Indo Mining Law moves forward

Vancouver — With both Newmont Mining (NEM-N) and Weda Bay Minerals (WDA-T) sitting on the sidelines, Indonesian government officials expect the country’s parliament to pass a new mining law by the end of the year.

Political uncertainty and frequent changes to government appointments have stalled the new draft mining law, which was originally tabled in 1996. The delay has had negative impacts on the country’s money-generating mining industry.

The reappointment of Purnomo Yusgiantoro as the country’s mines and energy minister paves the way for the passing of a draft mining law, which is sitting with the Secretary of State. The current mining law has been in use since 1967.

Purnomo assumed the ministerial post in August of last year under Abdurrahman Wahid, the country’s president at the time. After significant political strife, Megawati, Indonesia’s new president, re-appointed him to the same post. The continuity is expected to speed up the passing of the law, which gives the provinces greater control over revenues from natural resources, as well as granting tax and non-tax incentives to foreign and local miners.

Earlier this year, PT Newmont Pacific Nusantara, a unit of Denver-based Newmont Mining, stopped exploration for new projects sites in Indonesia until the country draws up a new mining law.

Weda Bay was force to followed suit. The company suspended work on its nickel and cobalt project on the island of Halmahera after its major shareholder and project financier voiced concerns about business uncertainty in the country.

The OM Group (OMG-N), with a 19.9% stake in Weda Bay, decided to halt the advance of funds for the nickel laterite project because it believes that, under current market conditions, project financing to put the deposit into production would be difficult to raise.

As a result, the Halmahera project has been put on care and maintenance. The Om Group said it would continue to provide the cash required for Weda Bay to meet its related financial obligations.

The junior recently tabled a positive prefeasibility study on the property. It was completed by Kvaerner Process (Australia) and Hatch Associates and it concluded that the project is robust at varying capital costs and production levels. The base-case scenario proposes 48,500 tonnes nickel and 4,600 tonnes cobalt over 20 years.

Weda Bay had been drilling the deposit in order to move the bulk of the resource from the indicated to the measured category. At last count, Weda Bay pegged the indicated resource at 66 million tonnes grading 1.4% nickel and 0.09% cobalt. The upper, limonitic portion contains 41 million tonnes of 1.2% nickel and 0.16% cobalt with a magnesium oxide content of 4.5%.

Overall, the property hosts an indicated resource of 133 million tonnes grading 1.4% nickel and 0.1% cobalt. Additional inferred resources are estimated at 70 million tonnes of 1.29% nickel and 0.14% cobalt, giving an aggregate resource estimate of 204 million tonnes of 1.37% nickel and 0.11% cobalt.

This resource is contained in 11 target areas — SM, Area 2, Uniuni Hill, Tarzan Hill, Sake River, Sake River West, Lipe River, Jira River, Casuarina, Orchid and Big Kahuna.

Weda Bay was moving towards a US$18-million bankable feasibility study, which was being funded by the OM Group.