Govt takes another look at Koba Tin’s contract

Amahl S. Azwar, The Jakarta Post, Jakarta | Business | Fri, April 05 2013, 11:29 AM

Indonesia, one of the world’s largest tin exporters, suddenly changed its approach over the fate of PT Koba Tin as the Malaysia-controlled tin mining firm’s contract in Bangka Island in Bangka-Belitung expired as of March 31.

Last year, the government stated it would transfer the concession to the state-owned, publicly listed PT Timah.

On Thursday, however, Deputy Energy and Mineral Resources Minister Susilo Siswoutomo said nothing had yet been carved in stone on Koba Tin’s future. The ministry, he said, had established a team to review the contract for the next three months from April 1.

“We have tasked [Koba Tin] to continue their operations in the next three months as the government reviews the contract. The team must have finished their assessment by then,” he told The Jakarta Post in a text message.

The decision, he said, was made to ensure there would not be massive layoffs for Koba Tin’s workers amid the contract uncertainty. Koba Tin employs 2,464 workers, of which 486 are permanent and the rest are contracted or outsourced, the Post has reported.

Koba Tin is a joint venture company between Malaysian Smelting Corporation Berhad (MSC), a publicly listed company in Malaysia, which owns a 75 percent stake, and Timah, which owns 25 percent. The company received its contract of work (CoW) in 1971 with a focus on tin mining on Bangka Island, then a part of South Sumatra.

The company’s total mining area covers 41,680 hectares in the southeastern part of Bangka Island. Koba Tin’s contract was set to expire in April 2003, but it was renewed in 2000 by then Energy and Mineral Resources Minister Purnomo Yusgiantoro for an additional 10 years of operation.

As previously reported, the provisions under the CoW stipulate the government is allowed to extend the contract twice, each for a 10-year period.

In July last year, the Energy and Mineral Resources Ministry’s minerals and coal director general Thamrin Sihite told reporters the government would not extend Koba Tin’s contract, citing that state owned tin miner Timah possessed the competency to manage Koba Tin’s mining area.

Susilo, who earlier this year was named as the new deputy minister replacing Rudi Rubiandini — now the upstream oil and gas regulator SKKMigas — said the government was still undecided whether to give the concession to Timah or extend Koba Tin’s contract.

“We can choose whichever option as long as it is the best for the nation,” he said.

Koba Tin’s corporate secretary Joni Abdul Rahman could not be reached for comment on Thursday.

Separately, MSC’s corporate secretary Sharifah Faridah Abdul Rasheed said in a written statement the company had received notification from the government to continue production until the completion of the evaluation.

“As announced on Feb. 26, in the event of the CoW not being renewed by March 31, it would have an adverse impact on the company’s investment and contingent liabilities totalling approximately 150 million ringgit [US$49 million]. MSC’s board has accordingly decided to make the full provision of the 50 million ringgit in the accounts for the financial year ended Dec. 31, 2012,” she said in the written statement published on Tuesday

Koba Tin’s tin production, which reached 22,180 metric tons in 2005, continued to decline over the past several years. In 2010, the company’s production further dropped to its lowest level of 6,166 metric tons.

In September last year, MSC suspended operations at Koba Tin in a bid to cut losses amid lower prices and dwindling demand from China due to the uncertainty over the work contract, the company said. The company reported losses of around $13,500 in the first nine months of 2012.

Koba Tin’s tin production reached 22,180 metric tons in 2005 but it continued to decline in production and in 2010 reached the lowest point of 6,166 metric tons.

Meanwhile, Timah’s spokesman Agung Nugroho reiterated the firm would still be keen to take over Koba Tin’s concession, citing that it would definitely boost the firm’s production.

Timah is currently one of the largest tin producers in the world behind China-based Yunnan Tin and MSC with a production last year reaching 29,600 metric tons.


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