Underground mining of PT Freeport Indonesia - Photo by Freeport Mcmoran

JAKARTA (TheInsiderStories)Asiamet Resources Ltd (AIM:ARS), a Bermuda registered company, through its Indonesian operation subsidiary PT Kalimantan Surya Kencana (KSK), has successfully concluded the long-running negotiations with the Indonesian government to amend its existing Contract of Work (CoW) to secure long-term mining tenure.

The amendment of the contract allows the company to move ahead with the development and financing of its Beruang Kanan Main (BKM) copper project in Central Kalimantan, the company said in a statement

The company’s CoW was granted on April 28, 1997 as a 6th generation CoW.

The BKM Copper project currently in the Feasibility Study stage with planned study completion in mid-2018, together with a pipeline of opportunities such as the BKZ polymetallic discovery, and the BKS, BKW and Baroi prospects along with numerous other gold and base metal targets.

Asiamet Resources is a dynamic junior company focussed on the exploration and development of its portfolio of large copper-gold deposits on the Indonesian islands of Kalimantan and Sumatra, adjacent to the key growth markets in Asia. Both deposits contain NI-43-101 compliant Mineral Resources and remain open in several directions.

Securing long-term tenure for the KSK CoW places the company in a strong position to deliver the BKM copper project and unlock further value through focused regional exploration work at a number of other targets within the KSK CoW.

The company has been working closely with the Indonesian government to align the KSK CoW with the New Mining Law introduced in 2009, focused on six key points that include: 1) royalty rates 2) size of the CoW 3) domestic processing 4) divestment obligations 5) state revenues and, 6) the use of local manpower, services, and products.

Key amendments agreed with the government of Indonesia for the KSK CoW are as follows:

1. An initial contract term of 30 years is granted at the commencement of production from the CoW area. The Company has the option of extending for two additional 10-year periods under the current Mining Law, namely the Special Mining Business Permit (IUPK) system;

2. KSK will retain 40,000 hectares under the KSK CoW (currently 61,003 hectares);

3. The fiscal framework will remain highly competitive on a global scale, summarised as follows:

  • Royalty and corporate income taxes shall be subject to the prevailing laws, namely (1) corporate income tax rate is set at 25 per cent;  (2) Net Smelter Return royalties for copper will be 4 per cent (previously US$45/ton), gold 3.75 per cent (previously US$225/kg) and silver 3.25 percent (previously USD1.9/kg);
  • KSK will receive a tax holiday and/or a tax reduction for imported capital goods.

In anticipation of these changes, the BKM Project PEA study completed in 2016 used the amended royalty rates outlined above and a corporate income tax rate of 25% as the basis for the financial evaluation of the project.

4. Foreign ownership laws mandate that Indonesian Nationals or Companies be offered the opportunity to invest in a Foreign Investment Company. KSK is a Foreign Direct Investment company and will be required to divest 51 per cent of its foreign-owned shares at the fair market value after 10 years of production. Divestment may take various forms including a partial listing on the Indonesian Stock Exchange (IDX) or introduction of a local partner(s) and Asiamet has clearly stated its preference for partnering with suitable Indonesian companies at the development and operations stage.

5. The amended CoW requires the Company to work towards, and assist, the GOI in supporting the policy of establishing metals processing facilities in Indonesia. Asiamet plans to produce LME Grade (99.99 per cent) copper cathode at BKM and as such will satisfy the criteria.

6. The amended CoW currently contemplates the priority use of local labor, products and registered mining service companies. Indonesian nationals currently comprise 98 per cent of the KSK workforce. KSK has strong community engagement and will continue to support the development of local communities in the areas in which it operates.

2018 Work Program
On March 13, 2018, the company has completed an off-market placing of GBP7.2 million, (approximately US$10 million) before expenses. This will provide the company with a strong platform to execute its near-term strategy for 2018. This includes but is not limited to:

  • Completion of the BKM Copper Project Feasibility Study
  • Delivering a maiden Resource for the BKZ polymetallic project
  • Accelerating exploration at additional targets on the KSK CoW
  • Securing a strong finance package for development of the BKM project
  • Increasing the Company’s equity position in the Beutong Cu-Au project from 40 to 80 per cent
  • Drilling to expand the Resource base and advance development studies at Beutong.

Written by Roffie Kurniawan, email: roffien@theinsiderstories.com