A chat with a long term exploration friend used the term “investor fatigue” recently to reflect his efforts to develop his mineral tenement. Since the tenements issuance, he has successfully raised funds from a group of dedicated backers, and carried out exploration. The constant changes to the tenement compliance meant that the exploration process was slowed down with tedious forestry permits, local government aspirations for community development and so on. The exploration program was positive, and the original investors were happy to dilute their interests with new parties in order to raise more funds to carry out feasibility studies. All this is a normal practice for financing start up exploration companies. However the government delays became even more difficult, with renewal of forestry permits taking forever, changes to the mining law, the nature of doing business, the new taxes for the export of raw ore, and even changes to who can be employed. A strong local partner was brought in, but the delays and constant outgoing of funds continued while the politicians kept changing the implementing regulations, and dreaming up new complications such as the Rupiah only regulations, whereupon the local partner eventually gave up and backed out.
The same investor fatigue may also be used to reflect the SUMSEL power plant selection process. It is understood that PLN invited bids for the development of coal reserves and power plants, then the terms of the bids were modified a little here and there. For example the technical reports on the coal reserves and mine plans first need to be completed by a reputable independent consultant, then the criteria of such consultants is further “modified”. The result is the submissions need to be revised several times, along with delaying commitment to financing, all the time keeping overheads and compliance costs ongoing. This modification process is rumored to be implemented so as to eliminate certain less politically connected bidders, or simply that PLN bidding is not a mature business setting. This leaves an impression that it is not worth investing millions of dollars to participate in the bid, if the rules of the game are being so changed.
In early 2009 the new Mining Law was passed, wherein investors felt the moratorium for the issuance of new tenements may be lifted by the end of 2009, then the complexities of C&C became more evident and the expectation for new tenements was pushed out to 2010, with diminishing committed investors supporting their core exploration and review programs. However the Government failed to implement the articles of the new mining law to facilitate the issuance of new tenements, and investors in new exploration gave up. In 2015 the Government is reviewing the laws of mineral & coal, oil & gas, CBM & Shale Gas and water. If they can pass such new laws by the end of 2015, then many investors who had paid to wait-it-out during 2009-10 now feel it could take up to 2 years for the implementing regulations and other supporting administration to be in place before any new exploration can start.
Finding the mineral potential is the challenge from God who hid the minerals in the earth, but finding a clear business path as created by this new generation of politicized Indonesian’s is even more of a challenge. Fortunately there are still a very few determined investors, and they are to be praised for their courage, determination, but their pockets are only so deep.