T

he government said it was prepared to face litigation in connection with the termination of the mining contract of PT Koba Tin on Bangka and Belitung islands and the upcoming acquisition of PT Indonesia Asahan Aluminium (Inalum) from Japanese controlling shareholders.

The Energy and Mineral Resources Ministry decided on Sept. 18 not to extend but rather terminate the Koba Tin mining contract, which is operated by Malaysian Smelting Corporation (MSC), because of its failure to fully meet the terms of the contract.

The ministry explained that Koba Tin, which is 25 percent owned by PT Tambang Timah, had failed to increase its output. Its tin output had declined steadily from 22,180 tons in 2005 to as low as 1,901 tons in 2012 because it operated only one of its four mining areas.

According to PT Timah, Koba Tin suffered losses over the past few years, amounting to US$84.7 million in 2012 alone and its debts had increased to $60 million. Moreover, the company has not implemented land reclamation work on the mined areas.

The company obtained its contract of work (CoW) in 1971 for tin mining on 41,300 hectares on Bangka-Belitung islands, then part of South Sumatra province. The CoW was set to expire in April 2003 but was renewed in 2000 for a further 10 years.

Last April, the government extended Koba Tin'€™s contract temporarily to give an assessment team '€” mining experts and industry players '€” time to evaluate the permit. The team recommended that the government scrap Koba Tin'€™s mining concessions.

The ministry asked state-owned Timah to undertake maintenance work at the Koba Tin concession while the mining area was thoroughly assessed.

Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said the government would let MSC seek international arbitration, citing that '€œit is their right to do so.'€

In another development, Industry Minister MS Hidayat confirmed on Tuesday that the government would take over Inalum after the joint-venture agreement ends on Oct. 31, as scheduled, irrespective of an agreement on the value of the company.

Hidayat said after a coordinating meeting on Inalum the government and the Japanese shareholder consortium, which owns 58.88 percent of Inalum, are still negotiating on the valuation of Inalum.

'€œWe hope to reach an agreement on the fair value of Inalum before the end of the contract. But if we do not reach an agreement, we will entrust an international arbitration to make the valuation,'€ Hidayat said, adding that proceedings would not change the deadline for the takeover.

The Japanese shareholders said last month there was still a gap between the sales price and other sales terms for the Inalum takeover. They had previously asked the government to renew the contract or allow them to hold a minority stake in the company, but the government confirmed its decision to terminate the contract after the end of its term next month.

But the Japanese investors threatened to bring the issue to the Washington-based International Center for Settlement of Investment Disputes, which operates under the auspices of the World Bank.

Established in 1976, Inalum is 41.12 percent owned by the Indonesian government. The company operates an aluminum smelter at Kuala Tanjung, North Sumatra with an annual capacity of over 250,000 tons, of which 60 percent are exported to Japan.

The only Southeast Asian aluminum smelter is powered by hydropower plants along the Asahan River near Lake Toba, built as a package of the Inalum investment venture.

Earlier reports quoted the Finance Ministry as estimating the total book value of Inalum at $1.23 billion and the Japanese stake at $723 million.

The Industry Ministry said after the acquisition the government would expand Inalum'€™s capacity to 500,000 tons, sell 60 percent of the production to domestic industrial users and develop a cluster of aluminum-based downstream industries in Kuala Tanjung.

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Displaced Shia Muslims from Sampang regency in Madura, East Java, who for months had taken refuge in Sidoarjo, broke down in tears as they hugged members of the Sunni community after signing a peace treaty on Monday evening.

It was a rare moment, a sight that few thought they would ever see, following a string of clashes between the two communities during the past few years.

Coordinator of the displaced Shiites, Iklil Al Milal, said: '€œWe have decided to bury the hatchet. There will be no hatred or revenge over the past. If such rioting recurs, we are ready to be responsible, including an agreement not to question the differences in faith because to us, brotherhood is above everything.'€

The Shia followers said they would maintain religious tolerance by respecting one another'€™s faiths. '€œWe will not ask other people to follow our ways,'€ Iklil said.

The Sunni-Shiite conflict in Sampang peaked on Aug. 27, 2012, when dozens of homes belonging to Shia followers led by Tajul Muluk were set alight and gutted by a mob. Two people were killed in the rioting.

The government evacuated hundreds of Shia followers to a sport stadium in Sampang, and eventually to the Puspa Agro apartments in Sidoarjo.

 '€” Vincent Lingga