West Wits Mining: Indonesian mining legislation amendments

(March 14, 2012)--On 6 March 2012 the Indonesian government published amendments to the existing regulations relating to the implementation of mining business activities in Indonesia.

The main amendment increases divestment obligations for foreign ownership in certain Indonesian mining projects. Local ownership requirements, which currently require mandatory divestment of 20% to Indonesian entities after five years of production, would be extended to require Indonesian ownership to reach 51% after the tenth year of production.

Although these amendments have been widely publicised in the international financial press, formal details of the effect of and timeline for implementation of the amended regulations is still subject to interpretation by the Indonesian Department of Energy and Mineral Resources.

In respect of West Wits Mining (?the Company?) Derewo River Gold Project, the Company notes that:
? 50% of its economic interest in the existing alluvial operation is already held by local Indonesian entities, therefore further divestment (if required) would appear to be limited to an additional 1% of the Company?s interest in the tenth year of commercial operation; and
? 20% of the economic interest in the exploration leases is held by local Indonesian entities, therefore any further divestment (if required) would not appear to be necessary unless these leases were converted to mining leases and then only after the sixth year of commercial production.

However the amended regulations also require that interests offered under the divestment provisions are, in the first instance, offered to the Indonesian government. It is unclear how this requirement will apply to operations with existing local ownership.

There have been some reports that the amended regulations will not affect mining concessions (IUPs) granted prior to the date of the enactment of the amendments (21 February 2012) however this has not been confirmed by the Indonesian Department of Energy and Mineral Resources. If this was the case, the Company?s IUPs (all of which were granted prior to 21 February 2012) would be unaffected by the amended regulations.(ends)