Bloomberg News

Arc Halts Indonesian Exploration After Two Killed in Protest

December 28, 2011

(Updates to add closing shares in fifth paragraph.)

Dec. 28 (Bloomberg) -- ARC Exploration Ltd., an Australian company looking for gold in Indonesia, halted work on Sumbawa Island after two people were killed last week in at least the nation’s third violent anti-mineral protest this year.

The deaths occurred on Dec. 24 after police clashed with demonstrators blockading the port of Sape, the Sydney-based company said today in a statement. Exploration work on the Bima project will remain halted until the situation is resolved, the company said.

Freeport-McMoRan Copper Gold Inc. and Newmont Mining Corp. are among global companies whose operations have been affected this year by violent protests in Indonesia, the world’s biggest exporter of thermal coal and tin. President Susilo Bambang Yudhoyono this week demanded a report on the Bima incident, which is under investigation, his spokesman Julian Aldrin Pasha told reporters yesterday in the capital Jakarta.

“There’s a long history of disputation throughout Indonesia over the last 20 years or so,” said Tim Schroeders, who helps manage about $1 billion in equities at Pengana Capital Ltd. in Melbourne. Local disputes are “definitely a factor that you would try to consider” when investing in Indonesia, he said.

ARC shares have dropped 72 percent this year in Sydney trading and declined 10 percent to 0.9 cents at the 4:10 p.m. local time close, the lowest since May 2009. The Bima project is a joint venture with Indonesia’s PT Sumber Mineral Nusantara.

Navy Ships

One person was killed and another injured during a three- month strike at Freeport’s Grasberg mine, where workers earlier this month agreed to end their action. Police and more than 600 protestors clashed outside PT Newmont Nusa Tenggara’s copper and gold mine in West Sumbawa in April, while the Indonesian Navy deployed two ships to secure an oil field on Tiaka island in Central Sulawesi province following a riot that killed two local residents, state-news agency Antara said Aug. 23 on its website.

“This is going to get worse,” said Syahrir Abu Bakar, an executive director at the Indonesian Mining Association. More than half the 9,000-plus mining licenses issued since 1999 have problems, he said.

“Foreign investors would think twice before doing business here,” Abu Bakar said.

Protestors have stated they want Arc’s exploration license revoked, Arc said in the statement. Limited field work had only recently resumed after positive responses from local communities and authorities following consultation since April, it said.

ARC “remains in full compliance with all legal, regulatory and license requirements,” the company said. Its activities at Bima are “minor’ and have involved a small number of geologists conducting field work, it said.

The protesters reportedly destroyed the Lambu police station and set fire to the precinct commander’s home, four units in a police housing complex and a bank, among other buildings, according to a Dec. 26 report by the Jakarta Post.

--With assistance from Agus Suhana. Editors: Keith Gosman, Baldave Singh

To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net


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