About Thomson ReutersAustralia's Indo Mines plans $1 bln...

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Australia's Indo Mines plans $1 bln Indonesia iron project-govt
Fri Oct 21, 2011 7:51am GMT

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JAKARTA Oct 21 (Reuters) - Australia's Indo Mines is to start construction of a $1 billion project on Indonesia's Java island in December, to begin operations in at least three years to produce 9-15 million tonnes of iron ore a year, a government official said on Friday.

The joint venture will involve PT Jogja Magasa Iron, which will own a 30 percent stake in the project, said Mudrajad Kuncoro, a local government official in Yogyakarta, central Java.

"We expect the ministry of energy and mineral resources to issue the permit to PT Jogja Magasa Iron in mid-November this year so the company can start its project in early December," Kuncoro said.

Indo Mines was not immediately available for comment.

The project will consist of a plant with production capacity of 1 million tonnes of pig iron and 2 million tonnes of iron concentrate per year, as well as a port, a coal-fired power plant, oxygen plant and water treatment facility, Kuncoro added.

When it starts operations in three to five years time, the project will produce 9-15 million tonnes of iron ore annually and will consume around 1.2 million tonnes of coal annually, said Kuncoro.

The world's fourth most populous country drew in a record $9.6 billion in foreign direct investment (FDI) in first-half 2011, lured by its relatively stable politics and strong economy, plus abundant resources and consumer spending power.

Despite issues over infrastructure, corruption and labour disputes, that trend is expected to continue as global firms look to take advantage of cheap labour, and Indonesia's huge mineral wealth.

Growth prospects have been given another boost by the government's offer of a tax holiday to big manufacturers investing more than $100 million. ID:nL3E7JF0JZ] (Reporting by Yayat Supriatna; Writing by Michael Taylor; Editing by Neil Chatterjee)