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Asiamet Resources (LON:ARS), formerly Kalimantan Gold, has provisionally agreed amendments with the Indonesian government to the contract of work (CoW) covering its KSK copper project.
After a period of negotiation, Asiamet has now signed a non-binding memorandum of understanding (MOU) with the Government of the Republic of Indonesia (GOI), and items contained within the MOU will be incorporated as an amendment to the CoW.
Many of the amendments align the contract with Indonesian laws.
CoWs typically provide security of tenure to an exploration company for 30 years or more, and Asiamet has clarified with the GOI that its CoW remains in the fifth year of the exploration stage, and as such has a total of 30 years remaining for exploration, development and operations.
Broker VSA in its Morning Miner note described this as a “key result”.
The MOU sets out the possibility that, after 30 years of operation under the CoW, the company would be entitle to apply to continue operations by applying for a special mining business licence for two further periods, both 10 years in length.
Under the agreed MOU terms the corporate income tax rate will continue to be 30% as prescribed in the CoW but royalties will now follow the provisions of the prevailing law. Royalty rates now applicable to gold and copper under the prevailing laws are 3.75% and 4% respectively. The rates compare well with most mining jurisdictions globally, Asiamet said.
The CoW currently has a provision that requires Asiamet to work towards, and assist, the Government in supporting the policy of establishing metals processing facilities in Indonesia in relation to smelting and refining. The company is now under obligation to process and refine the mineral ores domestically in line with the current provisions of the rules of law in Indonesia.
"We are pleased with the outcome of negotiations to date as the amended terms envisaged under this MOU consolidate Asiamet's position in the KSK CoW for the long term and provides a secure platform upon which the company can deliver value for all its stakeholders,” said Tony Manini, the company’s chief executive officer.
“The potential amendments outlined in the MOU are aligned with the company's strategy of partnering with reputable Indonesian investors to develop its projects and support the Government’s endeavours to build its economy,” he added.
VSA noted: “ARS is now obliged to process and refine the mineral ores domestically in line with the export ban on unprocessed ores; however, given the planned SX-EW processing route, this should not cause issues for ARS. In line with other foreign owned investments in Indonesia, ARS will also have to divest up to 40% of its shares to Indonesian nationals or companies over the next 15 years.”
“The CoW is necessary for ARS to continue to develop the project and we believe that this agreement in principle is a positive step forward for the company,” VSA said, as it reiterated its ‘speculative buy’ rating and 3.2p target price.
Shares in Asiamet were up 0.2% at 1.2p in mid-morning trading.