Australian miner kicked off foreign site

23 Jul 2012, 5:40 pm   -   Source: AAP
(Getty Images)

(Getty Images)

Indonesia's place as business destination is under scrutiny after a local firm ordered its senior Australian mining partner off its drilling site

Indonesia's reputation as a business destination is under scrutiny after an Australian miner was kicked off a project there.

Relations are believed to have broken down between Australia's Intrepid Mines and its minor Indonesian joint venture partner.

Indo Multi Niaga (IMN) suspended operations at the Tujuh Bukit gold-silver-copper project in East Java last week without consulting its JV partner, says Intrepid.

Shares in Intrepid plummeted 30.5 cents, or 55 per cent, to 25 cents when they resumed trading on Monday after going into a halt last week, wiping out more than $160 million in market value.

They have lost 77 per cent in value this year.

They also lost more than a third of their value on the Toronto bourse on Friday, where they are also listed.

The private Indonesian firm asked that members of senior management, including all expatriate employees seconded from Intrepid leave the site.

However the project expenditure of $US95 million ($A92.00 million) had been solely funded by Intrepid to date, including providing IMN's shareholders with than $A50 million to meet its financing commitments, it said.

Control of IMN changed several weeks ago when new shareholders bought 80 per cent of its capital, with the company not having commented since last week.

Intrepid hinted at uncertainty, saying it was engaging with the new shareholders and would update the market on those negotiations, including details about who they were.

The move comes with foreign companies already unhappy about new Indonesian laws capping foreign ownership of mines.

The new policy, introduced in April, provides staged increases ensuring stakes for local owners hit 51 per cent after 10 years of production.

Intrepid has majority equity of 80 per cent in Tujuh Bukit, which is regarded as one of the richest undeveloped deposits in the world.

There are 38 publicly listed Australian companies - including majors Rio Tinto and Newcrest Mining - doing business in Indonesia, plus many more private firms.

The latest developments were a concern to all of them, Patersons Securities senior resources analyst Simon Tonkin said.

The share prices of all of the public companies had been affected adversely since the foreign ownership laws were introduced, he told AAP.

"When you're putting a project into production you don't really need uncertainty about how much you own," he said.

"Investors are trying to look for a jurisdiction where the government is not going to turn around and go: `we'll take some more of that' which is also happening in West Africa."

Indonesia is ranked poorly by the World Bank as a foreign investment destination, well behind regional neighbours Malaysia and Thailand, although its economy has performed well under current president Susilo Bambang Yudhoyono.

Intrepid said in a statement that it was trying to establish discussions with IMN to find a way to resume drilling at the site.

Mining

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