JAKARTA, April 20, 2007 (Reuters) - The Indonesian unit of mining firm Rio Tinto Ltd/Plc said on Friday it had made progress in talks with Jakarta on a $2 billion nickel project on the island of Sulawesi.
"We have made some progress, but there are still some minor issues that need further discussion with the Indonesian government related with forestry and taxation issues," Budi irianto, Rio Tinto's Indonesia spokesman, said by telephone. He did not elaborate.
He said he hoped the issues could be resolved soon so that construction of the nickel mines and high pressure acid-leaching (HPAL) plant could begin.
Irianto said the nickel mining site, which is located on the border of Central Sulawesi and Southeast Sulawesi provinces, was estimated to have a capacity to produce 46,000 tonnes of low concentrate nickel ore a year.
The Wall Street Journal reported on Friday that two key obstacles holding back the project had been resolved and put the value of the project at $1 billion.
The head of Indonesia's investment agency, who in February said the country hoped to a sign a contract around the middle of March, at that time valued the project at around $2 billion.
The Journal quoted Energy Minister Purnomo Yusgiantoro as saying the two sticking points -- taxation and compensation Rio Tinto should pay Indonesia's forestry ministry had been resolved, though some "fine tuning" was still required.
The project also will need approval from Indonesia's parliament.
Indonesia's forestry laws ban open pit mining in protected forests, and mining investors need a licence from the forestry ministry to clear land for projects.
Indonesia's government and parliament have been discussing a draft of a new mining law in a bid to clear up uncertainty in one of the country's most vital sectors. The new mining law is expected to be approved by parliament in March.
Rio Tinto is one of several major global mining players in resource-rich Indonesia, which has been struggling to attract foreign investment in the mining sector.
Top miners such as Newmont Mining Corp. , Freeport-McMoRan Copper & Gold Inc. and PT International Nickel Indonesia have operations in Southeast Asia's biggest economy.
Indonesia mines around 150,000 tonnes of nickel annually, about 10 percent of global production
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