Rio Tinto says it may stop further Indonesian investments: Report

Anglo-Australian mining company Rio Tinto PLC said Thursday it may put further investments in Indonesia on hold if a court rules against its local joint venture in a row with the East Kalimantan provincial government, Dow Jones Newswires reported.

"If we got a substantially unfavorable judgment, we would have to reconsider further investments in Indonesia," said Lex Graefe, president of Rio Tinto's local operations.

The East Kalimantan government is suing Kaltim Prima Coal - an equal joint venture between Rio Tinto and BP PLC - in a $776 million suit for allegedly delaying the sale of a 51 percent stake to local investors.

Kaltim Prima's 30-year operating contract from 1992 states the company must divest a majority stake to Indonesian companies. The mining company said a change in government policy toward the joint venture in 1996 led to delays in the divestiture process.

Any move to stop further investment would mark another blow for Indonesia, which is already suffering from lack of foreign direct investment due to its unstable political situation, and lack of a clear legal framework.

Last year, Newmont Mining Corp. said it put all its further exploration plans in Indonesia on hold while it waited for the government to promulgate a new mining law.

Indonesia failed to pass a new mining law through Parliament by the end of last year. Delays have put off foreign investors from making plans for big capital expenditures and have caused delays in government approvals for mining projects.

Rio Tinto's Graefe said he expects it to take between six months and one year for the courts to reach a decision over the East Kalimantan suit. The next hearing is set for March, he said. (*)