BRISBANE, AUSTRALIA--(Marketwire - March 20, 2012) - Intrepid Mines Limited IAUIAU ("Intrepid" or the "Company") provides further commentary on Indonesian Government Regulation number 24 of 2012 (the "Regulation"), publicly released on 6 March 2012, which has had a severely negative impact on the Company's share price.
Following extensive analysis of the Regulation as well as informal consultation with officials of the Indonesian Ministry of Energy and Mineral Resources, industry associations and advisors, Intrepid wishes to help to clarify several aspects of the Regulation, some of which may have been misunderstood by investors.
The Regulation is aimed at further delineating aspects of the revised Indonesian Mining Law, and follows a series of earlier implementing regulations promulgated since 2010. Amongst other things, the Regulation amends existing divestment requirements for foreign-owned companies holding mining licences in Indonesia, such that the ownership participation of Indonesian entities or nationals after the end of certain annual periods following production shall not be less than 51% after ten years (see Appendix 1 for details).
The Tujuh Bukit mining licences are held by PT Indo Multi Niaga ("IMN"), a wholly-Indonesian-owned company, and the Company is in the process of finalising the negotiation of a shareholder agreement which will allow for it to implement its rights under existing agreements to acquire an 80% direct equity interest in IMN, subject to government approvals. The remaining 20% of the shares in IMN will be held by the Company's existing Indonesian joint venture partners.
The Company and IMN are currently conducting advanced exploration activities and undertaking development studies at the Tujuh Bukit project in East Java (in which the Company currently holds an 80% indirect interest). Since the divestment requirements only actualise in the sixth year following production, they have no immediate impact on the Company's ability to achieve an 80% direct equity stake in IMN, and to retain that stake for at least five years following production at the project. This allows a substantial window of time to evaluate the optimal operating and ownership structure for Tujuh Bukit going forward.
Whilst the Regulation is silent on the terms upon which divestment is to be made, informal enquiries made with officials of the Ministry of Energy and Mineral Affairs suggest that the divestment would be done according to the principles applied in divestments made by Contract of Work holders. (It should be noted that PT Newmont Nusa Tenggara, which holds a third generation Contract of Work, amongst others, has been subject to the 51% foreign-to-local divestment requirement since the early 1990's). These divestments have historically been on terms agreed between the parties according to market principles.
Importantly, the Regulation stipulates a tight timeframe for various levels of government to take a decision on acquiring a divestment stake (see Appendix 2 for details).
The Company considers it unlikely that the national government or state-owned enterprises would be able or inclined to accept offers to take up shares in all affected foreign-owned mining operations. Historically there has been a concentration of local interest in coal operations, since metal operations are more capital intensive and are developed over longer time horizons. As noted above regarding PT Newmont Nusa Tenggara, there are existing examples of Contract of Work divestment offers which have not been taken up, and others which were taken up after several years of repeated offerings.
The rigour of the stipulated timetable allows for certainty about government intentions to be obtained within a reasonably short period of time. The Company believes that its arrangements with its existing Indonesian partner ensures that the first divestment milestone has already been addressed, and in due course only a further 31% stake will be required to be divested, at an agreed value.
In the interim, there are options which the Company has a number of years to evaluate and implement.
As the Regulation is newly-enacted, the Company is of the view that the Indonesian government will provide greater clarity on implementation over time, following consultation with industry bodies and individual affected companies.
Said Brad Gordon, the Company's CEO: "Intrepid remains committed to the development of the world-class Tujuh Bukit project. The impact point for the divestment is many years in the future, allowing us time and flexibility to develop an ownership model which best preserves and increases value for our shareholders."
Appendix 1
Foreign divestment requirements
-- sixth year - 20%;
-- seventh year - 30%;
-- eighth year- 37%;
-- ninth year - 44%; and
-- tenth year - 51%,
in each case, of the total shares in the company holding the mining
licence.
Appendix 2
Divestment timeframe
-- Within ninety days after the fifth anniversary of production, an offer
of shares must be made to the national government, provincial
government, regency government, state-owned enterprise and regional
state-owned enterprise (with these government agencies enjoying
sequential rights of prior refusal);
-- The national government, provincial government, regency government,
state-owned enterprise or regional state-owned enterprise must notify
its interest within 60 days after the offer date.
-- In the event that the various government bodies are not interested in
purchasing the divested shares, then the shares are to be offered to
national private business entities within 30 days.
-- National private business entities must notify their interest within 30
days after the offer date. Should there be several interested private
business entities, a tender process will be conducted.
-- Payment for shares purchased by the Indonesian participants must be made
within 90 days after the date of the notification of interest or
determination of the tender award.
-- If divestment is not achieved despite the offering process having been
followed, the same process shall be followed annually thereafter until
the required divestment is achieved.
Directors
Colin G. Jackson (Chairman)
Brad A. Gordon (Managing Director)
Laurence W. Curtis (Non-executive Director)
Robert J. McDonald (Non-executive Director)
Ian McMaster (Non-executive Director)
Alan Roberts (Non-executive Director)
Adrianto Machribie (Non-executive Director)
Nyla Bacon (Company Secretary)
Stock Exchange Listing
ASX and TSX symbol: IAU
Substantial Shareholders
Taurus Funds Management 9.2%
Acorn Capital 5.7%
Van Eck Associates 5.5%
Issued Capital
524,401,963 shares
4,472,356 unlisted options
3,211,010 unlisted share rights
Shareholder Enquiries
Matters related to shares held, change of address and tax file numbers
should be directed to:
Computershare Investor Services
GPO Box 2975, Melbourne, Victoria 3001, Australia
Telephone: 1 800 805 505
+61 3 9415 4000
ABN 11 060 156 452
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