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Aust mining firms are firmly commited towards Indonesia

10 March, 2009

Australian participation at the Ozmine Conference in Jakarta has nearly doubled this year, with more mining suppliers turning to exports to weather the global financial crisis.

Over 80 Australian mining technology, equipment and services (METS) providers recently attended the Austrade event (24-25 February), compared to 45 last year.

Austrade’s Jakarta-based Senior Trade Commissioner, Rod Morehouse said, “Suppliers who didn’t have spare capacity to service overseas markets in the days of the mining boom, are now looking at exporting, while existing exporters are considering market diversification.

Morehouse said Austrade was seeing a marked increase in the number of new enquiries from METS providers.

“This year more than 20 new suppliers are going to Ozmine for the first time. Interest from other ASEAN regional players has also grown, with delegates coming from across the region.”

Morehouse said Indonesia’s ongoing energy demand and need to maximise productivity during the downturn will ensure prospects for Australian suppliers.

“Indonesia is the world’s largest producer of thermal coal (used in electricity generation). While the global demand for coal has eased, and prices have dropped, there is the safety net of electricity demand in the region, particularly from China and India. In fact, the Indonesian Government has restricted thermal coal exports to ensure there is enough supply for domestic use.

“Yes, there is a drop in Indonesian coal exports, 'a la' the world-wide drop; there is a lag in development of new mine sites. However, the industry still needs to refurbish, replenish and recondition to improve mine efficiency.

“New mining licenses won’t be granted until regulations for the new Mining Law (announced in December) are finalised, so existing mines have to maximise productivity. And Australian suppliers can help the industry stay competitive in these challenging economic times,” he said.

Morehouse said the intent of the new law was not to shut foreign investment out of the resources sector.

“Australian investors need to take into account the Indonesian Foreign Investment Law, which takes precedence. Under this law, foreign investors with a registered business in Indonesia will be given equal treatment to local investors.”

Austrade’s Chief Economist, Tim Harcourt said the best way for exporters to survive the global financial crisis was to prepare for recovery.

“Most successful exporters see going global as a long-term game and part of their core business. They look at new ways to adapt to market conditions during a downturn instead of pulling out. They work on lifting skills and productivity to better compete for market share.”

He said the experience of the Asian Financial Crisis was that exporters who stayed in Asia ‘through thick and through thin’ succeeded when the economy recovered. “And the economy recovered more quickly than most forecasters expected,” he said.

WA-based Gemcom Software will attend Ozmine again this year. The company has been active in Indonesia since the 90s.

Gemcom Software’s Asia Pacific sales manager, Ben Farquharson said, “Indonesia is now moving from a market of growth to a market of consolidation. While miners were more focused on value generation during the boom, they are now looking at more efficient, cleaner and smarter ways of operating.

“During a down cycle, you want to know that the right systems are in place to improve business efficiency, that productivity is not compromised and efficiency is maintained across the mining value chain,” he said.

“Our systems help the Indonesian industry manage and share data more effectively, while addressing the skills shortage issue and helping managers make more informed, strategic decisions that impact the bottom line.”

Morehouse said, “The global slowdown in commodities will certainly have an impact. But the reality is Indonesia is energy and resources rich. This will dictate the mining activity that will take place in the years to come”.

According to the Indonesian Ministry for Energy and Mines, Indonesia is still expected to produce 225 million tonnes of coal this year, unchanged from 2008.

Earlier this month, Leighton subsidiary, Thiess (Indonesia) was awarded an US$1.52 billion contract mining extension for the ongoing operation of two coal mines in South Kalimantan.

Last week, the Indonesian Government also announced plans to offer 15 geothermal fields for power development tenders, requiring a total investment of US$ 4.5 billion.

Indonesia is Australia’s fourth largest trading partner in ASEAN, with two-way trade valued at $10.3 billion in 2007-08. The partnership will be further strengthened by the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), which is to be signed this week.

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