Indonesia’s move to limit foreign companies to no more than 49% equity interest in some of its mines could spell bad news for Malaysian companies with mining operations in the republic, the country’s The Edge financial daily reported. Indonesia’s Energy and Mineral Resources Ministry said on 7 March that foreign investors with 100% ownership of mines will have to sell 20% to domestic investors within six years of the start of production. At least 30% of the mine must be in the hands of Indonesian investors by the seventh year, 37% by the eighth year, 44% by the ninth year and 51% in the 10th year.
The Edge notes that Malaysia Smelting Corporation could be affected if the proposed rule comes into force. It has tin mining operations in Indonesia which are primarily undertaken through its two subsidiaries, PT Koba Tin and PT MSC Indonesia. PT Koba Tin is 75% owned by MSC and the balance 25% by state tin mine PT Timah. PT Koba Tin has a contract of work with the Indonesian government giving it the exclusive rights for exploration, mining and smelting of tin within an area of 41,680ha on Bangka island. MSC’s wholly-owned PT MSC Indonesia is the company’s vehicle for undertaking exploratory programmes to search for new onshore and offshore tin deposits in the country. MSC also holds 18.54% equity interest in TMR Ltd, a company engaged in offshore tin mining activities in Indonesia.
PT Koba Tin’s contract of work is due to expire in in 2013, so its future has already been under discussion with the authorities for some time, with MSC have previously signalled its intention to sell part of its shareholding to Indonesian investors. Koba produced 6,332 tonnes of refined tin in 2011.
