Thursday, March 8th 12:41 PM IST

Indonesia enacts new mining law to reduce foreign investment

# Indonesia mining law  # Kalimantan  # Freeport-McMoran  # APBI  

As per the new law foreign investors must divest parts of the stake to Indonesian entities for them to participate in the mineral and coal-mining business.

JAKARTA(BullionStreet): Indonesia, one of the world's top mining destinations, enacted a new mining law that will ensure it's control over natural resources.

The new law enacted on Feb 21 says foreign investors holding mining business permits and special mining business permits must divest a minimum of 51 percent of their stake in the mining operation to Indonesian entities within a five-year period.

As per the new law foreign investors must divest parts of the stake to Indonesian entities for them to participate in the mineral and coal-mining business.

The divestment must begin during the sixth year of mining production. Under the existing regulations, by the sixth year, Indonesian investors must own at least a 20 percent stake in mining ventures.

It has to be gradually increased to 30 percent in the seventh year, 37 percent in the eight year, 44 percent in the ninth year and 51 percent in the tenth year.

The new regulation applies to firms mining for coal, minerals and metals.

The divested shares can be acquired by the central, provincial or district governments, state-owned enterprises, local government-owned companies or even local private firms.

Indonesian Coal Mining Association (APBI), said the new regulation would not affect existing contracts of work.

Resource-rich Indonesia has reserves of gold, tin, copper and coal.

Major foreign investors in Indonesia's mining projects include the world's largest mining company, BHP Billiton, which own a 75% stake in a Kalimantan coal project.

Freeport-McMoran operates the Grasberg gold and copper mines in Papua.

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