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10 COAL MINERS AGREED TO AMEND OPERATING CONTRACTS

Posted on September 02, 2015 on 10:17:26 WIB


As many as 10 coal mining companies have finally agreed to amend their operating contracts following prolonged renegotiations with the government.

Under the amended contracts, the mining companies will, among other things, have to adjust their royalty payments and mining areas in accordance with the requirements stipulated in the 2009 Mining Law.

The 10 companies that agreed to amend their contracts are Indominco Mandiri, Jorong Barutama Greston, Trubaindo Coal Mining, Antang Gunung Meratus, Bahari Cakrawala Sebuku, Borneo Indobara, Gunung Bayan Pratama Coal, Kartika Selabumi Mining, Mandiri Intiprakasa and Indexim Coalindo.

The companies, which operate in various provinces in Kalimantan, are relatively small in size compared to Indonesia's major coal mining firms such as Berau Coal, Adaro Energy and Arutmin.

Seventy-three coal contracts of works and 34 mineral contracts of work are still in the process of renegotiation and are expected to be completed in October this year. Last year, only nickel miner PT Vale Indonesia agreed to amend its contract.

"We hope this move can be followed by other coal mining companies, which are expected to speed up the negotiation process and sign the amendments of their contracts," Energy and Mineral Resources Minister Sudirman Said said during the signing of the amended contracts in Jakarta on Wednesday.

"Three companies from our holding group have signed the amendment and one is still in the process of negotiation. We hope it will not take much longer," said Leksono Poeranto, corporate affairs director at publicly listed Indo Tambangraya Megah.

The ministry's director general for minerals and coal, Bambang Gatot Ariyono, said 22 out of 31 articles in the contract were amended, particularly those related to the limitation of mining areas, the continuation of mining operation and the amount of royalties that firms have to pay to the government.

The amended points also include the obligation of processing and refining in the country's smelters, divestment as well as the commitment to use domestic goods, services and workforces.

"Divestment obligation will help increase domestic shares through state-owned enterprises and local entrepreneurs," Sudirman said.

Bambang added the revised contracts would help create additional state revenue of between 6 and 9 percent as all types of coal were subject to a 13.5 percent royalty. Previously, coal miners were required to pay royalties of between 3 percent to 13.5 percent depending on the calories of coal they produced.

The renegotiation is mandated by Law No. 4/2009 on mining as it aims to change the mining regime from "contract" to "permit" to ensure the state will have a superior position. Renegotiations should have been completed one year after the law was passed. However, the target was frequently delayed because of the complexity of related issues, such as financial obligations.

Among terms regulated in the financial obligation formulation are requirements that coal mining companies pay royalties in advance and that an export tax may be imposed in the future. The two issues contributed to a standoff in the renegotiations with coal mining firms, which saw the requirements as disadvantageous to them.

Source: The Jakarta Globe, 6 August 2015



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