Govt wants two royalty systems for Inco

The Ministry of Energy and Mineral Resources has proposed both fixed and floating rate systems in the payment of royalty by nickel mining company PT International Nickel Indonesia (Inco) to ensure that the government can benefit from the rise in nickel price and at the same time will not get burned when there is a fall in the metal price, Kontan reported Thursday.

 

Director General of Mineral and Coal and Geothermal, Simon Felix Sembiring, said in Jakarta Wednesday that the use of both fixed and floating rates had been proposed during a negotiation with Inco.

 

"We are still negotiating the change in the royalty payment system with Inco," he told reporters after a hearing with the House of Representatives (DPR).

 

Simon said that the government would determine the ceiling nickel price as the reference when to use floating or fixed rate system in the Inco's royalty payment.

 

In Inco's renewed contract of work which will be effective beginning 2008 until 2025, the royalty payment is based on a fixed rate. The government wants to revise the contract following the persistent increase in the nickel price in the world market during the last few years.

 

The government has said that it might suffer a potential loss of about US$ 5 million a year from Inco's royalty payment if the current fixed rate system is not changed. (*)