Got a few calls on this morning, not getting much press as yet, but protectionism seems to be coming...this move MAY affect ncm at some stage together with a whole lot of other miners, something that should be considered and factored in to risk assesments?
By ERIC BELLMAN And DEDEN SUDRAJAT JAKARTA, Indonesia—In a move that could affect billions of dollars in foreign investment, Indonesia said it would start requiring foreign investors to cut their stakes gradually in mining assets to less than 50%.
Foreign investors had been allowed to hold up to 80% of mining companies, but a presidential decree signed last month requires foreign firms to sell their holdings in stages to 49%, Indonesia's Energy and Mineral Resources Ministry said Wednesday. The policy change hadn't been announced earlier.
Indonesia is rich in reserves of gold, copper, tin and coal.
.The new regulations will apply only to new mining contracts between the government and foreign companies and to foreign companies that renew current contracts, a mining official said.
While many details about the new restriction were unclear, analysts and companies warned that the plan could crimp much-needed foreign investment into one of the most important sectors supporting Indonesia's recent growth.
"The interest in mining is very strong in Indonesia, but the regulations keep changing, which is paralyzing investment," said Umar Juoro, chairman of the Center for Information and Development Studies, a public-policy think tank here. "It is a very expensive business to get into, so foreign investors don't want to be forced to divest."
Although Indonesia drew a record $20 billion in foreign direct investment last year, its natural-resources sector has struggled to attract some Western companies because of confusion over the country's rules and regulations. Indonesia is rich in reserves of gold, copper, tin and coal. Gold and copper, in particular, need foreign investment because they are especially capital- and technologically intensive to extract.
Some Western analysts and executives have said privately in recent weeks that the country's recent success in attracting investment to other sectors may be giving politicians confidence about imposing restrictions to protect domestic companies. Indonesian officials have denied that.
Under the regulations unveiled Wednesday, foreign investors with 100% ownership of mines will have to sell 20% to domestic investors within six years of the start of production, the ministry said. At least 30% of the mine must be sold to Indonesian investors by the seventh year, 37% by the eighth year, 44% by the ninth year and 51% in the 10th year.
Jero Wacik, Indonesia's resources minister, declined to elaborate on the regulation. Government officials have said they want more mining wealth and control to stay in the country.
Indonesia's economy expanded 6.5% last year, and its large consumer market—the country has the world's fourth-largest population, behind China, India and the U.S.—has helped to make the country attractive for foreign money. Indonesia also is eyeing other restrictions on foreigners' operations. The country's central bank, for example, is considering capping bank ownership.
NCM interest in INDO FYI
Last year, the government demanded to renegotiate resource-sector contracts that it deemed "unfair," including with Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp., though it didn't lay out specifics. A recent regulation also requires companies to process all commodities in Indonesia before export, which stimulates the domestic economy.
"This contradicts the government's efforts to attract foreign direct investment into the country," said Priyo Pribadi Somarno, former chairman of the Indonesian Mining Association.
Freeport and Newmon said Wednesday that they expected their contracts with the government protect them from having to divest prematurely.
The mining sector contributed nearly 12% to the nation's gross domestic product last year.
GOSOWONG (82.5%): The project is situated in the Gosowong gold province on Halmahera Island, Indonesia. The main operation is the high grade, underground Kencana mine. At FY11, the Mineral Resource contained 2.5Moz of gold and 3.4Moz of silver along with an Ore Reserve containing 2.1Moz of gold and 2.7Moz of silver.
NCM Price at posting:
$31.56 Sentiment: None Disclosure: Not Held
