BHP Billiton Limited (ADR) NYSE:BHP, Rio Tinto plc (ADR)
NYSE:RIO, Newcrest Mining Limited ASX:NCM, Freeport-McMoRan
Copper & Gold Inc. NYSE:FCX
During the last week we have heard BHP, Rio, Newcrest,
Freeport etc all say that the Indonesian Mining Law does not
apply to them, however the Indonesian Department of Mines and
Energy has confirmed when we contacted them that all companies
without exception, must implement the new policy under which
foreigners cannot own more than 49 per cent of a mining project
in the country. The divestment must start taking place after a
mine has been in production for five years, and be complete after
The Indonesian regulation extends a 2009 law mandating local
ownership of at least 20 percent in joint ventures by the sixth
year of production.
The new law applies to companies with mining business
licenses. Miners, including Vale, Freeport-McMoRan Copper &
Gold and Newmont, currently operate under contracts of work and
need to apply for mining business licenses when their permits
expire, according to the literal translation of the rule.
So we will likely see miners holding working contracts but not
mine equity in Indonesia in the future.
With the current high profile focus of corruption in Indonesia
it is politically unlikely that any mining company will receive
or be able to negotiate special favours.
Indonesian politicians are in damage control after the
Indonesia Chamber of Commerce and Industry revealed last week
that businesses in Indonesia must set aside up to 17.4 percent of
their investment funds to pay illegal fees, such as those needed
to obtain official permits.
The study noted that complicated processes to obtain business
permits were still common, with businesses having to negotiate up
to nine steps at a variety of government institutions.
Shayne Heffernan oversees the management of funds for
institutions and high net worth individuals.
Shayne Heffernan holds a Ph.D. in Economics and brings with
him over 25 years of trading experience in Asia and hands on
experience in Venture Capital, he has been involved in several
start ups that have seen market capitalization over $500m and 1
that reach a peak market cap of $15b. He has managed and overseen
start ups in Mining, Shipping, Technology and Financial