IDX sets tougher IPO requirements for miners

Ika Krismantari ,  The Jakarta Post ,  Jakarta   |  Mon, 05/18/2009 1:44 PM  |  Business

The stock market authority plans to toughen up requirements for mining firms wishing to go public to ensure they focus their attention on the business and eventually protect investors' interests.

The new requirements, which are included in a new Indonesia Stock Exchange (IDX) listing regulation, are now awaiting approval from the Stock Market and Financial Institutions Supervisory Agency (Bapepam-LK).

Under the new regulation, companies planning to sell their shares to the public through an initial public offering (IPO) must prove they own at least one mining site and have the necessary mining permits from relevant government institutions, a draft of the regulation obtained by The Jakarta Post shows.

The companies are also required to submit their work plans and latest annual expenses approved by the related government institutions.

They must also incorporate any delayed exploration expenses, subtracting the value of mineral resources when calculating their net tangible assets.

For companies that hold the so-called special mining permits, the list of requirements for an IPO would become even longer. They have to come up with estimates on proven reserves for a minimum exploration period of seven years, which must be validated by external mining experts.

Special mining permits, unlike general mining permits that are normally issued by regional governments, are issued by the central government, through a minister. These permits are granted for operations in strategic sites previously incorporated under the so-called National Reserve Area.

None of those requirements exist in the current IPO regulation.

IDX director for listing Eddy Sugito said his office targeted to issue the regulation this month, adding it would be non-retroactive.

"The Bapepam is now examining it. We are waiting for their approval," he said last week.

Commenting on the draft, stock market analyst Norico Gaman welcomed the regulation, saying such requirements were put in place to make sure mining companies listed in the stock exchange were really focused on the mining business.

"From the requirements, you can see the stock market authorities want serious and professional mining companies in the market," he said, adding the purpose of the regulation was in the end to protect retail investors' interest.

The IDX data shows 21 mining companies listed in the stock exchange in 2008, with a total trading value accounting for 40 percent of the total market, or equal to Rp 431 trillion (US$41.37 billion). The market capitalization of those mining firms reached Rp 116 trillion, or about 10 percent of the total market, in the same period.

Other key items in the regulation:

1.The companies are required to sell a minimum of 20 percent of their total shares and 300 million shares to the market under the IPO program.
2.Companies with strong financial positions have to pay dividends to shareholders at least once every three years.
3.Companies involved in backdoor listing practices must inform the IDX about any transactions changing the share ownership structure. Backdoor listing occurs when a private company becomes a public firm after acquiring a publicly listed company.
4.The submission fee for any IPO proposal, which was previously Rp 15 million for shares in the main board and Rp 10 million for shares in the secondary board, will be Rp 25 million.
5.The main board is for companies that have at least 300 million shares publicly traded, while the secondary on is for those that have at least 100 million shares traded.

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