Indonesia plans to soften foreign miners' divestment rule

JAKARTA (Reuters) - Indonesia plans to relax a rule forcing foreign miners to sell majority stakes and allow those who make downstream investments to keep bigger holdings, a spokesman at the Energy and Mineral Resources Ministry said on Thursday.

Last year, the Indonesian government said foreign companies must reduce their stake in a mine to 49 per cent or less within 10 years of production starting, though it has been unclear how the rules will be applied.

The rule was part of a push by Indonesia, which is the world's top nickel ore, refined tin and thermal coal exporter, to generate more profits and influence in commodities markets.

"For those companies that integrate the upstream and downstream mining activities, they may have that divestment relaxation policy. Instead of divesting 51 percent to be achieved on year 10 of its activity," ministry spokesman Saleh Abdurrahman said in an email.

"They may divest less than that, depends on the negotiation," he said, adding there would be a revision to the current government regulation. He gave no timeframe for the change, but new regulations and rules can often get delayed in the lengthy Indonesian legislature system.

The mineral sector including coal contributes around 12 percent to Indonesia's economy. Foreign firms with mining projects in the country include Freeport-McMoRan Copper & Gold, Newmont Mining Corp, Brazil's Vale SA and France's Eramet.

The divestment rules and a ban on ore exports from January 2014 have resulted in uncertainty for miners and dented the country's credibility with foreign investors.

Eramet said in February it was not prepared to give up majority control of its Weda Bay nickel project and delayed a final investment decision to the second half of 2014.

The French company controls about 60 percent of the project, alongside Japanese companies Mitsubishi Corp and Pacific Metal, and Indonesian state-owned mining firm PT Antam.

Last month, Indonesia's government unveiled a fiscal package to promote foreign investment, reduce imports and quotas and prop up its tumbling rupiah currency.

Join ST's Telegram channel and get the latest breaking news delivered to you.