UPDATE 1-Koba Tin to seek arbitration if Indonesia scraps mining permit – by Niluksi Koswanage (Reuters India – September 19, 2013)

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KUALA LUMPUR, Sept 19 (Reuters) – PT Koba Tin, a subsidiary of the world’s second-biggest tin producer, will seek international arbitration if Indonesia’s government refuses to extend its permit to operate a mine, the chief executive of the Malaysian parent company said.

It is the latest corporate wrangle to raise questions over Indonesia’s openness to foreign investment. Southeast Asia’s biggest economy had pushed for more control over its natural resources, ranging from coal to gold, in the past few years but is rethinking the policy after a recent slide in its currency.

The dispute has been brewing since last year when Indonesian government officials said Koba Tin’s permit would not be renewed and that state-run PT Timah should take over the concession in the Bangka-Belitung islands off the east coast of Sumatra island. PT Timah is a minority shareholder in Koba Tin.

The government has since softened its stance, launching a review of the concession, which is eight times the size of New York’s Manhattan island. It was due to announce a decision this week.

“Under the terms, Koba Tin is entitled to a second extension of 10 years to 2023,” Mohammad Ajib Anuar, chief executive of Malaysia Smelting Corp Bhd (MSC) , told Reuters in an interview.

“As a foreign investor with significant investment in PT Koba Tin, MSC seeks fair treatment from the government of Indonesia.”

He said Koba Tin would file for arbitration in Singapore. Such a case would need Indonesia’s cooperation to proceed.

Indonesia’s chief economics minister Hatta Rajasa said on Thursday an independent team evaluating Koba Tin’s operations had recommended that the permit not be extended.

“If they (Koba Tin) want to go for arbitration, it is their right,” Rajasa told reporters in Jakarta. He did not elaborate.

MSC, via its 75-percent-owned Koba Tin, has built smelter and dredging facilities valued at $60 million, industry analysts said.

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