Rio Tinto sues Indonesia regional govt over mine permit

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JAKARTA - The Indonesian unit of mining firm Rio Tinto  has sued a regional government in Central Sulawesi for issuing a mining permit to local firms while it is still negotiating with the government over the area, a company official said on Tuesday.

The global mining giant has been negotiating with a team from the central and regional governments to obtain a permit to exploit the La Sampala nickel deposit in Central Sulawesi.

Rio Tinto and the government were close to an agreement after two sticking points -- taxation and compensation Rio Tinto should pay Indonesia's forestry ministry -- were resolved.

Rio Tinto plans to spend up to $2 billion on the project which is estimated to have a capacity to produce 46,000 tonnes of nickel a year.

"We filed the lawsuit against Morowali regency on May 23," Budi Irianto, Jakarta-based external affairs manager of Rio Tinto told.

"We became aware of the overlap in March. We only have 90 days to react, therefore we have no choice but to file this suit," he said.

Under the existing mining law, mining investors should obtain contract of works from the central government. But since regional autonomy rules were introduced in 1999, regional governments can also issue mining permits.

The project also needs approval from Indonesia's parliament.

Indonesia is home to some of the world's top mining sites and major producers of key commodities such as coal, rubber, tin, palm oil and natural gas.

Rio Tinto is one of several global mining players in resource-rich Indonesia, which is struggling to attract foreign investment in the sector amid a lack of legal certainty and continuous disputes with the government.

Seperately, the head of Indonesia's investment coordinating board (BKPM), Muhammad Lutfi, told reporters he regretted the decision of the local government.

"This is an irresponsible move by the regional government. I have informed the home affairs minister and asked him to intervene with the problem," Lutfi said.