Kangaroo seeks advice on impacts of foreign ownership regulation

By Ruli Setiawan

ASX-listed mining firm Kangaroo Resources said on Tuesday it had sought independent legal advice in order to help determine the potential short term and long term impacts on its investment in Indonesia of the new regulation on foreign ownership in Indonesia mines.

The firm referred to the Minister of Energy and Mineral Resources (MEMR) Regulation No. 7/2013 on issued on Sept. 13, 2013 on procedures and price determination for share divestment and change in investment status in mineral and coal sector.

The firm said the new regulation supplements the existing government laws and regulations (Minerals and Coal Law No. 4/2009, Government Regulation No. 23/2010 and Government Regulation No. 24/2012) which collectively set various limits on foreign ownership of companies holding mining concessions and stipulate the various processes and timetable for equity divestment to achieve compliance but there are provisions that appear to be inconsistent with those previous laws and regulations.

According to the firm, the effect of the regulation is that there is now a new requirement where a company converts from the status of being 100 percent Indonesian owned into a foreign investment company. The Indonesian ownership requirements are:
? 25%, where the mine is at exploration phase; and
? 51%, where the mine is at production phase

?Kangaroo Resources (KRL) expects that sales to local Indonesian investors will be able to be made on terms agreed by the parties according to market principles. However, for divestments to local Indonesian government, MEMR Regulation No. 27/2013 provides that the price at which the shares are to be offered must be appraised based on the replacement cost of the accumulated investment cost incurred, minus depreciation and amortization adjusted by inflation and the financial obligations of the holder of the concession,? the firm said.

There have been various proposals, regulations and variations to them relating to foreign ownership of mining concessions in Indonesia in recent years and the application, effect and implication of aspects of MEMR Regulation 27/2013 is unclear and still being investigated by KRL, the firm said.

?Given KRL?s extensive portfolio of 14 Indonesian coal mining concessions (comprising a majority equity shareholding in 9 Indonesian mining concessions and ongoing work to complete the legal acquisition of majority equity positions in another 5 concessions) the KRL Board has sought independent legal advice in order to help determine the potential short term and long term impacts of these new regulations on the company?s Indonesian investment,? the firm further said.

Editing by Johannes Simbolon