Aussie miner prepares for legal battle over Indonesian asset
Intrepid Mines forced to quit Java project worth US$5b
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Intrepid Mines forced to quit Java project worth US$5b
Reuters
25 July 2012
Australia- based gold miner Intrepid Mines is preparing for a legal battle after being forced to quit its Indonesian asset, it said yesterday, the latest step in a series of events suggesting that the archipelago is growing more hostile to foreign investors.
Intrepid’s move came at the same time Freeport McMoRan Copper & Gold Inc, a vastly bigger operation, said it has offered a 9.36 per cent stake in its Indonesia operations to the government, a move intended to deflect pressure from new mining rules.
The government, which owns almost 10 per cent of Freeport Indonesia, wants higher income from mining, as well as to enact new rules requiring foreign miners to divest 51 per cent of assets after 10 years of production.
Intrepid said its employees were asked to leave an East Java asset worth at least US$5 billion by its local partner last week, sending its shares plummeting.
“We weren’t expecting it at all, and had no idea at all that it was about to happen,” Brad Gordon, chief executive officer at Intrepid Mines, said yesterday.
“Security came in and closed everything down,” he added. “We are getting advice from our lawyers to decide what our actions will be.”
The Intrepid Mines case echoes that of London-listed Churchill Mining plc, which has gone to an international court of arbitration in its fight over a share of a US$3 billion Indonesian coal mine.
“My guess is that Intrepid is in for a similar fight. It’s not going to be pretty, and if Churchill’s experience is anything to go by, it’s going to end in tears,” said a source familiar with Indonesian mining who declined to be identified because of the sensitivity of the matter.
Indonesia is one of the world’s top metals miners and the fast-growing sector accounts for about 12 per cent of gross domestic product in the Group of 20 economy.
The government has announced a raft of new mining regulations this year - including export taxes, a ban on unprocessed metals exports and limits on foreign ownership - in an effort to boost state revenues from the sector.
Also yesterday, trade ministry data showed that Indonesia’s exports of nickel and copper plunged in June, suggesting that the new rules are damaging the industry.
Intrepid has invested almost US$100 million to develop the Tujuh Bukit Project, with production at the gold, silver and copper asset due to start in 30 months, Mr Gordon said in Jakarta.
The Brisbane-based miner says it had an 80 per cent indirect equity stake in the project with its Indonesian joint venture partner PT Indo Multi Niaga, which it was trying to convert into a direct equity stake.
Those talks dragged for weeks without significant progress, and ended when PT Indo Multi Niaga sold 80 per cent of its own shares to another Indonesian group, Mr Gordon said.
“We’ve been trying to engage with that new Indonesian group over the last few weeks but unsuccessfully,” he added.
“Then on Thursday that new Indonesian group closed down operations onsite . . . and asked everyone to leave. They are in breach of their agreement with us.”
Attempts by Reuters to contact PT Indo Multi Niaga were unsuccessful.
Intrepid’s shares in Australia fell 8 per cent yesterday, taking losses to around 60 per cent since last Thursday.
Mr Gordon, who declined to name the new Indonesian partner for legal reasons, said all of Intrepid’s 670 employees were asked to leave the site.
The first phase of the Tujuh Bukit Project contains about three million ounces of gold, or 150,000 ounces per year, with larger gold reserves, worth billions of dollars, available in phase two.
“Once it is in production, it is at least a US$5 billion project,” Mr Gordon said of the company’s major asset.
“This is purely a grab, as we see it, by some Indonesian businessman that we haven’t been able to engage with,” he said. - Reuters