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Indonesia May Ask Foreign Miners to Offer Stake to Government

Indonesia may ask foreign investors that are majority owners of mining companies to sell shares to the government to comply with a law that lowers their ownership, an energy and mineral resources ministry official said.

If the government declines, the stake can be offered to state-owned or private companies, Fadli Ibrahim, head of the legal division at the directorate general of minerals and coal, told reporters in Jakarta today. The guidelines will be ready this year, he said.

“This is a preliminary draft,” Ibrahim said, without specifying when the regulation will be issued. “We still need inputs to perfect it.”

Indonesia wants a greater share of mining profits and has asked foreign holders of licenses to cut their stakes to 49 percent within 10 years of starting production, according to a decree signed by President Susilo Bambang Yudhoyono in February. A 2009 mining law mandated local ownership of at least 20 percent in ventures by the sixth year of production.

Shares can be offered through a tender if there is more than one bidder from among state or private companies, Ibrahim said.

Mining companies with majority foreign holders that plan to list on the stock exchange must complete the divestment before selling shares in an initial public offering, he said.

The regulation applies to companies with mining business licenses. Miners such as Vale SA (VALE5), Freeport-McMoRan Copper & Gold Inc. and Newmont Mining Corp. currently operate under contracts of work and need to apply for mining business licenses when their permits expire.

To contact the reporter on this story: Fitri Wulandari in Jakarta at fwulandari@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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