Tussle over Kaltim Prima shares
The provincial government of East Kalimantan is attempting to get control of Indonesia’s biggest coal mining operation, the Kaltim Prima coal mine at Sangatta.
The mine is currently owned by UK-based companies Rio Tinto and BP-Amoco with 50% each. Under the terms of its contract, Kaltim Prima is obliged to divest 51% of shares in the company in stages between the fifth and tenth year of commercial production, which began in 1992.
The provincial administration has offered to buy the 30% share-holding currently available, as long as it can buy the remaining 21% in the future. Last year Indonesia’s PT Timah withdrew from share-bidding as it considered the price too high. The bid reflects the new-found muscle of regional authorities, but no improvement in decision-making processes – local communities affected by the mine’s social and environmental impacts have not been consulted.
The news has not been well received by Rio Tinto, whose president in Indonesia, Noke Kiroyan, has advised the government against agreeing to the request, saying it would violate the company’s Contract of Work. Ministry of mines and energy secretary general, Djoko Darmono, said the government was studying the offer, but would require information which showed that East Kalimantan could afford US$175 million for a 30% share in the company. 51% would cost around $300 million, he said. The ministry also wanted details of how the local authority would plan for the future of the company.
The mine, which excavates 15 million tonnes of coal per year and moves 300 million tonnes of earth in the process, is one of the world’s lowest cost coal producers. Kaltim Prima has been involved in disputes with local people over land and pollution – it is also located on the edge of the Kutai Nation Park. In 1996 workers at the mine went on strike for better pay as their wages, paid in Rupiah, plunged in value (see DTE 36, Feb,1998).
(Source: Jakarta Post 24/Jan/2000; Mining Magazine, Oct/99)
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