http://www.theaustralian.com.au/business/mining-energy/rio-tinto-gets-permit-for-2bn-nickel-project-on-sulawesi/story-e6frg9df-1225836339173
Rio Tinto gets permit for $2bn nickel project on Sulawesi Reuben Carder and Deden Sudrajat From: Dow Jones Newswires March 03, 2010 7:02AM RIO Tinto has been given a mining permit for its planned $US2 billion ($2.2bn) nickel project on Sulawesi, making it the first miner to gain investment approval under Indonesia's new mining law. Indonesia last year introduced a law which replaced the old contract system with mining permits, which many feared would reduce legal certainty for companies and make investing here more difficult. The Anglo-Australian miner said it could now review its options for developing the Sulawesi site, and would focus on determining the method of development that provides the best value. Rio Tinto has previously estimated the Sulawesi project could produce 46,000 tonnes of nickel a year by 2015, eventually rising to 100,000 tonnes a year or more, which the company says would make it one of the world's largest nickel producers. Rio Tinto has said it plans to spend $US2bn developing the site, which has an estimated 162 million tonnes of laterite nickel resources. Separately, PT Rio Tinto Indonesia spokesman Budi Irianto said that the company hadn't yet determined when the study would be completed or when exploration and production could start at Sulawesi. Rio Tinto would need to apply for a second mining permit from the Department of Energy and Mineral Resources before it started production, the spokesman said, adding that it would need separate permits from the environment and forestry ministries "before starting operations on the ground" in the exploration stage. Such complex, overlapping regulations, as well as legal uncertainty and disputes over the share of royalty payments that go to the central and regional governments, are among a slew of issues that have prevented Indonesia from attracting significant mining investment in the last decade. Although Indonesia has some of the world's richest deposits of nickel, gold and copper, many analysts and industry participants expected the introduction of mining permits in favour of the so-called contract of work system to further discourage investment. Under the old system, in place since the 1960s, companies had much more leeway to negotiate the terms of their contracts with the central government, including the duration of the project, tax rates, and the granting of relevant permits. By contrast, mining permits expire after a set time period and must be obtained for both the exploration and development stages. They also limit the maximum size of a mining area, restrict outsourcing of mining services, and require companies to pay a fixed 10 per cent of net profit to local and provincial governments.
