Rio Tinto may drop its investment plan in nickel project

The uncertainty in the law on mineral and coal coupled with slow bureaucratic process might lead Anglo-Australian mining giant company Rio Tinto to drop its US$2 billion investment plan to develop integrated nickel in La Sampala, Central Sulawesi.

Sources at the mining industry told Bisnis Indonesia in Jakarta Monday that Rio Tinto might refuse to sign the investment contract if the government enacts the new draft bill on the mineral and coal.

?The bureaucratic process has also seemed to be slow,? the source said.

The government did not seem to be serious in setting new regulations on royalty on nickel with low degree of content and besides, the existing tax regulation does not favor certainty in economic calculation and the flexibility in forestry sector, the source said.

?The four administrations that demanded a levy of US$5 million before the company starts production have also disrupted the company?s investment plan,? the source said.

Meanwhile, head of the Negotiation Team for the La Sampala Project Contract of Work (CoW) at the Energy and Mineral Resources Ministry Bambang Setiawan said that the contract is heavily dependent on the new draft bill on mineral and coal.

?Soon the law is enacted, CoW will no longer be effective and the application of the contract proposed by the Rio Tinto will be dropped because they will not be willing to ask for another permit,? he said.

He explained that negotiation on the application for the contract would involve many parties and besides, it also required an approval from the House of Representatives. The contract has no problem with the Energy and Mineral Resource Ministry but it has yet received a response from the Ministry of Finance and the Ministry of Forestry.

?Rio Tinto?s demand is natural and easy to meet. It is a pity if Indonesia will lose a US$2 billion investment as Indonesia is making massive efforts to attract investment,? he said.

He explained that Rio Tinto wanted all of the processes were completed prior to the enactment of the new mineral and coal law scheduled for completion next year.

Earlier report, Director general of geothermal, minerals and coal Simon Felix Sembiring said that Rio Tinto had asked the government for a new royalty rule for low grade nickel as it was not covered in the Government Regulation No. 45/2003 on Tariff on Non-Tax Revenue.

The signing of the contract that was initially scheduled for September 2006 has been delayed. (*)