Govt may revise mining companies divestment requirement
Monday, September 2 2013 - 02:08 AM WIB
The government has been engaged in protracted renegotiation of the so-called mining contract of works (COWs) with major mining companies. Of the six main points of renegotiation, the requirement for the mining firms to divest 51 percent of their shares to the government or local investors has been a major stumbling block to finalize the deal amid protest from foreign firms.
In what is seen as the government willing to relax on the divestment requirement, Thamrin Sihite, the director general of coal and mineral at the Energy and Mineral Resources Ministry, said in Jakarta last week that the 51 percent divestment requirement may not be applied to mining companies which already have an integrated operation, from the upstream to downstream.
He said that the divestment requirement for integrated mining companies will depend on the value of the upstream business as compared to the downstream business.
Thamrin said that this kind of incentive to accelerate the contract renegotiation has been approved during a meeting at the Office of the Coordinating Minister for the Economy. Thamrin said that his office is currently drafting the necessary government regulation on the new divestment requirement policy.
The change in the policy will benefit several companies including PT Weda Bay Nickel, and PT Vale Indonesia. ?For Weda Bay, the divestment may reach 40 percent, while for Vale, it would be different because it is publicly-listed firm,? he said.
The government is currently negotiating COWs held by the country?s mining companies to ensure that all contracts are in line with the 2009 Minerals and Coal Mining Law. The renegotiation cover six main issues, namely the size of mining areas, contract extensions, the amount of royalties to be paid, obligations to process raw materials in Indonesia, divestment requirement, and the utilization of local goods and services. (*)