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INTERVIEW- Indonesia Sees Mining Output Up But Future Frought

By Muklis Ali

 JAKARTA, Jan 19 (Reuters) - Indonesia expects output of copper, gold and coal to rise in 2004 despite a new forestry law seen threatening mining operations, a mining ministry official told Reteurs on Monday. But the longer – term outlook may not be so positive due to a lack of of new investment, Director for Mineral and Coal Enterprises Mahyudin Lubis said. “We estimate output of several commodities, including copper, copper concentrate, coal and gold to rise in 2004. But we predict the mining industry will slow five years from now because of no new investment.“

He saw many challenges for the industry, including a controversial forestry law that some analysts say could make most of Indonesia’s mines illegal if strictly implemented.

Cash-strapped Indonesia has struggled to attract foreign investors since the country plunged into economic and political turmoil in 1997-98, especially in the lucrative resource sector that is a major contributor to gross domestic product.

Indonesia has an abundance of coal, gold, copper, nickel, and tin along with natural gas and oil.

The forestry law has ratified in 1999 and has forced some firms to suspend projects, even though the statute has generally not been enforced. There has also been confusion over the application of taxes since the devolution of fiscal powers to the regions two years ago.

Mining analysts have said the forestry law was so broad that should it be enforced fully it could apply to virtually all mining operations in Indonesia. The law bans open-pit mining in forested areas.

Lubis also said several mining companies, including U.S firm Newmont Mining Corp <NEM.N>, were in the process of closing their operation in Indonesia’s North Sulawesi province because reserves were running out.

“The forestry law has caused investors to take a wait and see attitude to new operations in Indonesia. That is threatening the mining industry over the next decade,� Lubis said.

He said the government and parliament were in the process of amending the contracts of some 22 foreign and domestic companies involved in mining due to the forestry law.

That included the nickel operations of PT Inco <INCO.JKT>, controlled by Canada’s Inco Ltd <N.TO> in South Sulawesi, as well as Freeport McMoRan Copper & Gold Inc <FCX.N> and its giant operations in Papua province.

“we hope we can settle the problem this year and allow the companies to expand and open new mining operations in Indonesia ,� Lubis said.

Industry executives have said it would be highly unlikely long-standing projects would be affected, but that the law was a worry for firms in the early production or exploration stages.

The ministry’s predictions for output (in tones) :

 

 

2004

2003

Copper concentrate

Copper           

Coal    

Gold           

3,200,000

1,200,000

122,817,000

135

3,149,154

965,872

111,942,636

132

 ((Editing by Dan Eaton ; Reuters Messaging : muklis.ali.reuters.com@reuters.net ; +6221 384-6364))

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