Mining: Halmahera, Mindanao and East Sepik PDF Print E-mail

BY BRIAN WAWN, PROJECT MONITOR

The Indonesian island of Halmahera hosts one of the world’s largest nickel projects (Weda Bay).

The Philippines island of Mindanao hosts one of the world’s largest copper projects (Tampakan).

East Sepik province in Papua New Guinea hosts one of the world’s largest gold-copper projects (Frieda River).

Geology has treated Southeast Asia and the Pacific kindly. 

The region is part of the Pacific Rim of Fire, the world’s most seismic area. The result: major copper, gold and nickel deposits. In addition, Indonesia is the world’s largest exporter of thermal coal (used for electricity generation).

The geological attractiveness of the region is reinforced by its strong economic growth, averaging more than 5 per cent per year over the past 30 years. And with strong economic growth has come increasing political stability.

As in many other mining countries, government mining policy is developing.  

For example, in early 2012, Indonesia announced that the ownership of mining projects approved as from 2009 must be 51 per cent Indonesian within 10 years of the commencement of production. It subsequently announced that exports of unprocessed mineral ore (e.g. copper or nickel ore) will be banned as from 2014 and, in the interim, will be taxed. (Coal is exempted from this ruling.)

The Philippines plans to increase royalties on mineral production to 5 per cent and, pending the passing of legislation to this effect, is extending a ban on the issue of new mining permits.

Foreign mining companies have expressed fears that these changes (notably in Indonesia) represent growing “resource nationalism”, associated typically with developing countries. But these fears need to be qualified.

First, resource nationalism is not confined to developing countries. Australia has gone through a bruising debate over the past two-and-a-half years on mining taxation. In the same time, Canada has rejected several major proposals for foreign acquisitions (for example by BHP Billiton and PETRONAS) of Canadian resources companies.

Second, the Indonesian ban on exports of unprocessed minerals is unlikely to go ahead as planned, as the new processing plants required (for example copper smelters) and will not be in place by 2014.

Third, Indonesia, the Philippines and most other countries of the region favour mining and are unlikely to damage it significantly. 

In short, there will be pain ahead for mining companies dealing with governments in the region. But the opportunities will remain attractive. 

 



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