pub_date:Country's low costs remain a draw amid volatile mining rulesWHEN Vivek Agarwal's company first bought a licence to explore for coal in Indonesia's East Kalimantan province, it expected to secure the permits to begin mining in about six months and sell the coal to power stations in India and China.迷你倉 That was in 2010.After three years of presentations to local officials and more than US$1 million spent in consultancy and government fees, the company, Bhoruka Mines, a unit of the Bangalore- based Bhoruka Group, is still no closer to mining.Yet Mr Agarwal, Bhoruka Mines' president director and CEO, says his company won't shelve its first foray into Indonesia.Why? Because Indonesian thermal coal is better and cheaper than what the company could ever hope to find back home in India.Mr Agarwal says to transport inferior coal from India's north-east to the southern state of Karnataka, where his parent company runs a thermal power station, would involve permits and fees of three rail companies. Bhoruka would pay twice as much for coal compared with shipping it more than 4,000 kilometres by sea from East Kalimantan to the east coast of India."We won't walk away," Mr Agarwal told The Business Times.He blames the lost time, in part, on incompetent and corrupt officials who selectively interpret mining and environmental rules as well as unclear application procedures to deal with overlapping claims by village squatters or palm plantations."The application process is driven by personal relationships. But we've invested too much. If we can get this to work, it will be a huge shot in the arm for the company."However, compared to back home, some say, the quality of the resource here, the cost of Indonesian skilled labour and materials and even the regulatory environment mean doing business in Indonesia is worth the risk."I'm an optimist," Peter Lynch, chief executive officer of Brisbane-based Cokal, told BT.Mr Lynch was speaking after his company said in November it would spend US$120 million to begin building roads and jetties and on other capital works for its coking coal project, also in Kalimantan.The company plans to spend an additional US$200 million in the coming months to begin mining 2 million tonnes of the resource by the middle of next year. Indonesia's proximity to China and India; its high-quality coking coal, which is used in the production of steel; and the lower costs of everything from drilling to labour make Indonesia attractive, Mr Lynch says.A shift supervisor salary in Indonesia will top about US$14,000 a year while a truck driver in Australia may earn US$160,000, he says."We're picking the eyes out of the mining sector up here," Mr Lynch says. What's more, regulatory hurdles are no more onerous in Indonesia compared with Australia, he says.He says exploration, environmental impact studies and production permits will likely take about three years, compared with at least five years in Australia. He credits talented local staff, who help pull together all the necessary documents.Even so, tougher 迷你倉樂器wnership rules, higher levies and next year's export ban on raw ore have spooked investors, Mr Lynch admits, saying it can be tough to get backers keen on extending loans or buying equity.Resource companies have to look abroad for funds because domestic capital markets are too shallow, Pandu Sjahrir, chairman of the Indonesian Coal Mining Association, told BT."When we want to grow, we need foreign capital," says Mr Sjahrir, finance director at coal-mining company Toba Bara. He says many institutional investors are adopting a wait- and-see approach to how the country's regulatory changes will play out."Most of the meetings recently are about maintaining relationships," Mr Sjahrir says.Without prior notice, in early 2012, the government halved to 10 years the time within which foreign companies needed to sell a majority stake in their projects to domestic investors. The government is considering doubling the royalties that small coal-mining companies pay.The regulatory changes exacerbated the effects of the fall in the price of coal, and metals such as tin and nickel. Mining companies have cut in half their capital expenditure plans for the next year, analysts have said. Foreign direct investment (FDI) slumped to US$6.9 billion during the three months to Sept 30, compared with US$7.2 billion in the previous quarter.Still, analysts say that in recent months the country's regulatory environment may have improved, following the appointment of the reformist Chatib Basri as finance minister, replacing Agus Martowardojo, who became governor of the central bank in May.Mr Basri is credited with easing some of the nationalist measures that were blamed for exploding the country's trade deficit, including easing export duties on unprocessed minerals. Mr Martowardojo, as the new head of Bank Indonesia (BI), has ratcheted up interest rates to their highest level since 2009 to tackle rampant inflation. Consumer price increases have eased off from their four- year high."We are more positive on this regulatory environment than before," says Ali Saugi, head of equities at BNP Paribas in Jakarta."There has been a big improvement since the beginning of the year. Both the government and BI have accepted the macro- economic situation in Indonesia and they have produced policies that have taken the country in the right direction."Bhoruka's Mr Agarwal says his company is betting that Indonesian officials will water down regulatory changes such as the domestic ownership laws that require foreign mining companies to sell down their stakes to no more than 49 per cent 10 years after the start of production."That isn't sustainable," Mr Agarwal says. "They will drive away a lot of small producers, and that will hurt exports when they need them most."Cokal's Mr Lynch says Indonesia's government will want to ensure a sudden hike in royalties and other levies will not stifle altogether a sector which accounts for the largest source of revenues."They will want to ensure coal and other parts of the resource sector remain competitive," he says.迷你倉西貢
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