Rio Tinto in talks to develop Sulawesi nickel mine

Mining giant Rio Tinto is negotiating with the government on a contract to develop the Lasampala nickel deposit in Central and Southeast Sulawesi.

?The negotiation is in progress now,? M.S. Marpaung, a senior official at the Ministry of Energy and Mineral Resources, said on Wednesday.

An industry source predicted, however, that the negotiation would not be completed in the near future, as Rio Tinto would not make any decision until after the enactment of the new mining law.

The government has submitted the draft law on mineral and coal resources to the House of Representatives for an approval. The House and the government have yet to start debating on the bill. Analysts say it could take at least six months for the House and the government to debate on the bill.

Rio Tinto is particularly concerned with some articles in the draft law, which stipulate that mining contractors will get a permit rather than a contract of works (CoW). Rio Tinto feels comfortable with the CoW system, which is proved to be able to provide legal certainties for mining investors. Under Indonesian legal system, a CoW is equal to a law, meaning it must be approved by the House and can?t be revoked without the approval of the House. Meanwhile, a permit is considered lower than a CoW or law and is easier to be revoked.

The source said Rio Tinto would drop its plan to develop the Lasampala mine unless it is given a CoW.

Rio Tinto used to be a main player in the country?s mining industry with properties including a gold mine and a coal mine in East Kalimantan. It has closed down PT Kelian Equatorial Mining which operated the East Kalimantan gold mine and sold its 50 stake in coal mining company PT Kaltim Prima Coal.

Its only asset in Indonesia which is now in production is the Grasberg copper and gold mine in Papua, which it jointly owns together with American firm Freeport McMoRan Copper & Gold and Indonesian government. (Alex)