The mining rights underlying the Berau Coal Project were held in what are known as Kuasa Pertambangan (KP) under Indonesian mining law, owned by Strike’s Indonesian joint venture partner, PT Kaltim Jaya Bara. 

A new mining law came into force in Indonesia on 12 January 2009 (New Mining Law).  This law replaces the Mining Basic Provisions Law, which had governed mining rights in Indonesia since 1967.  Under the New Mining Law, in order to continue exercising their rights, entities holding KPs at 12 January will be required to convert their KPs into a new type of mining right called an Izin Usaha Pertambangan or IUP.

Strike notes that as at 12 January 2009, a valid KP was in force in relation to the Berau Coal Project.  The KP has since expired.  Under a circular issued by the Minister of Mineral and Energy Resources, Strike understands that KPs in existence as at 12 January will be converted into IUPs, once regulations are made specifying the process for doing so.  Strike understands that the Indonesian Government is endeavouring to have the regulations finalised by mid 2009.   Strike is in the same position as a number of other mining companies with interests in KPs that have expired post 12 January or which will expire before the regulations are issued.

In addition, the New Mining Law provides for a new framework for other matters relating to the mining industry in Indonesia including the size of IUPs capable of being granted, the calculation of government royalties and the manner in which mining activity is to be conducted (in particular the priority use of local contractors).

While the New Mining Law has been passed, its application will become clearer once regulations providing for its detailed implementation are issued.  In light of this uncertainty, Strike has been working with its Indonesian legal advisers to determine whether the change in law is likely to affect its business.  Based upon the legal advice received and the public comments made by the Indonesian Minister of Energy and Mineral Resources, Strike believes that the transition between the two legal regimes will be resolved such as to provide a reasonable degree of clarity with respect to its concession rights and its ability to conduct a coal mining operation.

Strike is monitoring legal and other developments in Indonesia and any resulting effect on its business activities within the country.