THE SHARE PRICE of Resources Prima Group may enjoy upside next week following news that its subsidiary, PT Rinjani Kartanegara, has received in-principle approval for the “borrow-use” permit IPPKH2 which allows applicants to clear forested land to commence mining operations.

Issued on 6 Jan 2016 by the Head of Investment Coordinating Board of Indonesia for and on behalf of the Indonesian Minister of Environment and Forestry, the in-principle IPPKH2 is a critical final step for the issuance of IPPKH2.

Agus Sugiono4.15aAgus Sugiono, executive chairman and CEO of Resources Prima.
NextInsight file photo.
PT Rinjani has been granted approval to carry out coal mining operations in an area covering 1,933 hectares in the District of Loa Janan and Loa Kulu, Kutai Kartanegara Regency, Province of East Kalimantan.

The tenure for the mining concession area is held under the Production Operation IUP which was granted on 24 November 2009 and is valid until 24 November 2021.

The existing “borrow-use” permit issued by the Indonesian Minister of Forestry to PT Rinjani in December 2011 covers 308.54 ha of the mining concession area.

As certain areas of the remaining 1,624.46 ha of the mining concession area overlap with the forestry concession area of PT ITCI Hutani Manunggal, the in-principle IPPKH2 only covers an area of 899.49 ha. 

PT Rinjani will work with the Indonesian Minister of Forestry to, amongst others,

(i) determine the approved area’s boundary coordinates; and
(ii) measure and quantify the volume of plants and trees in cubic metres within the boundary’s coordinates, as pre-requisites for the issuance of the IPPKH2.

NextInsight: What will happen to the overlap area? Is it difficult now for it to be approved for mining?

Resources Prima Group spokesman: For the overlap area, as ITCI holds the logging rights in that area, company would either need to reach an agreement with ITCI to compensate them (as previously disclosed in the circular) or wait until the forestry land has been cleared.  

Such procedures are undertaken to determine PT Rinjani’s financial obligations to the Indonesian Government.

Issuance of the IPPKH2 will allow Resources Prima to commence clearance of the forestry land and mining operations in the approved area.

Executive Chairman and CEO Agus Sugiono says: “The issuance of the In-Principle IPPKH2 is a major milestone in obtaining the IPPKH2. We estimate that, together with the Indonesian Minister of Forestry, the procedures will be completed by the end of March 2016.

"With the additional operating area of 899.49 ha, which is more than double that of our current operating area of 308.54 ha, we look forward to higher production output once the IPPKH2 is obtained.”

The share price of Resources Prima closed at 7.3 cents this week, near its 52-week low of 6.5 cents.

UOB Kay Hian's April 2015 report had a target price of 29.5 cents for the stock.

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