Director of Mineral Management and Development at the Ministry of Energy and Mineral Resources Bambang Susigit said.

Bambang said on Tuesday that the government is still currently in the process of renegotiation with 13 mining companies including PT Freeport Indonesia to amend their contracts. He, however, did not say when the 11 miners would sign amendment of their mining contracts.

He said that two of the most difficult issues in the contract renegotiation process are obligation for mining firms controlled by foreign investors to divest up to 51 percent of their shares to Indonesian investors, and the application of prevailing tax principle in the amended contract, instead of nailed down tax under the current contract. Miners have argued that until their contracts expire, the nailed down tax system should be maintained.

As such completion of contract renegotiation will largely depend on the Ministry of Finance, which has insisted on higher revenue for the state.

The government has started the process of contract renegotiation with miners since 2009 in a bid to amend their contracts to be in line with the stipulation set in the 2009 Mining Law. Among of the key issues in the contract renegotiation are reduction in the size of concession, conversion of COW into IUP mining business license, obligation to build domestic smelter, divestment obligation, and the use of domestic goods and services.

Of the total 34 COW miners, nine have signed contract amendment. IDX-listed integrated nickel mining firm PT Vale Indonesia Tbk was the first to sign the contract amendment. Gold and copper mining firm PT Amman Mineral Nusa Tenggara (formerly known as PT Newmont Nusa Tenggara) now does not have to continue contract renegotiation process as it has recently agreed to convert its COW into special mining business license (or IUPK) as part of conditions to obtain export permit for copper concentrates.

The process to renegotiate the contracts of coal miners holding the coal contract of work (or PKP2B) has also been at a snail?s pace. Of the total 74 PKP2B coal miners, 22 have signed contract amendment, 47 are still in negotiation process, four have been terminated, and one in the process of termination, the ministry said in a statement late in January. (*)