Government softens contract amendment deadline

The Ministry of Energy and Mineral Resources has decided not to implement an earlier threat for miners failing to meet the October deadline in completing the amendment of their mining contracts, Bisnis Indonesia reported on Monday.

The paper quoted Director General of Mineral and Coal at the ministry Bambang Gatot Ariyono as saying that the government would continue renegotiation process with the miners even if the October deadline has been passed.

Bambang reiterated that that the amendment of mining contract, as mandated by the 2009 Mining Law, is important to help ensure greater benefit for the country.

?If it turns out that it (the deadline) fails to be met, can we threaten or force them (the miners)?? Bambang said.

Director for Coal Development and Management at the ministry Adhi Wibowo earlier warned miners to meet the October deadline in amending their contracts or the government will not renew the contracts once they expire.

The government has been renegotiating for the past of couple of years with miners to amend their mining contracts to comply with the stipulations in the 2009 Mining Law. The main point of changes in the contract as proposed by the government include the reduction of mining concession, conversion of contract from KK to IUP mining business license, the use of local content, downstream obligation, higher royalty, and obligation for foreign miners to divest up to 51 percent shares to local investors. The last three are seen as the most difficult issues to be agreed by miners and the government particularly amid the current downturn in the global commodity market.

The ministry earlier this month said it hoped that 33 mineral mining companies holding the mining contracts of work (or better known as KK) to finally sign new amended contracts in October.

Syamsu Daliend, Head of Supervision of Mineral Mining Operation and Production at the ministry, said that out of the 33 KK mining firms, 24 have signed MoU agreeing on the six main points of contract renegotiation with the government. Of the 24, only IDX-listed nickel mining firm PT Vale Indonesia Tbk which has amended its mining contract.

Meanwhile, Adhi said in August that out of 73 coal miners holding coal contracts of work (PKP2B), 61 have signed MoUs agreeing on the six points of contract renegotiation but have yet to sign the amended contracts. Meanwhile, the remainders have yet to conclude contract renegotiation process with the government.(*)