DJ Indonesia May Reserve Some Metals Production For Local Market JAKARTA (Dow Jones)--Indonesia may require mining companies to put aside a part of their production for the domestic market to ensure domestic supply at affordable prices, said Robert Tambunan, an official at Indonesia's Ministry of Energy and Mineral Resources.
Tambunan is in charge of drafting contracts for mining investments. The requirement will ensure Indonesia has enough mineral deposits for domestic use and that soaring metal prices in global markets won't put metals such as nickel, copper and tin out of reach for ordinary consumers, he said. "Mining companies may be required to allocate a percentage of their (production) for the local market as a means of preventing local prices from skyrocketing," Tambunan said. A similar system is already in place for Indonesia's crude palm oil market to quell inflation fears as soaring palm oil prices have threatened to raise the price of staple cooking oil. Under the system, palm oil producers have to allocate part of their crude palm oil output for the local market while a government-set price has been imposed on cooking oil to prevent the staple from being priced outside the means of most Indonesians. The regulating system for the mining industry is currently being debated in parliament and will likely be part of the country's new mining laws, said Tambunan. Indonesia's proposed new mining laws, which have yet to be endorsed by parliament, have been at the center of much controversy. Mining companies have complained the new mining law may work against them. They fear the mining license system mandated under the proposed law will put control over their investments in the hands of largely inexperienced provincial governments. They want the current system, regulated by the central government, to continue. Mining companies have also complained that the content of the new mining laws lack clarity and prefer to wait until the legislation is passed before committing themselves to any major investment in Indonesia. Tuesday, Simon Sembiring, director general of coal and mineral resources at the Ministry of Energy and Mineral Resources, was quoted in a Bloomberg report as saying the new mining laws may include provisions to rescind existing mining leases but Tambunan said such a move is unlikely as both the company and the Indonesian government are bound by contract terms. "We can't just take away concessions (from mining companies). Once a contract has been signed, all parties have to abide by the terms," said Tambunan. Concessions may only be revoked if mining companies fail to abide by the contract terms, for instance, by exceeding production quotas set in the company's contract, he added. May Allow Companies To Exceed Production Quotas However, if the proposed price control scheme gets the green light, the Indonesian government may allow large metals producers such as state-owned PT Aneka Tambang Tbk. (ANTM.JK) and Freeport McMoRan Copper & Gold Inc.'s (FCX) Indonesian unit, to exceed their daily production quotas, in order to allow the Indonesian government to obtain the metal supplies it needs to maintain domestic market prices without disturbing the companies' existing contracts with buyers. Once Indonesia has obtained enough metal supply to cap possible price spikes on the domestic market, the company's original production quota would be re-imposed, Tambunan said. Many mining companies in Indonesia hold so-called offtake agreements with buyers who purchase most or all of the metals they produce. Indonesia, which is rich in copper, gold and nickel, has lagged behind other mineral-rich countries in luring foreign investment, and has mostly missed out on the current commodity boom as prices of metals such as nickel and tin scale new highs. Although it has sizable mineral resources - estimated at 6.7 billion tons - the country has developed no new major mines since the 1997-98 economic crisis. Indonesia hopes to attract $22 billion in mining investments a year but research by PricewaterhouseCoopers showed mining companies spent only $7 million exploring new Indonesian deposits in 2005, a figure that has remained unchanged for the last five years. -By Fawziah Selamat, Dow Jones Newswires; 62 21 3983 1277; [EMAIL PROTECTED] (Reuben Carder contributed to this article) -Edited by Denny Kurien (END) Dow Jones Newswires June 06, 2007 00:18 ET (04:18 GMT) Copyright (c) 2007 Dow Jones & Company, Inc.
