Rio Tinto?s investment plan in Sulawesi may fail

Plans by mining giant Rio Tinto Plc to develop the Lasamphala nickel concession in Central Sulawesi and Southeast Sulawesi could fail to materialize because the local governments have awarded the concessions to other companies, Bisnis Indonesia reported on Thursday.

The Anglo-Australian company has planned to invest US$2 billion to develop the Lasamphala huge nickel resources and negotiations on the contract between the central government and the firm, which has been lasting for years, has come to the final stage. The Morowali regency administration Central Sulawesi and the Konawe regency administration in Southeast Sulawesi were however not patient enough to wait for the negotiations to conclude that they have handed over the concessions to several local companies, according to the newspaper.

The Morowali regency has issued Mining Contracts (KP) over areas that are part of the Lasamphala concession to five companies affiliated to local firm Bintangdelapan Group and is processing applications from three other companies. Meanwhile, the Konawe regency has received seven applications for contracts over areas overlapping with the Lasamphala concession from companies affiliated with Bintangdelapan, including PT Panca Metta, PT Meltapratama Perkasa, PT Bintangdelapan Wahana and PT Bintangdelapan Mineral.

Bintangdelapan is cooperating with several contractors from China.

Bambang Setiawan, the secretary of the Directorate General of Mineral, Coal and Goethermal Resources, said the Ministry of Home Affairs has been trying to mediate a solution to the problem.

?The mediation, however, has yet to bring results. The overlapping of lands is threatening the continuation (of negotiations on) Rio Tinto?s Contract of Works (CoW),? Bambang said.

Head of the Investment Coordinating Board (BKPM) M. Lutfi confirmed that the Ministry of Home Affairs had been trying to mediate a solution to the problem by talking to both regency governments for three months.

?This is really unethical. If there is no solution within a month, we shall meet again with the minister of home affairs to solve the problem,? he said.

Negotiations between the central government and Rio Tinto have been protracted for years because the company wants a nailed-down tax payment system be applied in the CoW. The government, however, wants to apply a prevailing tax payment system.

According to Lutfi, the central government and Rio Tinto have reached agreement to apply a nailed-down tax payment system for 30 percent of Lasamphala?s products and a prevailing tax payment system for the rest of the product. (*)