Indonesia: Mining Holding Company to Be Established in Early 2007

The government a form the mining holding company (Indonesian Resources Company) in the first half of next year.

Mahmuddin Yasin, Deputy Minister of State-Owned Enterprises (SOEs) in the Restructuring Division, said that the study on the mining holding company is finished and is waiting to be carried out.

He recognized that the Department of SOEs was still discussing several options concerning the new holding company.

For instance, whether the status of the company will be a public company or a private one.

”If it is a public company, this means that its shares will be offered to the public in which the government still controls the majority of shares,” he said last week in Jakarta.

Three state-owned mining companies, he said, will later be subsidiaries of the holding company: PT Tambang Batubara Bukit Asam Tbk, PT Aneka Tambang Tbk and PT Timah.

The study for forming the holding company has attracted market players.

The reason is that the new company will organize 65 percent of the government’s shares in the three said mining companies.

This does not include share ownership at PT Freeport Indonesia of 9.36 percent and at PT Indonesia Asahan Aluminium (Inalum) with 41.13 percent.

A Tempo source at a government office said that share transfers at Freeport Indonesia and Inalum were being studied.

However, the government has also studied the transfer of mining authority to the holding company with a similar reason: giving additional value to the holding company.

”Should there not be any additional value, investors will be more comfortable in trading shares at other subsidiaries,” he said.

According to the anonymous source, the plan of selling shares of the mining holding company to public must also undergo further investigation.

The reason is that the mining holding company will be very strong if the transfer of mining authority is carried out.

”If the majority of shares are controlled by certain individuals, it will influence investment in mining in Indonesia,” he said.