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Written by: Staff

JAKARTA, Apr 17 (Reuters) Indonesia could become a major mining player if Jakarta can clear up legal uncertanties and rein in protests against mining companies, a top mining official said on Monday.

Indonesia could attract $3 billion in mining investment a year, said Jeffrey Mulyono, chairman of the Indonesian Mining Association, adding that the country remained attractive for investors despite the protests.

''The association and the government can urge investors to come, but they want to have their own freedom to make a decision,'' he told Reuters in an interview.

''The protests show over critisism against mining companies, but that won't dampen investors' interest on Indonesia.'' Indonesia expects foreign and local mining investors to spend $931 million this year, up from an estimated $880 million in 2005, but Mulyono said the country's potential was well beyond that.

''If the environment is conducive, I think we can reach a minimum amount of $3 billion a year,'' Mulyono told Reuters in an interview.

''The potential is good but there are laws and circumstances which have become obstacles. Commodity prices are buoyant ...

but we do miss out on that. We miss the train,'' he said.

Indonesia is rich in copper, gold, tin, nickel and oil. Top mining companies such as Newmont Mining Corp ., Freeport-McMoRan Copper&Gold Inc . and PT International Nickel Indonesia have operations in Southeast Asia's biggest economy.

But investment could be much higher if the regulatory environment was simplified, and if Jakarta addressed issues such as graft and tough labour laws, which give workers so many benefits and so much freedom to organise and strike.

Four police officers and a soldier were killed last month during protests demanding the closure of the giant mine run by Freeport in the remote province of Papua.

In February, mine operations were halted for four days before protesters, mostly illegal miners, left the site near the town of Timika -- about 500 km southwest of the provincial capital of Jayapura.

Copper, now at record high above $6,100 a tonne, has risen more than four-fold from below $1,400 in November 2001 and almost 40 percent this year on strong demand, especially from China, while gold is at its highest in 25 years, above $600 an ounce.

Mulyono said Indonesia has trouble encouraging major mining players such as Rio Tinto Ltd/Plc and Freeport-McMoran to increase their investment in Indonesia because of the legal uncertainties.

The country badly needs foreign investment to help propel its economic growth beyond 6 percent so it can tackle chronic unemployment and revive its ailing infrastructure.

''Those who dare to invest in Indonesia are medium-sized miners. This means that we can only invite less professional miners. While major players will wait and see,'' he said.

PricewaterhouseCoopers said in its latest report that spending for new mining exploration in Indonesia plunged to $7 million on average in 2001-2004 from $40 million in 1995-1997.

Exploration spending stagnated in 2003 and 2004, even though spending globally rose by 52 percent during those years, said the report.

But the government and parliament are discussing a new mining law to help reduce uncertainty in mining investment, give regional governments more power to give licences, and allow companies with exploration licences the right to produce minerals if they find and develop them.

According to a copy of the draft, the licences for mining exploration will be eight years, and licences for production 23 years.

Also, the Constitutional Court has allowed 13 mining companies to continue their operations despite a 1999 forestry law that banned open mining in protected forests.

''Whatever comes out from the new mining law will offer certainty for major mining players to make a move. The industry is still waiting for parliament to pass the law,'' said Mulyono.

Indonesia has seen violent protests against Newmont Mining and Freeport-McMoran in recent weeks, reflecting mounting resentment against foreign mining firms in Southeast Asia's largest economy.

Another major player, Newmont, faced criminal charges in a pollution case on Buyat Bay in Sulawesi.

It agreed to settle a separate civil suit launched by Jakarta by paying $30 million.


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