Newcrest to benefit from rule change in Indonesia: AFR

The Indonesian Government is poised to ease restrictions on open cut mining in forest areas which have blocked the plans of Australian company Newcrest Mining to continue operations in the country, Australian Financial Review reported Monday.

Newcrest is blocked from mining its Toguraci gold deposit in eastern Indonesia by a 1999 law which forbids open cut mining in areas designated as protected forest even though it already held permits allowing mining to proceed.

But after a drawn-out lobbying process, mining industry figures in Jakarta believe the government is close to allowing projects in protected forests to proceed.

Chairman of the Indonesian Mining Association, Benny Wahju, welcomed the signs that changes are imminent. "This would be a good start," he said.

The 1999 law, introduced under the Habibie government with the strong backing of environmental groups, was intended to help slow the massive plunder of Indonesian forests mainly by illegal loggers working in collusion with corrupt government authorities.

However, while the destruction of forests in Indonesia has continued, the forestry law has been one of the key factors threatening the continued existence of the mining industry in Indonesia which is one of the world's most prospective areas for gold and copper.

Among Australian-linked mining companies, BHP Billiton, Rio Tinto and Newcrest Mining have been affected by the law, but it is Newcrest which stands to gain most if it is eased.

Newcrest has exhausted its 82.5 per cent-owned Gosowong gold mine on Halmahera island in eastern Indonesia but could mine the Toguraci deposit only 2 km away - using the processing plant and airstrip which are already in place - except that it is an area designated as protected forest.

Toguraci is estimated to be a 360,000 ounce deposit, nearly half as large as the original Gosowong find.

Newcrest also stands to gain if Rio Tinto's Citra Palu gold deposit on Sulawesi island is freed from protected forest restrictions. Newcrest is interested in buying Rio Tinto's 90 per cent share of this project but a sale will not proceed until mining is permitted.

BHP Billiton's proposed nickel mine on Gag Island in Papua province is also in a protected forest region but this project is already on hold following the withdrawal of Canadian firm Falconbridge last January.

Indonesia's slow-moving official decision-making process has not yet finalised the changes to the mining ban in protected forests.

But according to the mining industry lobby, a key obstacle was removed recently when the forestry ministry agreed to allow companies which already held mining permits (known as contracts of work) in protect forest areas before the 1999 law to go ahead with their projects. Newcrest, Rio Tinto and BHP Billiton are all in this category.

Now the changes are to be discussed by a special parliamentary committee.

But Wahju said that new projects should also be allowed in protected forest areas if mining exploration is to be revived in Indonesia.(*)