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Jakarta Post

Higher royalties sought from state miners

  • Anggi M. Lubis

    The Jakarta Post

Jakarta   /   Wed, January 27, 2016   /  05:50 pm

The State-Owned Enterprises Ministry is looking to book higher royalty incomes from state-run miners this year, despite unfavorable commodity prices that put pressure on the financial performance of mining firms last year.

The ministry wants mining royalties paid to the government to increase by about 16 percent from Rp 1.23 trillion (US$885.6 million) last year to Rp 1.45 trillion this year, according to Fajar Harry Sampurno, the ministry'€™s assistant for mining, strategic industry and media. There are three mining firms under his division, namely diversified miner Aneka Tambang (Antam), coal miner Bukit Asam and tin producer Timah.

Fajar said recently that while he acknowledged that government-owned miners were struggling to mitigate impacts from slumping commodity prices, he was upbeat that the companies could meet the government'€™s royalty targets thanks to a number of downstream projects expected to bolster the industry amid a sluggish global market.

'€œOil prices have continued their downward trend, pushing down coal prices. Nickel and tin prices are also somewhat unnerving. However, we do believe that commodity prices will improve in the future,'€ he said.

'€œThere will be more coal-fired power plants in the country, in line with efforts to boost power supply, and the plants will absorb the coal from the market, further boosting up prices. Also, a number of smelters will also start processing nickel, thus opening up a chance for exports,'€ he added.

Fajar was referring to the government'€™s plan to boost electricity to 35,000 megawatts (MW) by 2019 '€” a third of which will be fueled by coal. According to a previous report, about 2,458 MW of new capacity was added to the national electricity system in 2015.

He also added that Antam'€™s ferronickel smelters were also expected to help boost nickel prices and exports.

Antam is expected to finish up the expansion of its facility at its Pomalaa base in Southeast Sulawesi this year. The improvements will see an expansion in production to between 27,000 and 30,000 tons of ferronickel (TNi) from previous production levels of 18,000 to 20,000 TNi. The company is also working on another smelter in East Halmahera, North Maluku.

Antam reported its net losses nearly doubled last year from Rp 590.37 billion to Rp 1.04 trillion on the back of rising costs and slumping commodity prices. The government'€™s ore-exports ban, implemented in early 2014, triggered a significant drop in nickel sales, one of the company'€™s largest sources of revenue.

Meanwhile, Bukit Asam and Timah have also struggled with declining coal and tin prices. Bukit Asam saw its net profits decline by around 5 percent between January and September last year, while Timah saw its bottom line reduced by around 98 percent.

Thermal coal at the port of Newcastle, Australia, a global benchmark, dropped to $50.63 a ton in the week ending Dec. 25, the lowest price since December 2006. Prices declined by 18 percent throughout 2015 according to a report by Bloomberg. Coal prices have been consistently plunging for around five years now, and currently trade at less than half the price registered in 2011. Tin prices, meanwhile, slipped by around 30 percent throughout the past year.

As previously reported, the ministry also plans to set up a holding company for state-run miners, the preparation of which is expected to be concluded by the end of this year.

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