2006 was another spectacular year for the mining industry, both in Indonesia and globally – and with commodity prices at their current highs, 2007 and 2008 will see even better financial results. Globally, investor confidence in the sector and its prospects has remained strong, fuelled by a sustained rise in commodity prices, and as witnessed by a year of significant growth in market capitalization on both international bourses and the Indonesian exchange. In Indonesia, profits in the sector have continued to increase in line with the rise in commodity prices. Total investment in the mining sector has also increased in 2006, however spending on exploration, and in particular greenfields exploration, continues to be only a fraction of the global spend. It is hope that several of the large projects currently awaiting investment approval will commence in 2008 and that this, together with finalization of the proposed new mining law, will help secure the longevity of a lucrative mining industry in Indonesia.
A report released on 29 February 2008 by PricewaterhouseCoopers (PwC), “mineIndonesia 2007* - review of trends in the Indonesian mining industry”, illustrates that the mining industry, both in Indonesia and globally, continued to reap the benefits of strong commodity prices in 2006, exhibiting strong growth in revenues and profits. PwC’s survey, representing more than 85% of the Indonesian mining industry, shows that aggregate profits achieved by the industry reached record levels, resulting in the highest level of government revenues from royalties and taxes in the last 10 years.
However, PwC mining technical advisor Sacha Winzenried notes that “while the Indonesian mining industry continues to post strong financial results on the back of high minerals prices and continuing global demand, more new investment is needed to sustain it into the long term. 2006 saw some growth in investment spending in Indonesia, but exploration spending on new projects is still relatively low, considering the geological attractiveness of Indonesia often attested to by global players”.
“Survey respondents indicated that regulatory uncertainties continue to hamper investment, including the long delayed new mining law”, he continued. “Finalisation of an investor-friendly mining law may be the key to a real surge in investment in the sector”.
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