Minews - Indonesia may revoke contracts of 17 coal miners, including Bumi unit

(Minews) - Indonesia may revoke the contracts of 17 coal miners that owe royalties to the government, including PT Arutmin Indonesia, a unit of PT Bumi Resources Tbk, the director general for coal and minerals said on Wednesday.

The potential termination of Arutmin's contract is likely to hurt Bumi, which has been struggling to repay its debt and generate cash flow amid weak coal prices. Bumi is the country's biggest coal miner.

The company was not immediately available for comment.

Bumi shares fell 2 percent after the news. They have lost about 36 percent so far this year, against a 20 percent rise for the Jakarta stock exchange.

Arutmin, which operates coal mines on the Indonesian island of Kalimantan, produced 28.8 million tonnes of coal or more than one-third of Bumi's total output in 2013, according to Bumi's latest annual report.

Coal production in Southeast Asia's largest economy would likely remain flat this year at around 420 million tonnes, the head of the coal mining association said in June.

"If they haven't paid, we will terminate," Sukhyar, the director general for coal and minerals, told reporters on the sidelines of a briefing with other miners, tax officials and the country's
anti-corruption watchdog.

The Corruption Eradication Commission has been working increasingly closely with the government to ensure compliance within the country's natural resource sectors.

"Their contracts can be ended," Sukhyar said, adding the companies must pay their dues by the end of October.

Coal miners that hold contracts of work are obliged to pay royalties equal to 13.5 percent of their sales to the Indonesian government.

Bumi does not have the internal capacity to fund more than $1 billion of debt maturing over the next 18 months, Moody's Investors Service said earlier this month. The company narrowly avoided a default on its $375 million bonds last week.

During the briefing, director general of tax Fuad Rahmany said his office was working to ensure tax compliance in the sector. "There are lots of problems, but the problems fall into various categories," Fuad Rahmany said, but declined to name any company.