INDONESIA is being warned it risks foreign mining investment evaporating under the double cloud of ownership controversies and the government’s rush to impose a welter of tough new regulations on the industry.
Jakarta-based consultant Geoffrey Gold describes the Intrepid Mines imbroglio, the latest in a succession of high-profile disputes involving overseas miners, as “tragic” for Indonesia’s investment reputation.
Patersons senior resources analyst Simon Tonkin said there was no risk appetite for Indonesia among prospective mine developers or market investors while it was bent on forcing 51 per cent divestiture of foreign project ownership after 10 years.
In a jittery international environment, risk capital was looking for safety, Tonkin said, “and obviously it’s not going to go to Indonesia if they continue down the path they are”.
Intrepid has been battered in the market by news it was locked out of its potentially world-class copper-gold-silver prospect in East Java last week by its Indonesian junior partner after a sudden ownership change.
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The Australian reported yesterday links between PT Indo Multi Niaga shareholder Andreas Tjahjadi and entities associated with the Soeryadjaya family, the dominant interest in the Adaro Energy coalmining group. Tjahjadi and Adaro Energy chair Edwin Soeryadjaya were not available for comment yesterday.
On the ASX yesterday, Intrepid stock slipped again, closing 0.5c weaker at 24.5c, almost 60 per cent down on the 56c price at the start of the week. In Jakarta, June-quarter data showed foreign direct investment into Indonesia rose 30 per cent on a year earlier, to a record Rp56.1 trillion ($5.74 billion).
That provoked suggestions that offshore investors had taken controversy and sudden regulatory changes in their stride.
But Gold said Intrepid’s case coming hard on the heels of Churchill Mining’s $US1.8bn ($1.74bn) suit over revocation of its East Kalimantan coal leases, would lead inevitably to stem the already sparse foreign investment. “I think this latest case is tragic for the shareholders of Intrepid and it’s tragic for Indonesia’s image as an investment destination,” said Gold, who has been advising new foreign investors into Indonesia’s resources and mining services sector for almost two decades.
“The tendency for outsiders to see the worst of Indonesia will mean there’s going to be an investment dry-up for projects that should be well funded by risk-taking investors from overseas.”
Indonesia had little more to lose, with annual foreign exploration investment averaging $US25 million in the past decade.