Boston, MA -- (SBWIRE) -- 05/21/2012 -- We expect Indonesia's mining industry value to almost double from US$82.6bn in 2010 to US$143bn in 2016. Growth will be driven by coal and nickel production, with annual average growth rates of 10.4% and 9.1%, respectively. Despite our low production growth rate forecasts for the other metals, the country will remain a dominant mineral exporter in the region and will retain its status as the largest thermal coal and tin exporter in the world.
Positive regulatory developments in recent years include the passage of the 2009 Mining Law, which streamlines and improves upon the 1967 Mining Law. However, key implementation guidelines with reference to benchmark pricing and asset divestment procedures have yet to be announced, which is a source of uncertainty for investors. Two new mining laws were signed into law during Q112 that give more clarity to previous statements by the Indonesian government.
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Firstly, actual threshold specifications for raw material exports have been now revealed through the passing of Law. No 7 of 2012. Secondly, a new law was also passed that will require foreign investors to divest at least 51% of their ownership in Indonesian mining assets 10 years after initial production. The key risk for these two rulings is whether these will be applied retroactively or partially to existing contracts.
Nevertheless, we expect foreign investments into Indonesia to remain strong in coming years. Despite additional regulations, the country's geological resources and geographical location continues to make it an attractive destination for investment. In South East Asia, Indonesia remains the top place for new mining projects, followed by the Philippines and Vietnam. A large number of these are green field and brown field exploration projects for coal and copper-gold prospects.
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