[Kabar-indonesia] 2: RI Trade and Investment News, 7 August 2006

[JoyoNews at aol.com]

The Coordinating Ministry for Economic Affairs
Republic of Indonesia
Jakarta
August 7, 2006

Trade and Investment News, 7 August 2006

Part 2 of 2

INVESTMENT

H1 Investment Moves Higher 

The realization of foreign direct and domestic investments in the country was 
valued at Rp45.23 trillion ($9 billion), up 12% from the same period last 
year, a deputy at the Investment Coordinating Board (BKPM), Mohamad Najib, was 
quoted as saying by Antara.

Najib said the implementation of foreign direct investment projects was 
valued at Rp34.04 trillion and domestic investment projects at Rp11.19 trillion.  
He said total investment of Rp765 trillion, including by the government and 
non-facility companies in addition to foreign and domestic investments, will be 
needed to achieve the economic growth target of 6.2% this year.

Bank Indonesia estimates that the country's investment sector will grow by 
only 5.6% this year, slower than previously predicted.

The central bank attributed the lower-than-expected growth to low domestic 
demand, Antara reported on Monday (31/7/06).

In 2007, investment is expected to grow faster with expected improvement in 
the investment climate and the purchasing power of the people, it said in a 
report.  Investment is forecast to grow 9.9% to 10.9% in 2007, the report said.

Malaysian Investments Sought in SEZs

Indonesian President Susilo Bambang Yudhoyono has invited Malaysian 
businesses to invest in the country's special economic zones (SEZs), offering 
opportunities in energy, housing and electricity, Bernama News Agency reported.

Indonesia, he said, plans to come up with more special economic zones besides 
the one in Batam and its nearby islands, to attract foreign investments 
through investor-friendly regulations and other incentives.  Jakarta also plans to 
develop 14 such zones. 

Dr. Yudhoyono said Malaysian companies have significantly contributed to 
Indonesia's economic development.  "But there are still many opportunities for the 
Malaysian companies and they can invest in more sectors in Indonesia," he 
said.

Malaysian investors rank among the top five investors in Indonesia, he said, 
adding that he expects Malaysia to be among the top three.

Genting Keen to Buy Land - Minister

Malaysia's Genting Bhd is keen to buy 1 million hectares of land in Indonesia 
to develop a bio-fuel venture, Mines and Energy Minister Purnomo Yusgiantoro 
said Friday (4/8/06), according to Dow Jones Newswires.

"Genting has said it would take 1 million hectares minimum... Their focus is 
palm oil and sugarcane," Yusgiantoro said after meeting businessmen in the 
Malaysian capital.  Diversified Genting controls plantations company Asiatic 
Development Bhd and has fast-growing investments in oil and gas exploration and 
power generation.

The minister said Indonesia plans to set aside 6 million hectares of land for 
development of the bio-fuel industry by 2009 to 2010.

He said other Malaysian companies such as Sime Darby Bhd and government 
investment firm Khazanah Nasional Bhd have also met with Indonesian officials, and 
expressed interest to invest in his country.  "Some of them are concrete in 
expressing their interest in bio-fuel," he said.

Malaysia and Indonesia recently agreed to limit the use of palm oil for 
bio-fuel to 6 million metric tons each due to fears of a shortage of the vegetable 
oil in future for food.  Malaysia is the world's biggest producer of palm oil, 
with an annual output of about 15 million metric tons, while Indonesia is a 
close second.

Meanwhile, Indonesia's PT Sinar Mas Agro Resources and Technology (SMART), a 
subsidiary of diversified Sinar Mas Group, said it is considering constructing 
a bio-diesel plant due to the expected rise in demand in coming years.

"Currently, our company is still studying the cost and benefits offered by 
the bio-diesel opportunities, which include entering long-term supply 
arrangements or investing in the construction of a new bio-diesel plant," Rafael B. 
Concepcion Jr said in a statement to XFN-Asia.  

More Singaporeans in Business in Bintan

Many Singaporean investors are going into business in Bintan island following 
an exhibition of Indonesian investment opportunities held in Singapore last 
January, an official said.

"Every week, three to four Singaporean investors apply for investment 
permits, notably in the manufacturing, agro-industry and infrastructure sectors in 
Bintan," Bintan district head Anshar Achmad said, according to an Antara report 
on Thursday (3/8/06).

Achmad said the regional administration would conduct similar exhibitions in 
Kuala Lumpur, Bangkok, Hong Kong and Guangdong province in China.

Govt. Lures S. Korean Business 

Forestry Minister MS Kaban said his department is hoping South Korean 
businessmen will invest in the development of 500,000 hectares of industrial timber 
estates (HTI) in Indonesia, 

"South Korea is one of the countries expected to take part in expediting the 
development of 8 million hectares of such estates," Kaban said after a meeting 
with dean of the Agriculture and Natural Sciences Faculty of the Seoul 
National University, Lee Junjae, and president of IUFRO Lee Donkoo in Seoul on 
Monday (31/7/06).

With a view to luring South Korean investors, the minister is scheduled to 
sign a memorandum of understanding with the National Forest Cooperation 
Federation, Samsung and Posco.

In a seminar held at the university, Kaban invited the country's businessmen 
to support his department's efforts to improve Indonesia's degraded forests.  
Apart from the implementation of forest and land rehabilitation programs, he 
said his department would continue to intensify HTI development.

According to him, the Indonesian government would not set a limit for 
businessmen who are interested in investing in HTI development.  He said it would 
extend the current concession period to 100 years, which businessmen could use to 
obtain capital from banks.

STATE CONCERNS

Indonesia, Germany Sign Debt Swap

Indonesia and Germany have signed a third debt swap deal worth 12.5 million 
euros and a 10 million euro new loan/grant agreement, officials said. Another 
deal component, focusing on nature park management for the same amount, is 
still being prepared, XFN-Asia reported on Thursday (3/8/06).

Under the deal, Indonesia will have to spend approximately Rp60 billion to 
establish a revolving fund for investment in environment-friendly technology.  
Selected national banks will administer the fund and channel it into micro and 
small enterprises, especially those facing difficulties in obtaining bank 
loans.

In return, the German government will cancel outstanding debts amounting to 
twice the sum spent by the Indonesian government.  In total, Germany will 
cancel debts totaling 93.5 million euros as it has recently announced a fourth debt 
swap to support reconstruction efforts following the May 27 earthquake in 
Yogyakarta and Central Java.

The statement also said that the new 10 million euro loan/grant comprises a 
40-year loan worth 9 million euros to improve medical services for the poor at 
Dr Wahidin Hospital in Makassar, South Sulawesi and a 1 million euro grant 
earmarked for consultancy and training.

Separately, the Finance Department's treasury director Mulia Nasution said 
the new loan carries an interest rate of 0.75% and will a have 10-year grace 
period.

H1 Foreign Tourist Arrivals Down 7.5%

Foreign tourist arrivals to Indonesia fell 7.5% in the first half of 2006 
from the same period last year, the Central Bureau of Statistics said on Tuesday 
(1/8/06), following a spate of natural disasters.

Tourism accounts for about 5% of Indonesia's gross domestic product.  It is 
one of the country's largest sources of foreign exchange revenues, contributing 
$4.5 billion in 2005 from an estimated 4 million foreign tourists in the 
year, Reuters reported.

The bureau said foreign tourist arrivals fell to 1.89 million in the 
January-June period.  

Indonesia's tourism industry has been hit by a series of natural disasters 
this year such as an earthquake in the major tourist destination of Yogyakarta 
and a tsunami in the beach resort of Pangandaran in West Java.

SOEs

Three State Firms Plan IPOs

State-owned companies PT Jasa Marga, Bank Tabungan Negara (BTN) and PT 
Indonesia Power plan to conduct initial public offerings (IPO) in 2007, State 
Minister for State Enterprises Sugiharto said Tuesday (1/8/06).

"The three companies will be readied for it in the second semester," 
Sugiharto said at the Indonesia Investors Forum.  He said that in accordance with 
Government Regulation No 33/2005, a privatization committee has been formed to 
determine which company is ready to be privatized.  The committee consists of the 
coordinating minister for economy, the finance minister, the state minister 
for state firms and other ministers concerned.

He said Bank Tabungan Negara is qualified to sell its shares.  "What is 
important is that the bank's planned IPO is not aimed at meeting the national 
budget target but it is intended to strengthen the bank's capital structure".  He 
said by increasing its capital, the bank would be able to finance its annual 
target of development of one million low-cost housing units.

Proceeds from the planned IPO of Indonesia Power meanwhile would be used to 
increase funding for the development of power plants to reduce the price of 
electricity so that electricity rates would not have to be raised.  "Toward this 
end, Indonesia Power will sell its shares through the capital market," the 
minister said.

Regarding the planned IPO of Jasa Marga, the minister said he hoped it would 
improve its leverage so that it could finance about 70% of toll road 
development projects in the country.

"Jasa Marga's leverage is high because investment in toll road development is 
huge but with continuous and fixed return of investment," he said.  "I agree 
with the opinion of several quarters that privatization means foreign 
ownership."

Telkom's H1 Net Profit Up 53%

The nation's largest telecommunications company by assets, PT Telkom. said 
Monday (31/7/06) its first-half net profit rose 53% from the year-earlier period 
due to an increase in revenue from its cellular and internet divisions. 

Telkom posted a net profit of Rp5.82 trillion for the January-to-June period, 
up from Rp3.8 trillion in the year-earlier period, Dow Jones Newswires 
reported.  Consolidated revenue increased 24% to Rp24 trillion in the period from 
Rp19.38 trillion in the year-ago period. 

Telkom, which owns 65% of Indonesia's largest cellular company PT Telkomsel, 
said first-half revenue from the cellular division rose 47% to Rp9.44 trillion 
from Rp6.41 trillion in the year-earlier period due to an increase in its 
subscriber base.  It did not provide the number of cellular subscribers for the 
first half.  Revenue from the cellular division contributed 39.3% of Telkom's 
consolidated revenue. 

Revenue from internet and multimedia services rose 32% to Rp4.1 trillion from 
Rp3.1 trillion in the year-earlier period.   Telkom said revenue from its 
fixed-line service, however, slipped to Rp5.34 trillion from Rp5.47 trillion in 
the year-earlier period.  Telkom's assets were at Rp67.66 trillion as of June 
30, compared with Rp58.48 trillion a year earlier.  The government owns 51.19% 
of Telkom. 

Semen Gresik to Sell Rp2t in Bonds 

Indonesia's biggest cement maker by sales, PT Semen Gresik, said it plans to 
sell Rp2 trillion ($220 million) of bonds to fund the construction of a new 
plant.

The cost of building the plant would be about Rp3 trillion, Rp1 trillion of 
which will come from the company's own cash, finance director Cholil Hasan was 
quoted as saying by Bloomberg News in Jakarta on Tuesday (1/8/06).  He didn't 
elaborate on the timing of the sale.

Adhi Karya Sees 2006 Net Profit Rising 

State construction firm PT Adhi Karya said it expects its net profit this 
year to increase to Rp91.2 billion from Rp77.9 billion last year, on major 
construction projects being undertaken both domestically and overseas.

It said in a statement to the Jakarta Stock Exchange that it expects its 
revenue to increase to Rp4.41 trillion this year compared to Rp3.03 trillion a 
year earlier.  However, it said the cost of contracts is expected to increase to 
Rp4.115 trillion from Rp2.61 trillion last year.

Its operating income is expected to reach Rp260 billion, compared to Rp174 
billion a year earlier, it said, according to XFN-Asia.  In the first half of 
2006, Adhi Karya posted a net profit of Rp2.26 billion, compared to Rp17.54 
billion a year earlier, on sales of Rp1.54 trillion, compared to Rp1.1 trillion a 
year earlier.

The company said lower interest rates would further spur construction 
projects early next year.  "Adhi Karya expects national private property projects 
(related to high-rise buildings and malls) to start to roll over again early 
2007," it said.

The company said that major projects under construction include the Doha City 
Center worth $46 million, infrastructure projects for the Tangguh LNG plant 
worth $28 million, the Dumai port -- where Adhi Karya has a 45% stake -- worth 
a total of Rp256 billion, the Medco Tower project worth Rp226 billion, and 
infrastructure work for Heavy Oil in Duri, Riau worth Rp398 billion.

RNI Seeks Partners to Produce Ethanol

State-owned agribusiness company, PT Rajawali Nusantara Indonesia (RNI), is 
seeking private firms to be its strategic partners in processing molasses into 
ethanol.

"RNI plans to produce ethanol through collaborative ventures with several 
private firms that have experience in the field.  We plan to start production 
next year," production director of the company's East Java unit, Achmad Sjaiful, 
was quoted as saying by The Jakarta Post last week.

"The cooperation will take the form of joint ventures with alcohol 
producers," he said, without specifying potential partners.  "We will provide the raw 
materials and their job will be to provide the machinery."  Molasses can be used 
to produce ethanol, which is used in bio-fuel blends.

Operating 10 sugar factories, RNI's molasses production is sufficient to make 
ethanol distillation commercially feasible, Sjaiful said.  "We have to 
support the government's program of promoting the use of bio-fuels to reduce 
gasoline usage.  The molasses we produce will be turned into alcohol to be mixed with 
gasoline," Sjaiful said.  

PRIVATE SECTOR

Motorbike Sales Move Forward

Motorcycle sales in Indonesia, a good indicator of grassroots buying power, 
picked up to 369,747 units in July compared to 343,399 units in the previous 
month.  

The figure was 22% lower than buoyant sales in the same month last year, 
before Indonesia hiked petrol prices, causing a jump in interest rates. 

Last month's number took Indonesia's total motorcycle sales in the first 
seven months of the year to about 2.18 million units, down from 2.93 million in 
the same period last year, said PT Astra Honda Motor marketing director, Johanes 
Hermawan, according to Reuters.  

Motorbike sales hit a historic high of 5.07 million units last year, when 
interest rates were at record low levels.  Industry officials expect sales volume 
to fall by 20% to 25% this year.

TV Firms in Strategic Deal 

Two Jakarta-based television stations have agreed to work together, with 
Trans Corp, the owner of Trans TV, buying a 49% stake in TV7 from Kelompok Kompas 
Gramedia (KKG), The Jakarta Post reported. 

The two companies said Friday (4/8/06) the move was aimed at improving 
competitiveness in the 11-channel market. 

Trans Corp president director Chairul Tandjung said the two stations would 
not compete with each other as regards program content, and that 
well-established programs on Trans TV could also be broadcast by TV7.

TV7 would focus on sports and entertainment, while Trans TV would continue to 
concentrate on entertainment and lifestyle programs.

TV7 enjoys a 6% share of the country's television audience, while Trans TV 
has a 13.8% share.

BANKS

H1 Bank Lending Grows 3.75% 

The central bank reported that total lending for the year's first half grew 
by 3.75% to some Rp721 trillion ($79.2 billion).  

The figure compares with the 12.4% credit growth achieved between December 
2004 and June 2005. 

On a year-on-year basis, bank lending grew by 14% in June, Bank Indonesia 
(BI) Deputy Governor Hartadi A Sarwono said, according to The Jakarta Post. 

This represented a decline from the 29% recorded between June 2004 and June 
2005.  "We think it will continue to pick up to produce growth of between 15% 
and 16% by this year's end," he said, as reported by Antara. 

The central bank had previously expected total bank lending to grow by 
between 18% and 20% this year.  Lending grew by 24% over the course of last year to 
reach Rp695.6 trillion by the end of December 2005. 

Sarwono acknowledged that BI has received revised lending-growth targets from 
several banks, although others remained upbeat about extending more loans 
this year. 

BCA Shows Strong First Half Growth  

Publicly listed Bank Central Asia (BCA) managed to increase both its lending 
and profits for the first half of the year despite high inflation and interest 
rates that have recently been holding back the industry.

BCA, Indonesia's third biggest lender by assets, saw a 16% increase in its 
unaudited net profit for the first six months ending June 30 to Rp2.04 trillion 
($226 million) from Rp1.76 trillion during the same period last year, the 
company's vice president Jahja Setiaatmadja said Tuesday (1/8/06) during a 
briefing to investors, The Jakarta Post reported.  

The higher profits resulted from BCA's ability to increase total lending 
during 2006's first semester to Rp52.8 trillion, up 21% from the same period a 
year earlier.

This boosted BCA's net interest income by 28% to Rp4.58 trillion, while the 
lender also reduced costs and losses by better managing its interest margins, 
as well as reviewing loans that had the potential to turn sour.

BCA's total 2005 lending amounted to Rp54.1 trillion, up some Rp14 trillion 
from the previous year.

Its net NPL ratio rose slightly to 1.7% from 1.5% in the first quarter, still 
far below the central bank's 5% maximum limit. 

Bank Mega saw its net profit in the first six months of the year to June 
slide to Rp101.94 billion from Rp162.38 billion in the same period last year, 
XFN-Asia reported. Operating profit over the period fell to Rp98.87 billion from 
Rp239.72 billion in the same period in 2005.  

Interest income was up Rp1.46 trillion from January to June, from Rp961.14 
billion in the same months last year, while net interest income decreased to 
Rp317.59 billion from Rp437.76 billion. 

Publicly listed Bank Buana Indonesia reported Rp199.17 billion ($22.1 
million) in net profit in the first half of the year, down 7.42% from the same period 
last year.  Bank president Jimmy Kurniawan Laihad said an increase in 
operating cost caused the decline in net profit, despite an increase in net interest 
income.

The bank, which is 61.1% owned by United Overseas Bank of Singapore, posted 
Rp557.89 billion in net interest income in the first six months of the year, up 
19.86% from the same period last year, he said, according to Antara.   Its 
assets also rose 13.48% to Rp17.43 trillion and its non-performing loans grew to 
3.53% from 2%.

POWER

Medco-Led Consortium Wins Project

A consortium led by PT Medco Energi Internasional has won a bid issued by 
state-run utility company, PT PLN, to build a 340-MW geothermal power plant in 
North Sumatra for $600 million, said to be the largest single-contract 
geothermal project to date in the geothermal industry worldwide, Dow Jones Newswires 
reported. 

The consortium, whose other members are US-based Ormat Technologies Inc (ORA) 
and Japan's Itochu Corp, will build, own and operate the Sarulla power plant 
and sell the electricity to PLN under a 30-year contract.  

Ormat did not disclose the price for the electricity it will sell to PLN, but 
Bisnis Indonesia reported on Wednesday (2/8/06) that it was set at $0.0468 
per kilowatt-hour. 

The Sarulla plant will be built over the next five years in three phases of 
110 MW to 120 MW each, with the first power generating unit scheduled to begin 
operating within 30 months and the last within 48 months from the financial 
closing.  

The consortium expects annual revenue from the electricity sales to be $110 
million, once the third phase of construction is completed, Ormat said in a 
July 31 press release posted on its website. 

43 Bids for 10 Power Projects - PLN

State electricity firm PT PLN said 43 of 59 potential investors have 
pre-qualified to bid to construct 10 coal-fired power plants, XFN-Asia reported on 
Tuesday (1/8/06).

Seven of the plants will have a capacity of 300 MW to 400 MW each and the 
other three, 600 MW to 700 MW each.  They are part of the government's 
accelerated program to build new power capacity of 10,000 MW.

PLN acting president Djuanda Ibrahim said the winning bidders will be 
announced on October 20.  He reiterated that investors should cover 80% of the cost 
of the projects, while PLN will cover the rest.

The bidders were mostly consortiums of foreign and Indonesian firms, with 
many Chinese companies on the list of foreign participants, including the China 
National Machinery Industry Corp, China National Electrical Equipment Corp, 
Chengdu Engineering Corp, China National Technical Import & Export Corp, China 
National Machinery Import & Export Corp, CITIC and Harbin Power Equipment Co Ltd.

Other foreign participants are South Korea's Hyundai Engineering and 
Construction Co and Doosan Heavy Industry, and Japan's Mitsubishi Corp, Itochu Corp 
and Marubeni Corp.

Indonesian firms include PT Mitra Selaras Hutama Energi, PT Bumi Rama 
Nusantara, PT Bumi Karsa PT Penta Adi Samudera; PT Wijaya Karya; PT Hutama Karya, PT 
Waskita Karya, PT PAL Indonesia, PT Barata Indonesia, PT Primanaya Djan 
International and PT Modaco Enersys.

OIL AND GAS

High Oil Prices Due to Politics - Minister

Escalating global crude oil prices are mainly driven by political reasons 
rather than the fear of shortages and increasing demand, Mines and Energy 
Minister Purnomo Yusgiantoro said in Kuala Lumpur on Friday (4/8/06).

Supplies of crude were sufficient to meet demands and predicted it would 
outpace demand next year, he said.

"The problem is not that supply and demand balance, the problem is the 
political situation that sometimes will push the oil price at the highest position," 
Yusgiantoro was quoted as saying by Agence France-Presse after a forum on 
investment in Indonesia.

"What we are predicting from the OPEC standpoint, (is that) the demand growth 
next year is about only 1.3 million barrels of oil per day, but the supply 
growth is 1.7," he said.  "So next year it's going to be an oversupply from the 
fundamental standpoint," Yusgiantoro said.

OPEC has predicted that world oil demand in 2007 is set to increase by 1.3 
million barrels per day (bpd) to reach 85.9 million.

The conflict in the Middle East has sent oil prices soaring to all-time highs 
above $78 last month and Yusgiantoro said he wanted to see a return to a 
"normal trend" of $50 to $60.  "What we believe today is the political premium 
(is) about $15 to $20 per barrel that jacks up the oil price (to the) level it is 
today, about $70 dollars," he said.  

LNG Price for CNOOC Approved - Minister

Mines and Energy Minister Purnomo Yusgiantoro said on Tuesday (1/8/06) the 
government has formally approved the pricing of the liquefied natural gas to be 
supplied to China's CNOOC from the Tangguh project in Papua province.

"There were no problems with the renegotiation, there's an improvement in the 
price.  The formal approval has been given," he was quoted as saying by 
Reuters.  He however did not give a specific price.  Energy giant BP Plc operates 
the project.

Meanwhile, the Tangguh gas field is expected to start production and delivery 
by the end of 2008, following Tuesday's signing of a $2.5 billion loan, 
Yusgiantoro said, according to Xinhua.

Tangguh has proven reserves of 14.4 trillion cubic ft of gas and estimated 
total reserves of 23.7 trillion cubic ft, which have not been proven yet.

The loan consists of $1.2 billion from the Japan Bank for International 
Cooperation (JBIC), $350 million from the Asian Development Bank (ADB) and $1.07 
billion from a consortium of seven international banks, including the Bank of 
Tokyo-Mitsubishi UFJ Ltd, Singapore-based BNP Paribas, Hong Kong-based ING Bank 
NV Kong, Mizuho Corporate Bank Ltd, Sumitomo Mitsui Banking Corp and Standard 
Chartered Bank.

The Tangguh project is estimated to cost $5.5 billion.  The Tangguh field has 
secured gas supply orders amounting to 6.9 million tons a year, consisting of 
2.6 million tons a year from China's CNOOC, 0.6 million tons from South 
Korea's Posco and K-Power and 3.7 million tons from Mexico's Sempra Energy LNG Corp.

Pertamina Seeks Investors in 15 Fields

PT Pertamina EP, a unit of state oil and gas firm PT Pertamina, is planning 
to offer 15 onshore oil fields for joint operation to investors this August, 
pending approval from upstream oil and gas regulator BP Migas, company president 
Kun Kurnaeli said.

The 15 fields comprise nine production and seven exploration blocks mostly 
located in Java and Sumatra, he said, adding that 35 multinational companies 
have expressed interest to develop the blocks, including Total, Marathon, 
Chevron, Anadarko and Petronas.

"About 200 investors, including 35 multinationals, are interested in the 
fields," Kurnaeli was quoted as saying by XFN-Asia.

He said the 15 blocks are just part of an initial plan that will include many 
more brownfields that Pertamina is planning to offer.  "Through such 
cooperation, we hope there will be additional output of 15,000-20,000 barrels of oil 
per day in 2008 or 2009," he said.

He also said Pertamina EP expects to raise its oil output by 110,000 bpd this 
year from 101,000 at present.  Additional output of 3,000 bpd to 5,000 bpd 
will come from the Pondok Tengah field in Bekasi, West Java.

The rest is expected to come from fields jointly developed with investors 
either through a joint operating body (JOB) or a technical assistance contract 
(TAC) scheme.

MINING

Investor Buys Berau - Source

Indonesian businessman Rizal Risjad has taken over PT Berau Coal, the 
country's fourth largest coal company, in the largest private buyout of an unlisted 
company in Southeast Asia, a person close to the matter said on Tuesday 
(1/8/06).

Using $279 million in financing arranged by US investment bank Merrill Lynch, 
Risjad bought out four other Indonesian parties in Berau and repaid its debt 
owed to US hedge fund Farallon Capital, the source told Reuters.

The financing consists of a three-year senior loan of $39.5 million and 
$239.5 million in mezzanine financing -- debt facilities that can be converted into 
equities, the source said.  Under the deal signed the previous week, Risjad 
boosted its stake in Berau to 90% from more than 9%, he said.

Japan's Sojitz retains its 10% stake in Berau, which has an annual capacity 
of 11 million tons of coal mainly exported to major power utilities in Hong 
Kong, southern China's Guangdong province and India, he said. 

Grasberg Copper Output to Fall Further - Rio Tinto

Mining results from the giant copper-gold open pit Grasberg mine in Indonesia 
will decline further after a disappointing first half of 2006 due to lower 
ore grades, diversified miner Rio Tinto Plc said Thursday (3/8/06).

Contained copper output at Grasberg fell to 458 million pounds in the first 
half of 2006, down from 638 million pounds in the same period the year before, 
Dow Jones Newswires reported.

Together with majority stakeholder Freeport-McMoRan, the company is looking 
to implement an optimization plan that will examine opportunities to up mining 
results, including bringing forward underground mining.

US-based Freeport-McMoRan owns 91% of the mine.  It has lowered mine 
production outlook for 2006 to 1.2 billion pounds of copper from 1.3 billion pounds 
but left expected gold output unchanged at 1.7 million troy oz.

The company said lower grade ore and abnormally high clay content at its 
Grasberg mine were to blame for weaker results, with weather-related delays 
further hurting operations in late June.

Inco H1 Net Profit Down 17% 

PT International Nickel Indonesia said Monday (31/7/06) first-half net profit 
fell 17%, mainly reflecting a surge in government-mandated fuel costs, 
according to Dow Jones Newswires.

Net profit at the end of June fell to $123.3 million from $148.7 million in 
the 2005 first half.  Sales rose 1.4% to $440.5 million from $434.3 million.  
Inco said the net profit decline reflected the government's decision last 
October to double fuel prices.  The company's transportation costs -- along with 
the cost of powering its smelters -- increased 24% to $254.68 million from the 
first half of 2005.

Meanwhile, Inco said Tuesday (1/8/06) its nickel output for this year may 
fall to 158 million pounds due to a delay in restarting its second furnace after 
a fire in late May.  

Inco president director, Arif Siregar, said the furnace has been repaired but 
it would take more time to bring it back into operation.  "There has been a 
delay in heating the furnace.  We expect the furnace to resume normal 
operations in the fourth week of August," Siregar was quoted as saying by Reuters.  
"Thus we can only produce 158 million pounds of nickel this year."  Initially, 
the furnace was expected to resume operations in early August.

Inco had earlier said the fire at its second furnace was expected to cut its 
nickel matte output to 159 million to 160 million pounds this year.  It had 
initially targeted 2006 output of 167 million pounds.

In the first half of 2006, its nickel matte output fell 8% to 73.3 million 
pounds, or 33,300 tons, compared with the same period last year.

Siregar said nickel prices would remain strong in 2006 as demand would 
continue to outstrip supply due to higher stainless steel production.  "This year 
will be another year where high nickel prices will encourage producers to 
operate at or above capacity," he said.

Inco Indonesia is 60.8% owned by Canada's Inco Ltd. Inco Indonesia's 
nickel-mining license covers 218,000 hectares on the island of Sulawesi.

-End 2 of 2-

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Joyo Indonesia News Service
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