Metal mining industry in Indonesia.
The prices of various types of metal have continued to scale up since 2005. Increases were recorded for almost all types of metals produced in Indonesia including nickel, tin, gold, silver, copper, bauxite and iron.
In 2005, the selling price of tin averaged US$ 7,507 per metric ton, up to US$ 13,700 per ton early 2007. The prices of nickel in matte of PT INCO in the last quarter of 2006 averaged US$ 24,725 per ton (US$ 11.21 per pound) or a 148.5% increase from US$ 9,950 per ton (US$ 4.51 per pound) in the same period a year earlier. Similarly the prices of gold, silver and copper have also increased.
The rises in the prices of metal have encouraged investment in the mining sector after long slump earlier. State-owned tin company PT Timah Tbk, which slowed down production when the price of the metal fell, has not received a boost to increase output especially after the government cracked down on illegal smelters and miners.
Nickel producers have also boosted to increase output after the world demand for that metal increased especially from China and India that use it to produce stainless steel.
However, the surges in prices do not at once bring in new investment to the mining sector in Indonesia. New ventures are mainly additional investments made by the old investors that want to gain from the good prices.
The delay in passing new mining bill into law has delayed inflow of investment to the sector. Prospective investors choose to wait and see as there are too many conflicting and confusing regulations in the mining sector that investor see it is not secured yet to start venture in this sector. They want new law that give greater investment and business certainty. Regional administrations especially after the implementation of the law on regional autonomy have issued many regulations contradicting regulations issued by Jakarta.
This study report concerns mainly mining of major types of mineral already produced by large mining companies for years in the country such as gold, silver, tin nickel, bauxite and iron sand.
This report is expected to help investors make the right decision before embarking on expensive venture in the mining sector.
Overall Mineral Deposit Estimate
Indonesia ranks second in tin production, is the world's 4th largest producer of copper, the 5th largest producer of nickel, the 7th largest producer of gold, and the 8th largest producer of coal.
While the mining sector already makes an important contribution to the economy, the bulk of Indonesia remains unexplored. Geologically Indonesia has some of the most prospective land areas anywhere in the world for further mineral development.
Based on statistics from the MEMR and the companies operating metal mineral mines, the deposit of gold, copper, nickel, tin, bauxite, and iron sand are estimated which are presented in table below.
Based on average production in 2000-2005, the depletion of each mineral is estimated as between 24 years and 130 years. The actual depletion, however, will depend on production development of each mineral and whether or not they will be new deposit discovery of each mineral concerns.
Gold and Silver Deposit
Of a number of regions containing gold and silver in Indonesia, the region stretching from the northern tip of Sumatra down to Java is widely known. Recently, Indonesia has been more well known by its gold sources in Kalimantan, Sulawesi, Nusa Tenggara and Papua. Most of gold and silver are derived from porphyry copper mines, specially from Grasberg mine in Papua.
It has been known for a long time that gold deposits exist in North Sulawesi and Gorontalo. Most recent company operating gold mine in North Sulawesi is PT. Newmont Minahasa Raya (NMR) which is now in the closure process because of depleted ore deposits. But, another company is now starting its gold mining operation not far from NMR' mining site, i.e. PT. Avacet Bolaang Mongondow.
In Gorontalo gold deposits are scattered around the former gold mine at Mount Pani, which contains alluvial gold sediments.
In Sumatra, which was known as Gold Island in the past, traditional gold mining has been conducted for a long time. The same goes for West Kalimantan, where the Chinese have conducted traditional gold mine since long time ago.
Modern gold mining in Sumatra began with the opening of a gold mine in Lebong Donok in Bengkulu in 1899.
This was followed by the opening of other gold mines in the region Most of these gold mines were closed down with the outbreak of war in the Pacific, but some had been closed down long before that.
At that time, there were almost no big gold mines in Kalimantan and Sulawesi; Existing gold mines were mostly small and traditional.
Towards 1940, the Cikotok gold mine in West Java was opened. During the revolution, the Government of the Republic of Indonesia continued the operation of the existing gold mines, including the Cikotok and Lebong Tandai gold mines.
Gold reserves being exploited include; 1) The one located at Pongkor in West Java by PT. Antam. Pongkor gold reserves has a total ore deposit of 13.1 million with containing 105 tons of gold; 2) Lanut field by PT. Avacet Bolaang Mongondow and Halmahera Field by PT. Nusa Halmahera.
Most of the gold produced in Indonesia comes from porphyry copper ore deposits found largely in Grasberg field in Southern Papua which is now being mined by PT. Freeport Indonesia (PTFI).
The reserves in Grasberg consist of 1,981 million tons of ore deposits containing copper 0.99%, gold 1.20 gram per ton (g/t), and silver 2.32 g/t, PTFI also controls reserve deposits at several places.
Overall, Freeport's reserves in Papua is estimated consist of 2,677 million tons of porphyry copper deposit which is calculated to contain 27.7 million tons of copper, 3,117 tons of gold and 7,216 tons of silver.
The second largest porphyry copper deposit in Indonesia is located at Batu Hijau in Sumbawa Island, West Nusa Tenggara (NTB) province being mined by PT. Newmont Nusa Tenggara.
Batu Hijau is a major gold-rich porphyry copper deposit typical of the islands in South East Asia. These gold-rich porphyries are overwhelmingly hosted by composite stocks of diorite to quartz-diorite and, to a much lesser degree, more felsic compositions such as tonalite and monzogranite.
The deposits tend to be characterised by a strong correlation between the distribution of copper sulphides (chalcopyrite and bornite) and gold as the native metal in addition to having a notably higher magnetite content.
As of the end of 2003, Batu Hijau had an ore reserve of around 1,000 grading 0.525% copper and 0.37g/t gold. It means, Batu Hijau is estimated to contain 3,700 tons of gold reserves were replaced net of depletion during 2004 and at current production rates, will support a mine life until 2025.
Another large gold are deposit ore found at Kelian, East Kalimantan, which is estimated to have 114 tons of gold. Smaller gold deposits are found in many other places in Indonesia, particularly in Kalimantan, Sulawesi, Sumatra and Maluku, with a total of 4,401 tons of gold, mostly (70.8%) found in Grasberg or Freeport mining area.
Substantial quantity of porphyry copper deposits are found in Grasberg, Papua. The Grasberg area is of granodiorite rocks with porphyritic texture. Although the mass is considered an entity, it is composed of different materials, ranging from dioritic to monzonitic quartz. The mass penetrates the Faumi formation of limestone, which dates back to the Eocene. Grasberg is a rock mass with the characteristics of limestone's, which has undergone transformation (metasomatosis).
The ore body is shaped like a peg or a tooth with a long root. The exposed section is 140 meters high, rising from the trough and its root stretches downward to a depth of 360 meters.
The ore from the eastern part of Grasberg is made up of calcosite (Cu2S), with an average Cu content of 2.64%. The main rocks are made up of monticellite and scarn yakut. The width and height of the ore body are not the same everywhere. In the west, they are 160 meters and 120 meters and in the east 200 meters and 200 meters. There are three ore zones, namely: Deep--Ore zone (DOZ), Intermediate-Ore Zone (IOZ) and the so-called DOM basin.
The rise in metal prices since the lows of 2001 has renewed interest among producers, explorers and investors in the largest copper deposits on Earth--porphyry copper deposits. Yet the interest is not limited to just copper as these deposits can potentially host significant concentrations of gold, silver and molybdenum, an element used in hardening steel.
Title of the most gold-rich porphyry copper deposit goes to the Grasberg mine on the south side of Papua (formerly Irian Jaya), Indonesia.
Freeport owns 85.9% of the mine, with the remaining held by the Indonesian government and a private company; Rio Tinto has a claim of 40% of production in excess of 125,000 tonnes per day.
In 2003, 1.5 billion pounds of copper and 2.3 million ounces of gold were produced. The net cash production cost for the copper was negative US$ 0.02 per pound thanks to the sale of gold as a byproduct credit.
Freeport McMoRan's share of estimated recoverable reserves at Grasberg as of December 31, 2004 totaled 40.7 billion pounds of copper and 46.6 million ounces of gold.
Grasberg and other mine fields controlled by PT. Freeport Indonesia are estimated to have a total porphyry copper deposit of 2,677 million tons, estimated to contain 27.7 million tons of copper, 3,117 tons of gold and 7,276 tons of silver.
Tin deposits in Indonesia occur in the world's richest tin belt, which extends from South China, Myanmar, Thailand, Malaysia to Indonesia. In Indonesia, tin is found in Bangka, Belitung, Singkep and Central Sumatra (Bangkinang). Reportedly, it is also found in the islands of Anabas, Natuna and Karimata.
The oldest rocks in the island of Singkep date back to the Permocarbon and constitute transformed rocks. In the islands of Bangka and Belitung, the oldest rocks date back to the Permocarbon and Trias. In Pemali, they tend to the northwest and southeast.
Primary tin deposits are found in granite and in transformed rocks. In Tikus in the northwestern part of Belitung, in particular, tin deposits are found in granite. The deposits are made up of quartz containing casiterite and wolframite, with a usable content of 0.4%.
Primary tin deposits in Kelapakampit are unique, because they occur in veins and sprawl in the same direction as sedimentary rocks, which makes their direction predictable. Apart from that, they have a steep slope and are generally mixed with sulphuric or magnetic minerals.
In Bangka, the most important deposits are found in Pemali and Tempilang. In Pemali, tin deposits exist as a stockwork and greisen in granite and turmaline casiterite veins which run parallel. The exploitation of primary tin deposits in sedimentary rocks in Belitung has promising prospects and the exploitation of those in Bangka has even better prospects.
The other deposits are secondary deposits which were formed from primary deposits that had undergone decomposition and are found in nearby locations. Secondary deposits may be classified into two types: eluvial and alluvial deposits.
In offshore exploration, shallow geophysical surveys are conducted in detail over a large area. Drilling has been conducted far from the shore into remote areas.
Tin deposit in Indonesia is estimated at 810 million tons of tin ores with 0.1% Sn content. In addition there is also primary tin deposit totaling 55 thousand cu. meters with 1.0% Sn content. Total ton (Sn) content is estimated at 1,350 thousand tons.
Since 1992, many tin mining locations have been closed by PT Timah due to the depletion of tin ore deposit in the areas. In 2002, PT Timah gave permission to local people to mine in their concession areas.which are not economical for large scale mining operation.
Nickel mining in Indonesia is operated only by two companies, i.e. PT. International Nickel Indonesia or PT. INCO and PT. Aneka Tambang (ANTAM). PT. INCO at present is only operating in Sulawesi. PT. ANTAM is also operating in Sulawesi but with some activities in North Maluku.
Nickel ore found in central and eastern Sulawesi belongs to the categories of laterite and silicate nickel ores. Based on a survey conducted in Soroako, Sulawesi which is now mined by PT. INCO, there are three broad types of basic rocks, namely: Type A, unserpentinized peridotite; Type B, weakly serpentinized and crudely grained peridotite; and Type C, strongly serpentinized and crudely grained peridotite.
The western part of Soroako, particularly, lies on basic rock of Type A, and the eastern part on Types B and C.
PT. International Nickel Indonesia has a substantial ore reserves, with 88 million tons of proven reserves grading 1.84% nickel and 20 million tons of probable reserves grading 1.81% nickel. The ore reserves can support the company's operations for an estimated 20 years, at long-term nickel forecast price of US$ 3.50 a pound.
In its 2005 annual report, PT. INCO disclosed that the company is now mining 88 million tons of nickel proven reserves grading 1.84% nickel and 20 million tons of probable reserves grading 1.81% nickel.
In 2004 INCO started mining a new East Block-type ore body in Petea, with 27 million tons of proven reserves grading 1.74% nickel and four million tons of probable reserves grading 1.79% nickel. The Petea are chemistry is ideal for blending with other Soroako ore to provide optimum quality feed to the plant.
The company started mining saprolitic ore at its Pomalaa East deposit and sending it to PT. Antam for smelting, under the terms of a Cooperative Resources Agreement that will benefit both parties, and also the community and the local government of Kolaka Regency.
PT Aneka Tambang operates several nickel mines located in Pomalaa, Gebe Island, Gee Island, Tanjung Buli, and other Buli area. Nickel ore deposits in Kolaka-Pomalaa are found in the islands of Lemo and Maniang, in the hills in Pomalaa, Tanjung Pakar and Batukilat.
The terrains in the areas are made up of low hills with an average height of 250 meters above the sea level.
The basic rocks are all peridotite and serpentinite. The distribution of ore is very uneven. Ore deposits are generally found in slopes and ridges between hills.
PT. Antam, reported that it has a total reserves of 55,860 thousand Wmt of nickel ore consisting of 34,180 thousand of saprolite containing 2.36% Ni and 21,680 thousand Wmt of Limonite containing 1.92% Ni.
Indonesia is estimated to have 1,295 thousand tons of bauxite containing 27-55% of Al203 located mostly in Bintan, Bangka and West Kalimantan. PT Aneka Tambang Tbk (ANTAM) is the only mining company producing bauxite from their mining areas in Bintan, Bangka and West Kalimantan.
The existence of iron sand deposits along the south coast of Java island have been known for a long time, especially those between Cilacap and Karangbolong. In 1910, there was an effort to use iron sand for making iron and steel, but failed because by that time the technology to separate titan from its association with iron in the mineral had not been known yet.
In 1950's, the Minister of Mines made an estimate of iron sand deposit. In 1960's, further research was conducted in cooperation with Japan. In February 1969, the first sales contract was signed by PN Aneka Tambang with Nippon Kokan Kabushiki Kaisha concerning sales of 300 thousand tons of iron sand per year for 10 years. In 1971, commercial production was started which was conducted as an open pit mining using water-spaying machines.
The most resent estimate says that Indonesia's iron sand deposit totals 162 million tons with around 21-61% Fe2O3 content. The deposits are located in Central Java (Cilacap and Karangbolong), West Java and East Java.
In its 2005 report, DMCE disclosed that there are 42 mining companies recorded in its office consisting 22 companies at production stage, 3 companies at construction stage, 3 companies at feasibility study stage and 14 companies at exploration stage.
Of the 14 companies at exploration stage, 9 have been suspended by the Government, because they do not carry out exploration as required. One company, i.e. PT Newmont Horas Nauli is being sold to Agricourt Resources of Australia. Another company, PT BHP Sumba Mineral is considered default.
Encouraging production development of copper, tin and silver
Copper, gold and silver production a growing development as indicated by high production growth rate in 2005, i.e. copper 32.1%, gold 54.1% and silver 16.2%. This remarkable performance took place after a stagnant development in 2003 and 2004.
Bauxite production dropped by 18.7% in 2005, although actually it had been quite steady in 2000-2004 with an increasing trend. Iron sand mining development is reflected by PT Antam production which dropped by -8.4% in 2005.
Gold production fluctuated
Indonesia is the seventh largest world's gold producers. Its production reached its peak of 157.9 tons in 2001, but then it gradually decreased to 102.4 tons in 2004. Encouraged by rising price, gold production jumped up by 41.2% in 2005 to 143.1 tons.
PT Antam's gold production dropped by 11.5% in 2005 to 3.5 tons from 3.9 tons in 2004, mostly due to deposit depletion and technical problems. Illegal mining has also significantly disturbed the company's operations.
Copper production fluctuated
Copper is produced by PT. Freeport and PT. Newmont in Indonesia. Their production is recorded in term of copper concentrate and copper metal. PT. Freeport produces most of copper producing 74.4% of copper concentrate and 74.6% of copper metal in 2005.
In 2000-2005, copper production fluctuated slightly reaching its peak in 2002 but dropped to its lowest level in 2004 and increased sharply in 2005 encouraged by higher prices.
Copper concentrate production increased from 3,266 thousand dmt in 2000 to 3,554 thousand dmt in 2006 with an average annual increase of only 2.9%. Copper metal production similarly increase at low growth rate namly only at an annual average of 2.2% from 1,012 thousand dmt in 2000 to 1,064 thousand dmt in 2005.
Tin production tend to increase
Tin production is recorded in terms of tin concentrate and tin metal which are produced by PT. Timah and PT. Koba Tin. Tin concentrate and tin metal production performed a steady increase since 2000 as indicated by 7.3% growth rate for tin concentrate and 12.5% for tin metal.
In 2002, there was a significant increase in tin concentrate from 61,883 ton in 2002 to 88,142 ton in 2002 or 42.4% grwth rate. The number of convensional mining operated by local people in PT Timah concession area have increased the production of tin concentrate.
Tin metal production increased from 47,129 tons in 2000 to 67,600 tons in 2005.
[FIGURES 1-5 OMITTED]
Converter matte and nickel in-matte which are produced by PT Inco increased only mildly in 2005, 6.2% and 5.7% respectively, but in the same year, PT Inco enjoyed quite high profit thanks to rising nickel-price. In the meantime, production of nickel ore, ferronickel and Nickel in ferronickel by PT Antam dropped drastically in 2005 indicates the company's need to explore for more reserves and to exploit existing recoverable reserves.
The following table presents nickel production development in Indonesia. PT Inco has been performing well as indicated by its nickel production development, both converter matte as well as Ni + Co in matte, which rose from 70,243 tons in 2000 to 97,781 tons in 2005. The comparable figures for Ni-in Ferronickel increased from 55,589 tons in 2000 to 77,471 tons in 2005.
PT. Antam production performance was not encouraging. Its Ferronickel production decreased from 47,749 tons in 2000 to only 20,036 tons in 2005. Ni-in Ferronickel production developed similarly from 10,111 tons in 2000 to only 3,985 tons in 2005. The drop was mainly caused by deposit depletion as discovery of new reserve 2005 lagging behind.
Production Development by Company
As already discussed earlier, there are 20 mining companies recorded already at production stage. Before 2000, there were 7 companies closed their operation, then in 2004 another company was closed (PT. Newmont Minahasa Raya), and in 2005, PT. Kelian Equatorial Mining was shut down. An interesting one is that PT. Indo Muro Kencana, which stopped its operation in 2002, resumed its production in 2005.
PT. Avocet Bolaang Mongondow started its production in 2005. In 2005 only 11 companies were still active producing minerals, because 9 of them have ceased their productions since 2003 due to mineral deposit depletion including PT. Kelian Equatorial and PT. Newmont Minahasa Raya.
The 11 active companies are :
1. PT Aneka Tambang Tbk (PT Antam Tbk), producing nickel, gold, bauxite and iron sand.
2. PT Timah Tbk, producing tin.
3. PT Freeport Indonesia, producing copper, gold and silver.
4. PT Koba Tin, producing tin.
5. PT International Nickel Indonesia (PT Inco), producing nickels
6. PT Newmont Nusa Tenggara, producing copper and gold.
7. PT Nusa Halmahera Minerals, producing gold.
8. PT Avocet Bolaang Mongondow, producing gold.
9. PT Indo Muro Kencana, producing gold.
10. PT Karimun Granit, producing granite.
11. PT Galuh Cempaka, producing diamond.
After PT Newmont Minahasa Raya closed down its operation in 2004 in North Sulawesi, PT. Avocet Bolaang Mongondow started its gold production in the same province.
PT Newmont Nusa Tenggara maintains Newmont's successful operation in Indonesia after the closure of Newmont's Minahasa Raya operation in 2004.
PT Nusa Halmahera Minerals maintains its fluctuating gold mining operation as indicated by its gold and silver production. The company is a subsidiary of Newcrest Mining of Australia.
In 2000-2005, PT Antam performance was not encouraging, as all of their mineral production tended to decrease. Its nickel ore production fluctuated with a decreasing trend from 3,039 thousand Wmt in 2000. It reached its peak of 4,395 thousand Wmt in 2003 but dropped gradually to 2,545 thousand Wmt in 2005. The company's ferronickel and Ni-in FeNi production followed the same fluctuation as also its gold, silver, bauxite and iron sand production.
PT. Timah recorded a significant increase of its production in 2005 after a significant drop in 2004. The company experienced a slow down in its operation due to the depletion of its deposit. The company has diversified its operation by entering coal and gold mining through its subsidriaries, but their production is not recorded in this report.
Freeport mineral production fluctuated and performed a significant increase in 2005 after a declining trend in 2000-2004. The year 2005 was regarded by the company as a successful year, but in production and profit.
PT. Koba Tin has been growing steadily as indicated in its production development. Its tin metal production increased from 11,579 tons in 2000 to 25,801 ton in 2005, more than two times in 6 years.
PT. Inco has been growing in term of its production. Its Ni-Co in metal production increased from 63,741 tons in 2000 to 77,471 tons in 2005, or 39.4% in 6 years.
Declining trend in domestic sales
Mineral domestic sales dropped significantly in 2005, which was mainly due to the rising prices in the world market. Domestic sales are mainly carried out by national companies, including PT Antam and PT Timah.
Foreign companies, including PT Inco, PT Freeport and PT Newmont, are more interested in selling their products to export market.
Higher export growth rate performed by copper, Tin, and silver
As presented in the following table, most of mining companies minerals increased their export in 2005. Dropped exports, however, were shown by nickel ore, ferronickel and Nickel in-ferronickel, which were produced by PT Antam. Rising mineral exports were related to rising mineral prices in export market.
Bauxite is produced only by PT Antam and only for export. Its export followed the production trend, which increased from 1,124 thousand tons in 2000 to reach its peak of 1,306 thousand tons in 2004, then dropped by-20.45 to 1,039 thousand tons in 2005.
Gold export fluctuated
Gold is produced primarily for export. The fluctuation of gold export followed that of production, which dropped in 2004 to 77.5 tons from 112.5 tons in 2003. But then it increased to 79.6 tons in 2005.
The closure of PT Kelian Equatorial Mining, PT Newmont Minahasa Raya and PT Indo Muro Kencana made a significant decrease of production, but was overcome by gold production of Freeport and Newmont Nusa Tenggara.
Nickel export from PT Antam tended to decrease
There is no domestic sales of nickel in whatever forms. PT Antam export 3 different forms of nickel consisting of nickel ore, ferronickel and nickel-in-ferronickel (Ni-in Fe Ni). In the meantime, PT Inco export it in the form of nickel metal.
PT Antam export tended to decrease. its Ferronickel export decreased from 47,311Mt in 2000 to 24,463Mt in 2005 and this trend was also performed by Niin Ferronickel export, which declined from 4,123 tons in 2000 to only 753 tons in 2005. Export decline was caused primarily by decreasing production.
Tin metal export increased
Tin export increased by 12.4% in 2005 to 66,920 tons from 59,555 tons in 2004. It has steadily increased from 43,504 tons in 2000 through its peak of 62,031 tons in 2002. Then it gradually dropped to 59,555 tons in 2004.
New tin trade regulation
Tin market in the world has been oversupplied in the past five years because of large supply from Indonesia. Supply has flooded the world market from Indonesia since non conventional tin mining began on the Bangka and Belitung islands seven years ago. Non conventional mining was rampant in concession areas abandoned by state-owned tin mining company PT Timah considered no longer commercially profitable for large investment.
The small miners apart from selling their tin ore to PT Timah, also exported to Malaysia, Singapore or Thailand, with low prices. Exports are possible as the government no longer consider tin as strategic commodity. As a result the tin price fell sharply in the world market.
The non conventional mining has caused not only the tin price fall but also causes potential losses in royalty and export tax to the government. The non conventional miners pay no royalty and export tax as PT Timah does. Previously there was no regulation on exports of tin bars.
Actually the government has taken step to cope with the problem with a decision of the trade minister No 443/MPP/Kep/5/2002 banning exports of tin ore since June, 2002. However, the regulation was not effective to curb exports with the establishment of many small tin smelters legalized by the regional administration to process tin ore into tin metal for exports with quality below international standards.
The exported tin has yet to be processed further abroad before being sent to the market. The large supply from Indonesia resulted in a sharp fall in price to below US$ 4,000 a ton in 2002.
On Feb. 23 in 2007, the government tightened regulation on tin bar exports with a regulation of the trade minister No 04/2007. Under the regulation an exporter is required to have the status of registered tin exporter from the foreign trade directorate general.
The status is available only to exporters of tin produced by license holder of tin mining authority (KP). They are also required to pay royalty and that the tin hey are to export must have a 99.85% content. The government also has named state-owned surveyor PT Sucofindo and PT Surveyor Indonesia as the official agencies to verify that the exporters have fully met the requirements.
The tightening of the regulation not will prevent further losses in income to the state but also will prevent further destruction of the environment by illegal and non conventional miners. Now exports of tin bars are regulated and exports of sand and top soil have been banned.
Before issuing the regulation on tin exports, the government already closed illegal smelters on the islands of Bangka and Belitung in October, 2006. Currently there are around 37 tin smelters including large ones owned by PT Timah Tbk. and PT Kobatin. Most of the smelters have licenses form the regional administration but not recognized by the central government. Some of the smelters even hold not license. Police have also closed licensed smelters having no supply of tin sand from licensed mining companies.
Before being closed, the tin smelters produced around 60,000 tons of tin bars a year. The world tin production averages 360,000 tons a year. The closure of the smelters, therefore, has significant impact on supply to the world market.
The new measure by the government resulted in a surge in the prices of tin on the London Metal Exchange (LME). The price shot up to more than US$ 10,000 per metric ton (MT), even hit a new record high of US$ 11,000 in mid October, since 1989.
The new regulation is expected to change the composition of tin exporting countries in Asia even in the world. The largest tin ore producers in Asia are China (50%) and Indonesia (47%). Tin metal producers in Asia are led by China (50%), followed by Indonesia (27%), Thailand (11 %), Malaysia (8 %) and other countries (4%).
Malaysia and Thailand have small tin reserves producing only small tin ore, but produce tin metal in substantial quantity. The two countries are believed to have processed low quality tin bars supplied from Indonesia.
Tin factories in Thailand, which produces only around 3,000 tons of tin sand, have total annual production capacity of 30,000 tons of tin metal. Malaysia, with tin sand production of only 5,000 tons a year, have factories with an annual production capacity of 30,000 tons of tin metal.
Singapore which has no tin reserve also produces branded tin metal relying on supply of basic material from Bangka and Belitung.
Indonesia is the world's largest tin producer after China, but the country could not effectively used its potential with poor production and export management.
Apart from potential losses in royalty and taxes, the state also has potential losses in added value that could have been created by processing the tin bars into tin metal or finished products in the country.
The new regulation is expected to have serious impact on smelters abroad until recently rely on Indonesia for supply of basic material.
Major Companies Engaged in Mineral Mining Industry
The mining industry is currently dominated by three foreign companies i.e. Freeport and Newmont both of USA and International Nickel of Canada, plus two state-owned companies, i.e. PT Antam and PT Timah.
PT Freeport Indonesia
Freeport-McMoRan Copper & Gold of USA is operating in Indonesia through its Indonesia's incorporated subsidiary company named PT Freeport Indonesia. It operates the well-known Grasberg field in Southern Papua of Indonesia, which is known to have 2.6 billion tons of porphyry copper ore containing 1.9% copper, 1.20 gram per ton gold and 2.38 gram per ton silver.
This field is being intensively mined producing 2,645,550 dmt copper concentrate, 793,505 tons copper, 108,448 tons gold and 224,293 tons silver in 2005.
Freeport Indonesia also have other mining fields, i.e. Kucing Liar, Deep Ore Zone (DOZ), Ertsberg Stockwork Zone (ESZ), International Ore Zone (IOZ) and a completely depleted area called Ertsberg.
Freeport Indonesia is the largest producer of copper, gold and silver in Indonesia reaching 793,505 tons of copper, 108,449 Kg of gold and 224,299 Kg of silver.
Newmont Mining Corp. is a Canada incorporated company known as one of the world's largest gold producers. The company is also engaged in the exploration and acquisition of gold properties, which has operations in several countries, including the United States, Canada, Australia, Peru, Uzbekistan, Bolivia, New Zealand and Indonesia.
In Indonesia, Newmont is operating through its Indonesia's incorporated subsidiaries, i.e. PT. Newmont Nusa Tenggara, PT. Newmont Minahasa Raya and PT Newmont Horas Nauli.
PT. Newmont Minahasa Raya is now in the process of closure and PT. Newmont Horas Nauli is sold to another foreign company. The only active company in Newmont Group is PT Newmont Nusa Tenggara, which is operating Batu Hijau mining area in Sumbawa Island, Nusa Tenggara.
Batu Hijau has 1 billion tons ore reserves containing 0.525% copper and 0.37 gram per ton gold. In 2005, Newmont's Batu Hijau produced 270,344 tons copper, 22,761 Kg gold and 68,214 Kg silver, slightly below the production in 2004.
Under current production rate, PT Newmont Nusa Tenggara/Batu Hijau mine will continue until 2025. The company is now exploring other part of mining area to discover more mineral reserves.
PT International Nickel Indonesia (PT Inco)
PT Inco is owned by Inco Ltd. of Canada (61%), Sumitomo of Japan (20%) and the remaining 19% by public, as PT Inco's shares have been listed in Jakarta Stock Exchange since 1990.
PT Inco operates under a Contract of Work (COW) that was signed in 1968. In 1996, the COW was modified and extended until 2025. The company claims to have the world's most impressed reserves, consisting of 55 million tons of proven reserves grading 1.65% nickel and 42 million tons of probable reserves grading 1.74% nickel. These reserves will be able to support the company's operations for more than 20 years. The company has 357 million tons of ore resources with similar nickel grade.
In 2005, PT Inco produced 97,781 tons of converter matte and 77,471 tons of Nickel in-matte, higher by 6.2% and 5.7% respectively.
PT Aneka Tambang Tbk (PT ANTAM Tbk)
The company is a vertically and horizontally integrated company operating nickel, gold and bauxite mining, in the same time engaged in smelting processing the minerals. The company has nickel reserves at Pomalaa (Southeast Sulawesi) Gee island (North Maluku), Mornopo (North Maluku), and Tanjung Buli (North Maluku). It is now operating Pongkor gold mine in West Java and bauxite mine at Kijang island (Riau).
Antam has about 112 million Wmt of saprolite nickel ore reserves and resources, which could last for 25 years at current extraction rate.
The company runs Indonesia's only underground gold mine at Pongkor, West Java. The gold ore is processed into bullion gold at Pongkor mining site into gold bullion, which is then transported by using armored trucks to Logam Mulia for further refining to be made into high quality gold bars.
Antam is the only legal producer of bauxite by operating Kijang mine in Riau province. Iron sand is mined only in Central Java.
In 2005, Antam produced 2,645 thousand Wmt of nickel ore, 20,036 mt of ferronickel, and 3,985 mt of Nickel-in-ferronickel, which were significantly lower than its production in 2004.
Antam runs Indonesia's only underground gold mine at Pongkor, West Java.
Antam is also producing bauxite from Kijang mine in Riau and Tayan, West Sumatra, which is now increasing its production. The problem at Tayan is high cost overland transportation.
Despite its declining production, Antam made a 4% rising profit in 2005, to Rp 846 billion or US$ 87 million from Rp 810 billion or US$ 83 million in 2004.
Antam is planning a major expansion of its smelter production capacity. Another investment is being implemented to increase its power plant capacity for its ferronickel facility.
PT Timah Tbk
The company (Timah) has a set of activities including mining, industry, transportation and services. Other activities include smelting, refining and selling of tin products. The Group also provide ship, marine construction, engineering, procurement and construction services, manufacturing offshore mining facilities, trading and distributing related marine equipment.
Timah holds Mining Authorization until 2025 over more than 7,700 square kilometers. The integration of all business functions from exploration to marketing makes Timah playing a leading role in the major growth areas of the changing marketplace.
Total production of tin-in-concentrate in 2005 amounted to 42,615 tons of Sn, or 15% higher than that of 37,212 tons of Sn in 2004. Of the total amount, 22% or 9,373 tons was produced by offshore dredge operation, while the remaining 78% or 33,243 tons of Sn was sourced from inland mines. The production of offshore dredges in 2005 was 36% higher compared with 2004 production of 6,911 tons and inland production of tin-in-concentrate was 10% higher from 30,301 tons in 2004 to 33,243 tons of Sn in 2005.
In line with the availability of tin-in-concentrate, production of refined tin in 2005 reached a level of 41,799 metric tons, or 20% higher than that of 34,764 metric tons in 2004.
Tin-in-concentrate inventory at the end of 2005 was 43% lower from 4,272 tons to 2,454 tons of Sn. Refined tin inventory was also decreased by 9% from 3,791 metric tons to become 3,435 metric tons. Meanwhile, tin slag inventory increased by 14% from 14,872 tons at the end of 2004 to become 16,899 tons at the end of 2005, although the company has operated its Kundur Smelter as well as singlestage-furnace at Mentok Smelter.
Based on production and sales volume, as well as average tin price received and the average exchange rate of the US-dollar to Rupiah, the company's financial performance during 2005 compared to that of 2004 can be described as follows:
* Sales revenues were increased by 21% from Rp 2,812.4 billion in 2004 to Rp 3,396.2 billion. Of the total sales revenue, 90% or Rp 3,068.3 billion were the contribution of sales of refined tin, 9% or Rp 289.8 billion were from sales of coal, and the remaining were from sales of engineering services (Rp 31.9 billion), exploration services (Rp 1.2 billion) and docking services (Rp 5.0 billion).
* Profit before income tax decreased by 33% from Rp 307.2 billion to Rp 204.6 billion, and net income decreased by 40% from Rp 178.0 billion to Rp 107.5 billion.
Indonesia has been recognized as one of the top ten producers in the world for copper, gold, nickel and tin. World class active mining companies operating in Indonesia include Freeport, Newmont, Inco, Antam, Timah and Koba Tin. Mining is a significant contributors to Indonesian economy, although also a contribution to environmental hazard.
International mining observers believe that Indonesia has highly prospective mining areas, but exploration for minerals have been slowdown in recent years due to derived from decentralization and the prohibition by Law No.41/1999 of open cut mining in designated protected forest areas. Foreign mining companies are quite pessimistic and believe, that the proposed reformation to mining laws and the possible end of the country's long-trusted Contract of Work (COW) regime have reduced investors confidence.
The observers and mining companies blame the decentralization process, because as provincial and regional governments have also begun to exercise their rights to grant mining rights and impressing additional obligations and taxes on mining companies.
The existing mining law is perceived by then as inadequate in many ways. There is a need to resolve jurisdictional confusion and more fully define to environmental reclamation obligations of mining companies. The forestry law has since 1999 prohibited open cut mining in protected forest areas which conflicts with mining right granted under earlier COW and greatly limits mining operations under mining authorization (MA) scheme.
Law No. 11/1967, the basic provision on Mining, permits foreign companies to explore and develop non-oil minerals on the basic of Contract of Work (COW). The implementation of the law is stipulated by Government Regulations No. 32/1969, which regulates the granting of mining Authorization and Mining Permits
Law No. 11/1967 and its implementation Regulation (GR No. 32/1969) stipulate the grouping of minerals in Indonesia are divided into three groups.
Group A : Strategic Minerals
1. Oil, natural gas, liquid bitumen and natural wax
2. Asphalt and solid bitumen
3. Coal, anthracite and lignite
4. Uranium, rodium, thorium and other radio--active minerals
5. Nickel and cobalt
Group B : Vitals Minerals
1. Iron, manganese, molybdemium, chromium and wolframate, vanadium and titanium
2. Bauxite, copper, lead and zinc
3. Gold, platinum, silver, mercury and diamond
4. Arsenic, antimony, bismuth
5. Yttrium, ruthenium, cerium and other more minerals
6. Beryllium, corundium, zirconium and iron sand
7. Cryolite, Fluorite, barite
8. Iodine, bromide, chlorite and sulfur
Group C : Other Minerals
1. Nitrates, phosphates, halites
2. Asbstos, talc, mica, graphite and magnesite
3. Jarosite, lencite, alium and ochre
4. Quarts sand, kaolin, feldspar, gypsum and bentonite
5. Pumice stone, tracium, obsodium, psilite, diatomite and fullers earth
6. Marble, slate
7. Limestone, dolomite, calcite
8. Granite, andesite, basalt, trachyte, clay and sand
The mining of Group--A or strategic minerals may be carried out only by :
a. Government bodies appointed by the Government
b. State owned companies
Group--B or vital minerals may be mined by the following entities :
a) Companies owned by the central government or regional administration
b) Private companies or individuals after meeting all government requirements
c) Business entities owned jointly by the government/and regional administration
d) Companies owned jointly by the government/state administration and private companies/individuals
Mining of Group C could be undertaken by the state, regional governments, Indonesian private companies, cooperatives or individuals. The holders of KP and SIPD (Regional Mining Permit) which are given only to Indonesian private companies, could cooperate with foreign investors.
In 2002 tin was no longer clissified as strategic mineral, it means that b the mining of tin could be undertaken by private company or individual.
Kuasa Pertambangan or Mining Authorization (MA)
Any business entity wishing to be engaged in mining operations required to have a mining permit called Kuasa Pertambangan (KP) or Mining Authorization (MA) for each stage of mining operations.
According to official definition, mining operation covers the following stages :
a. General Survey
d. Processing and refining
Each operational mining stage can be conducted by a mining company only after "Kuasa Pertambangan (KP)" or "Mining Authorization (MA)" is granted by Ministry of Energy and Mineral Resources (MEMR). This is the most important mining permit granted to large as well as small mining companies for all kinds of minerals, including foreign mining companies.
KP or MA is granted to companies mining strategic or Group A and vital or Group B (Government Decree No. 32/1969, Article 2). The licenses to operate the mining of Group C minerals are granted by Provincial Governors, and the license is called "Surat Izin Pertambangan Daerah (SIPD)" or Regional Mining Permit as stipulated by Government Decree No. 32/1969, Article 47).
The size of the mining area depends on the stage of the Mining Authorization (MA). For general survey, it shall not exceed 5,000 hectares, for exploration 2,000 hectares and for exploitation 1,000 hectares. The Ministry Energy and Mineral Resources (MEMR) may. However, grant special permission for larger areas. It should be noted that several mining authorizations or MA may be held by the same entity, but that total acreage shall not exceed 25,000 hectares (general survey), 10,000 hectares (exploration) and 5,000 hectares (exploitation). Special permission for areas in excess of these are obtainable.
A Mining Authorization (MA) expires by the lapse of its term or by cancellation if work has not been started within six months of issuance of the authorization or if work starts before either payment or compensation is made. The Mining Authorization shall also be cancelled if the holder fails to fulfill the terms of the authorization or if the holder fails to observe the directives given by the Ministry. The holder may also return his authorization. The Ministry shall determine the period within which the holder shall remove his property from the area. All property that has not been removed, a special permit for the transfer of ownership to another party may be granted.
Foreign Investment in Mining Sector Through Contract of Work (COW)
COW basic rules
Foreign Investment Law (Law No. 1/1967) allows foreign companies to invest in Indonesia, but for investment in mining sector, they are subject to the basic mining Law (Law No. 11/1967) and the implementing regulations and policies.
Chapter 10 of the Mining Law No. 11/1967 says that :
* The mines and energy minister could and if necessary names a third party as the contractor to undertake activities not yet or that could be implemented by the government sector or BUMN as the KP holder.
* In signing an agreement with a contractor, the government agencies or BUMN must observe the entire guidelines, instructions and condition set by the minister mines and energy.
* A contract of work (COW) between a government body or BUMN and a contractor will be effective after being approved by the government and the parliament in the event that it concern strategic minerals or if the agreement concerns PMA.
Chapter 8 of the Foreign Investment Law (Law No.1/1967) says that operation of a foreign investment company (PMA) in the mining sector is based on a cooperation agreement through contract of work (COW) or other forms of agreement in line with the regulation.
COW contract area
A contractor may apply for the sole right to undertake general survey in a specified contract area. In the case of Coal Contract of Work (CCOW), contract area is limited to 100,000 Ha, while no limit is set for other minerals. It will be determined based on the applicant's proposal and consideration by the Director General. The important point in the formulation of COW is matters related to ownership and right over mineral reserves, mutual benefits which are reasonable and fair for the government (the owner) and the contractor, and help meet other national interest namely to maximize added value through development of downstream industries, environmental management, Indonesianization of workers and development of local communities.
Period of activities and relinquishment of COW contract area
The Contract of Work and Coal Contract of Work, divides mining activities into 5 phases :
* 1 year General Survey Period (+1 year extension)
* 3 year Exploitation Period (+2 x 1 year extension)
* 1 year Feasibility Study Period (+1 year extension)
* 3 year Construction Period
* 30 year Operating Production Period (+2 x10 year extension
Taxes and other financial obligations
The contractors shall pay to the Government and fulfill its tax liabilities and other financial obligations, including its obligations as tax withholder.
The tax provision are essentially based on the following Tax Laws :
* Law No. 10/1994 concerning Amendment to Law No. 7/1983 concerning Income Tax as Amended by Law No. 7/1991.
* Law No. 11/1994 concerning Amendment to Law No. 8/1983 concerning Value Added Tax on Goods and Services and Sales Tax on Luxury Goods.
* Law No. 12/1994 concerning Amendment to Law No. 12/1985 concerning Land Building Tax.
Generation I-VII Contract of Work (COW)
The government hopes that the natural wealth could be utilized for the welfare of the public through cooperation with foreign investors that is through their money and technology. Therefore COW is introduced that is expected to be competitive with the system used in other countries especially in this region. With the COW system, the government through the mines and energy ministry seeks to apply a win-win principle. In one hand the COW system creates a business climate conducive for foreign investors and on the other hand, the government derives maximum profit from their existence.
The first generation of COW was introduced in April 1967. Since then the government has continued to encourage foreign investors and change the regulations by phases. The only contract of foreign company operating in the mineral sector in the first generation is that of PT. Freeport Indonesia. At that time the contract was more in favor of Freeport and less beneficial for the government.
In the second generation of COW signed in 1968-1974. The tax free facility in the first generation was no longer given in the second generation COW, and the value of royalty varies more widely. In the third generation and fourth generation COWS there were changes that principally concerned tax and financial matters in contracts. With the changes, the interest of foreign investor to venture in the mining sector was stronger.
In COW of fifth generation tax incentive was offered including reduction of corporate tax and acceleration of depreciation and amortization. The fifth generation COW was also called Frontier COW as it was originally aimed at attracting foreign investors to invest in eastern Indonesia..
In the sixth generation COW the stipulation and regulation mentioned in the new Tax Law which came into force in January 1995, were implemented. In general, the new Tax Law is more in favor of investors especially with the slashing of corporate tax to 30% from 35% previously. Other stipulations implemented in the sixth generation COW were acceleration of depreciation, lower dividend tax and indirect benefit for workers.
The stipulation in the seventh generation of COW were almost the same as the ones in the sixth generation COW but the control was tighter especially in the monitoring of company performance in every phase of activities.
Impact of mining activities on the environment
Mining always has negative impact on the environment. The damage could be because of the uplifting of mass of soil and rocks from the earth and the waste from the processing of the mineral products.
The causes of damage to the environment include improper processing of:
* Waste from the processing of mineral products
* Land reclamation after the mining
Overburden is soil or rock layers that have to be removed to get into to the mineral underground to be lifted to the surface. The handling of overburden should be well planned as there are many types of undesired metal such as mineral sulfide that could lifted along with the overburden.
Reaction of water, oxygen and natural bacteria are potential to produce sulfuric acid. The acid water could dissolve metals in the overburden, therefore, improper handling could cause negative impact on the environment. This process is also called mineral acid water.
Waste from Mineral Processing
Waster from mining activities could come during mineral processing or in waste of mining equipment. This type of waste is called tailings, which are remnants of natural rocks ground smoothly from ore processing and then allowed to settle in isolated area that they would not cause damage to the environment.
In the mines of PT Freeport Indonesia in Papua, tailings were in the beginning chanelled from the mine to the Ajkwa river. The company built embankment in which tailings settled. However, in 1998, a new dyke was built in the east of the existing embankment and in 2005 in line with the AMDAL of 1997, the Ajkwa river was diverted to the channel of the new dyke to prevent contact between the river water and the flowing tailings. The diversion also will increase supply of fresh water to flow in the Ajkwa river heading toward the eastern border of Timika, which is more heavily populated as the Ajkwa is no longer used to carry tailings sediment.
PT Freeport Indonesia also seeks to minimize waste by reducing and replacing equipment and supporting facilities such as used containers, used oils, waste paper, used tires, etc. which are recycled if possible. Other material that could be recycled such as aluminum, used iron, used batteries are collected and kept in a place before being recycled or thrown according to the government regulation.
Handling of dangerous waste (B3) though small in quantity such as those form trial operations, laboratory tests and processing is based on the regulations of the government.
The tailings from the mining activities of PT Newmont Minahasa Raya (PT NMR), is handled with detoxification process before being channeled to the sea. Using 1,020 meter pipe from the beach at a depth of 82 meters to place the tailings as a sediment in the sea bed. The decision to send the tailings to the seabed is because there is no safe place in the area around the mine to let the tailings settle as sediment as the area where he company operated is often hit by earthquakes that could cause erosion and floods that could send the tailings anywhere. The case of the Buyat Bay in North Sulawesi in which NMR is accused of polluting the sea and damaging the ecosystem is still in the process of court investigation. The prosecutor accuses NMR and its president Richard B. Ness of damaging the environment. The district court of North Sulawesi is scheduled to make its decision on the case in March or April this year.
PT NMR, however, maintained it caused no damage to the environment and it had fully follow the procedure of handling its waste or tailings. On Feb, 16 last year a Goodwill Agreement was signed with the government and an independent scientific panel as formed to decide whether the tailings of NMR had caused damage or not to the environment in the Buyat Bay.
Observation of the environment in the Buyat Bay will be made in 10 years and the result will be made public regularly.
Mining companies are required to carry out land reclamation before they abandon an area after their mining operation has been ended to reduce as much as possible damage to the environment. Land reclamation is even expected to have positive result for local people in that the land could be used for farming.
Land reclamation by PT Freeport Indonesia has been carried out using various methods such as with Bio filter that the land where the sediments of tailings have been kept could be used for farming by local people. Overburden from the mines of PT Freeport Indonesia is handled so to be planted with endemic plants with engineering techniques that the change in natural contour will not cause drastic change in the ecosystem and the fauna and flora are well preserved.
PTNMR also replanted the mining areas with indigenous plants to make the land productive after being abandoned. The land is planted with peanuts or hard crops in coordination with the regional forestry office in the regency of Minahasa, North Sulawesi.
Mining activities of PT Inco mostly are open pit minings with an area of more than 120 km x 60 km. PT Inco uses over burden for land reclamation in their mining areas.
Reclamation by PT INCO started in 1980 to prevent erosion. Until 2005 PT Inco already finished reclamation over 2,844 hectares of land in South Sulawesi, Central Sulawesi and Southeast Sulawesi.
A sharp increase has been recorded in the prices of metals such as tin, nickel and gold. The prices of other metals have fluctuated but are still higher than the price levels two years earlier.
Tin price sky-rocketing
The price of tin in the world market hit a record high in many years. The price was recorded at US$ 13,000 a metric ton at the Kuala Lumpur Tin Market (KLTM) and US$ 13,950 at the London Metal Exchange (LME) late February, 2007.
The price shot up from US$ 3,600 a ton in 2002 when the price hit the rock bottom as a result of over supply from Indonesia especially from illegal miners operating in mines abandoned by PT Timah, which considered the mines not longer commercially profitable.
From 2003 to 2005, the tin prices scaled up from US$ 450 to US$ 7,800 a metric ton. By the end of 2006, tin price shot up crossing the level of US$ 10,000 a metric ton.
The price hike followed the step taken by the government closing illegal mining operations and smelters on the Bangka island. Illegal mining and smelters have operated freely since 2002 until the regulation was imposed lately. Meanwhile, the world's larger producer China needs larger supply of tin reducing supply to the world market.
World's tin trader said the tin price will not stay long at the present level as supply will increase again from Indonesia. PT Timah plans to increase its production and some of the smelters closed by the government may resume operation after they fully meet the legal requirements.
However, tin price will not fall at once as demand remains high from India and China, two fast growing Asian giants. Meanwhile, the government will keep tight control of illegal exports supplying tin bars for smelters in Malaysia, Thailand, and Singapore. The world tin reserves are also dwindling in capacity.
Nickel price hit record high
The price of nickel has also hit a record high at US$ 37,600 a metric ton in February, 2007. The price is forecast to scale up higher in the coming several months. The price already increased in 2006.
Based on data at the country's largest producer of nickel PT INCO, the prices of nickel in matte averaged US$ 24,725 (US$ 11.21 a pound) a ton in the last quarter of 2006 or a 148.5% increase from $9,950 per ton (US$ 4,51 per pound) in the same period in the previous year.
In 2006, INCO's selling the price for nickel in matte averaged US$ 18,356 per ton (US$ 8.33 per pound), up 60.1% from 2005. In 2003, its selling price was US$ 7,177 per ton or US$ 3.25 per pound, up to US$ 10,766 per ton or US$ 4.88 per pound in 2004.
PT Aneka Tambang also reaped a handsome profit from its nickel mining operation. Its earning from the sales of ferronickel shot up 177% to Rp2.731 trillion in 2006, because of a 92% increase in its sales volume to 13,389 tons and a 57% hike in price on the average to US$ 10.14 per pound.
The price of nickel hit the rock bottom in January, 2004 at US$ 13,650 per ton. The price of nickel scaled up to US$ 14,400 per ton at the London Metal Exchange in February 2004 and up again higher in 2005. The soaring prices of nickel in the past several years followed growing demand from China amid dwindling supply in the world market.
Nickel requirements of two large consumers, China and Japan in 1994 were 6% and 24% of the world supply respectively. In 2004 China's requirement rose to 13% of the world supply and Japanese requirement was 15% of the world supply.
In the first quarter of 2005, China already led Japan in nickel consumption, China used 16% and Japan 14% of the world supply in the first quarter of 2005. In 2005, China was estimated to use 22% of the world supply.
Demands for nickel is forecast to remain strong in this decade. Supply is predicted to fall short of requirement, which is estimated to grow 4% annually. Meanwhile, production capacity could not be increased to keep pace with the growing demand as most nickel factories have been operating at full capacity.
In 2005, supply grew only by 3.1% resulting in a price hike with growing demand especially from China and India.
The Minara Resources Ltd, the third largest nickel producer in Australia, predicted that nickel price will continue to scale up in the next three to five years because of growing demand from China.
Gold price continues to rise
Similarly, he price of gold has increased sharply since 2002. The price of gold at the New York bourses in August 2005 was recorded at US$ 439.5 dollar per troy ounce (troy ounce = 31.1035 grams). The surge in price in international market was followed with an increase on the domestic market by Rp 12,000 to Rp 142,000 per gram.
The price of gold continued to scale up and hit a record high in February, 2006 triggered by large buying of precious metal amid soaring price of energy. The surge in price was also caused by uncertainty in the value of the U.S. dollar against the world currencies and concerns with global security.
The price of gold at spot market in February, 2006 rose 7.45% to US$ 559.60 per troy ounce, after large buying by consumers in Hong Kong.
The price of gold in international market in November 2006 continued to rise hitting a record high in the past several months at US$ 627.80 per troy ounce (troy ounce = 31,1035 gram) or Rp 184,000 per gram. The price surged 10.78% in a month.
By the end of February, 2007, gold price fluctuated but tended to increase. The spot price by the end of February, 2007 was US$ 644.70 per ounce, or an increase of US$ 17 per troy ounce from November, 2006
Gold price continued to scale up while the price of crude oil in the world market tended to decline--from US$ 60.03 to US$ 57.88 per barrel.
Copper price fluctuates
The price of copper has increased fast sharply since 2002 hitting a record high in the middle of 2006, but tended to decline early 2007. In May, 2006 the price of copper at the London Metal Exchange was recorded at US$ 8,010 per ton or the highest since it was listed on the bourse in 1877. The price surged after the closure of copper mines in Mexico.
The price of copper has increased mainly because of dwindling supply. The largest producer of copper in the world is Chile, followed by Brazil and Indonesia. A number of mines in Chile have been closed down after the reserves have been depleted.
Meanwhile supply from Indonesia declined as a result of communal conflict in Papua which has the largest copper mines in the country operated by PT Freeport Indonesia. Only Brazil could produce at full capacity.
Amid the decline in supply, demand from increased sharply especially from China which needed the metal for its large infrastructure projects. Most of copper supply in the world market went to China.
In June, 2006 the price of copper began to decline hitting the rock bottom at US$ 6,765 per ton. In the following months the price fluctuated until February, 2007 when the price of that metal at the London Metal Exchange was recorded at US$ 6,568 per ton.
Now the price of copper fell but it is forecast to rise again until 2010 as more electronic factories will need components made from copper.
Mining Operations in Protected Forest Areas
The issuance of the law No. 41/1999 banning mining operations in protected forest areas required review of licenses granted to 150 mining companies. After the review some of the licenses were suspended. As result mining operations in the country declined.
The issuance of the law No. 41/1999 triggered a controversy and some of the companies having their licenses suspended threatened to file arbitration suit against the government. In a bid to cope with the controversy, the government issued a regulation in place of law (Perpu) No. 1/2004.
The Perpu was signed by then President Megawati Soekarnoputri on March 11, 2004. The Perpu added a stipulation to the Law No. 41/1999 stressing that all mining licenses or agreements in protected forests before the issuance of the No. 41/1999 were effective after the termination of the licenses.
To strengthen the Perpu, a Presidential Decree No. 41/2004. was issued reaffirming the licenses for 13 mining companies to continue their operations in open mines in protected forest areas. The decision was made to ward off arbitration suit. The projects of the 13 companies were valued around Rp 181 trillion.
Constitutional Court holds Judicial Review of the Law No. 19/2004
Based on a lawsuit filed by 92 people represented by A Team of Legal Advisers Saving Protected Forests (TAPHL), The Constitutional Court held Judicial Review of the Law No.19/2004 on mining in protected forests.
The Constitutional Court decided that only seven, which already started exploitations, of the 13 companies were allowed to resume their operations.
The other six companies, which were still in the phase of explorations and feasibility studies, were subject to the Law No. 41/1999, and not allowed to operate open mines in protected forests.
The Constitutional Court said in its decision that the six companies were still in the process of feasibility study and early stage of explorations, therefore, they are subject to the Law No.41/1999 banning them from operating in protected forests.
The forestry ministry said with the decision of the Constitutional Court, the six companies have to make evaluation of mining plan, and schedule and investment after they finished feasibility study and explorations.
Investment projects in Metal Mining Sector
There are a number of new investment being planned or implemented in metal mining and processing sectors. PT Aneka Tambang and Austindo Resources Corporation have a number of new mining projects being developed.
Austindo Resources Corporation is an Australian gold mining company established in 1983. Now it is developing its Cibaliung gold mine its main project in the country.
Austindo speeds up completion of Cibaliung mine
Austindo Resources Corporation started construction of the gold mine in Cibaliung, Banten in June, 2005. The project is built in cooperation with state-owned mining company PT Aneka Tambang Tbk (ANTAM) under joint venture company PT Cibaliung Sumberdaya (CSD), which is 89.75% owned by the foreign partner and 10.25% by Aneka Tambang.
The project is estimated to cost US$ 37 million. Loan fund of US$ 26 million has been pledged by ANZ Bank.
Explorations were carried out in 2004 with drilling of 108 wells. Based on an initial study, the Cibaliung gold mine in a concession of 3.5 km x 6 km has a reserve of 1.38 million tons with a gold content of 423,000 ounces and silver content of 3,56 million ounces.
Based on a report issued by Austindo in the last quarter of 2006 construction of gold processing plant handled by PT Petrosea Tbk has been 75% completed with an investment of US$ 11.6 million.
Originally, the gold mine was to start production in May 2007, but delay in mining and construction of the facility resulted in roll over of the production schedule. Now a new schedule is yet to be set.
Mining is forecast to last 6 years with production of 220,000 tons of gold ore a year with gold metal at 70,000 ounces a year. The conventional process of Carbon in Leach (CIL) is used to produce gold and silver from the ores.
Cooperation between Austindo and PT Sumber Mineral Nusantara
Austindo also has cooperation with PT Sumber Mineral Nusantara in Pekalongan, Central Java in the development of a mining concession of 5,618 hectares believed to have a similarly potential reserve of gold and silver. Austindo has a 95% stake in the project, which is now in early phase of explorations taking map and collecting samples of sediment.
In Trenggalek, East Java, Austindo also cooperates with PT Sumber Mineral Nusantara, which secured the mining authority early last year over a concession of 17,384 hectares. This area also has gold reserve as potential as those of Cibaliung and Pekalongan. It is 95% owned by Austindo and 5% by PT Source Mineral Nusantara.
Austindo started explorations in 2005 in Trenggalek. The explorations indicated that 17 areas in Trenggalek have good prospects and further explorations are being held in three areas namely Dalang Turu, Sentul and Paces.
Cooperation between Austindo and Anglo American
Austindo will also cooperate with Anglo American Group, which is carrying out explorations for copper and gold reserves in the Aisasjur project in Kepala Burung area of Papua.
The mining authority over Aisasjur is held by PT Alam Papua Nusantara, which is 80% owned by Anglo American Group and 20% by Austindo Resources Corporation, covering a total area of 9,486 hectares. Under a contract Anglo American will be the operator and will finance the process of explorations and Austindo as he minority shareholder will start to be involved in financing after the completion of exploration.
ERAMET to invest US$ 1.5 billion in Halmahera
ERAMET S.A from France will invest up to US$ 1.5 billion for the development of a nickel mine in Halmahera, North Maluku. Eramet has acquired Weda Bay Mineral Inc. of Canada, the owner of 90% stake in the nickel and cobalt mine in Halmahera, Maluku. It is scheduled that mining and processing of nickel ore into concentrate will start in five years.
The presence of ERAMET in nickel mining industry in Indonesia will be through PT Weda Bay nickel (WBN) in which it has a 90% stake with ANTAM holding the remaining 10%. ANTAM's share will increase after the completion of feasibility study.
Based on a study report of Eramet, the Halmahera mine has a reserve of 277 million tons of nickel ore with a nickel content of 1.49%.
The processing facility will have an annual capacity of 60,000 tons making the Weda Bay mine in Halmahera the second largest nickel project in the country after Newmont's Batu Hijau in Nusa Tenggara.
ERAMET is a world's producer of minerals with an annual income of US$ 765 million. Its annual production of nickel is 68,000 tons from its New Caledonia mine, in southern Pacific Ocean. It also produce cobalt as a side product averaging 5,000 tons a year or 10% of the world supply.
Currently development of the Weda Bay nickel mine is suspended over regulation banning open mining operation in protected forest area. The government allows only close mining operation in protected forest areas.
ANTAM plans three large projects
Antam plans to build three large mining projects until 2010 including Chemical Grade Alumina project in Tayan, West Kalimantan, Ferronickel IV factory in the Nusa Halmahera islands and High Pressure Acid Leach (HPAL) project in Nusa Halmahera.
Chemical Grade Alumina(CGA) project in Tayan
Antam is preparing for the construction of a Chemical Grade Alumina (CGA) factory with an investment of US$ 220 million to produce 300,000 tons of CGA a year. The feasibility study in the project was already completed in 2003 and it is to be completed and operational in 2009. The project will utilize bauxite reserve in West Kalimantan.
ANTAM has no experience in aluminum industry, therefore it has agreed to cooperate with Showa Denko KK (SDK), Straits Trading Amalgamated Resources Private Limited of Singapore (STAR) and Marubeni Corporation of Japan with contract signed on Feb. 26 in 2007 at Antam's head office in Jakarta.
Under the agreement a joint venture company PT Indonesia Chemical Alumina (ICA) was established which is 49% owned by ANTAM, and 51% split by its foreign partners. The Tayan project will be financed with loan 65% and equity capital 35%.
Antam hopes construction will start in 2007 and it is to be operational in 2010.
Ferronickel IV plant in Nusa Halmahera
Antam also plans to build its fourth unit of ferronickel plant which will cost around US$ 650 million to have an annual production capacity of 30,000 tons of ferronickel utilizing its nickel reserve in Buli, North Maluku.
Construction of the project is to start in 2010 in cooperation with Posco of South Korea.
High Pressure Acid Leach (HPAL) project in Nusa Halmahera
The HPAL project will utilize limonite nickel reserve of Antam in Halmahera. It will produce 50,000 tons of nickel a year. The project will cost around US$ 1 billion and it is being discussed with prospective foreign partners. Antam agrees to become a minority shareholder in the venture as it considers large funds it has to spend for other large projects almost at the same time. The project is to be operational in 2010.
Inco to build nickel processing plant immediately
PT International Nickel Indonesia (INCO) plans to build two nickel processing plants in Pomalaa, Southeast Sulawesi and in Bahodopi, Central Sulawesi before 2010. The projects will cost around US$ 1 billion. Production of 1 million tons a year from the two plants will be supplied to PT ANTAM to feed its ferronickel plants.
PT ANTAM has just finished construction of its third unit of ferronickel plant in Pomalaa with an annual capacity to produce 13,000 tons of ferronickel. Inco already signed a 10-year agreement to supply nickel for Antam for 10 years.
PT INCO has nickel mines in various areas in Sulawesi with a total reserve of 145 million tons with a nickel content of 1.80%. Inco said the reserve will keep it in operation for the next 28 years. In that area
Prospects and Conclusion
* In the 2002-2006 period, the prices of various mineral products rose sharply including tin price which earlier plunged to the rock bottom because of oversupply mainly from illegal producers. The tin price surged since 2006 after the government cracked down on illegal smelters and mining operations.
* With growing consumption in the world notably by China and India, demands for metal products are expected to remain strong in the next five to ten years. The prices of metal goods, therefore, are expected to fluctuate with rising tendency with declining supplying capacity to the world market.
* Reserves of a number of minerals such as nickel and tin reserves in the world have tended to decline, therefore, production could not be increased to meet growing demand.
* A number of gold and tin mines have been closed after depletion of reserve. The reserves in nickel mines of PT ANTAM, for example, have declined. Without explorations and new discovery, the production from its old mines will decline.
* Indonesia is one of the counties in the world rich in mineral resources. Many potential reserves have remained untapped, therefore, there is no estimate of the real potential. Explorations and exploitations have been delayed or cancelled in some areas when the metal price fell in the world market as venture would not be feasible. Now, however, the condition has reversed. The prices of metal are soaring making ventures in metal mining highly attractive.
* The present condition constitutes a good momentum to invite investors to do business in metal mining in the country. There are still potential reserves not yet sufficiently explored that the prospects are still good at least for the next five to ten years.
* Unfortunately despite the soaring prices in the world market, there are relatively few investors showing strong interest in starting business in metal mining industry in the country. In fact there is almost no new investor. Investments have been planned only by the old investors mainly to maintain the levels of heir production capacity.
* A factor discouraging new investors in the country is lack of legal certainty and taxation. A number of mining companies have to postpone operation as it happens their concession is located in protected forest area. Overlapping and conflicting regulations between those issued by the regions and Jakarta caused legal uncertainty such as the case involving many local tin miners and smelters in Bangka licensed by the regional administration but declared as illegal by Jakarta.
* Investors have complained about lack of transparency and consistence in the country's mining law. Investors need legal certainty as they will invest large funds in long term demanded venture.
Table-1 Estimated Mineral Deposits In Indonesia (R/P) Mineral Unit Reserves Depletion (year) 1. Gold Tons of Gold 4,401 33 - In Porphyry Copper 3,689 - In gold ore 714 2. Copper (porphyry) Million tons of 27.7 27 Cu (copper 3. Nickel Thousand tons of 512 25 Ni (nickel) 4. Tin 000 tons of Sn 1,360 24 (Tin) 5. Bauxite 000 tons of A 32,650 27 [L.sub.2][O.sub.3] 6. Iron Sand 000 tons of 40,500 130 [Fe.sub.2][O.sub.3] Source: Data Consult Table-2 Official Estimates of Indonesia Gold Deposits, In Indonesia Name of Type of Are Deposit Deposit Grasberg Porphyry Medial Irian Jaya Batu Hijau Porphyry Banda Kelian Low Central Sul hidation Kaimantan Gunung Pongkor Low Sunda Sulphidation Cabang Kiri East Porphyry North Sulawesi Busang Low East Sulphidation Kalimantan Mesel Sediment North Hosted Sulawesi Mount Muro Low Central Sulphidation Kalimantan Gunung Pani Low Sulawesi Sulphidation Kayubulan Ridge Porphyry Sulawesi Lanut Low Sulawesi Sulphidation Sungai Mak Porphyry Sulawesi Awak Mas Metamorphic Not Arc-- Related Name of Status Resource Deposit (Ton of gold) Grasberg Production 3,117 Batu Hijau Production 525 Kelian Mine 114 Closed Gunung Pongkor Production 105 Cabang Kiri East Production 79 Busang Feasibility 75 Mesel Mine 62 Mount Muro Mine 52 Closed Gunung Pani Local Mine 41 Kayubulan Ridge Exploration 35 Lanut Production 29 Sungai Mak Exploration 33 Awak Mas Feasibility 26 Source: Data Consult Table-3 Porphyry copper deposit and its metal content mining areas operated by PT. Freeport Indonesia Mining Copper Copper (Cu) Area Ore Mill. % Cu Cu Mill. Ton Ton 1. Grasberg 1,909 0.99 19.6 2. Kucing Liar 320 1.41 4.5 3. Deep Ore Zone 181 1.10 2.0 (DOZ) Mining Gold (Au) Silver (Ag) Area g/t Au g/t Au Au Tons Au Tons 1. Grasberg 1.20 2,377 2.38 4,715 2. Kucing Liar 1.41 451 5.30 696 3. Deep Ore Zone 0.81 150 5.83 1,028 (DOZ) Source: Data Consult Table-4 PT. Antam's Nickel Ore Reserves Location Classified Saprolite Wmt Ni (000) (%) 1. Pomalaa Proved 2,500 2.25 Probable -- -- Total 2,500 2.25 2. Gebe Proved 450 2.50 Probable -- -- Total 450 2.50 3. Gee Island Proved 3,200 2.33 Probable -- -- Total 3,200 2.33 4. T g. Buli Proved 2,850 2.40 Probable 5,900 2.45 Total 8,750 2.43 5. Other Proved -- -- Prospect of Buli Area Probable 19,280 2.35 Total 19,280 2.35 6. Bahubuli Proved -- -- Southeast Probable -- -- -- -- Sulawesi Total -- -- Grand Total 34,180 2.6 Location Limonite Nickel Wmt Ni Cu (Ni) (000) (%) (%) 000tons 1. Pomalaa 1,050 1.98 -- 85.0 -- -- -- -- 1,050 1.98 -- 85.0 2. Gebe 500 1.59 0.13 19.2 -- -- -- -- 500 1.59 0.13 19.2 3. Gee Island -- -- -- 74.6 -- -- -- -- -- -- -- 74.6 4. T g. Buli 620 1.41 0.16 77.1 7,930 1.39 0.16 254.7 8,550 1.39 0.16 331.8 5. Other -- -- -- -- Prospect of Buli Area 11,580 1.39 0.16 614.8 11,580 1.39 0.16 614.8 6. Bahubuli -- -- -- -- Southeast -- -- -- -- -- -- -- -- Sulawesi -- -- -- -- Grand Total 21,680 1.42 0.16 511.8 Source: PT. Antam Table-5 PT Antam's Bauxite reserves and resources Location Classified Reserves Washed Bauxite Wmt T-Si02 (000) % 1. Wacopek Proved 3,000 13.1 Probable -- -- Total 3,000 13.1 2. Ta an Proved 9,300 20.1 Probable 21,600 12.0 Total 30,900 14.4 Grand total 33,900 14.3 Location Classified Reserves Washed Bauxite Wmt T-Si02 (000) % 1. Wacopek Measured -- -- + Indicated Inferred -- -- Total -- -- 2. Tayan Measured 51,500 10.4 + Indicated Inferred -- -- Total 51,500 10.4 Grand total 51,500 10.4 Location Reserves Washed Bauxite R-Si02 Fe203 AI203 % % % 1. Wacopek 7.0 6.1 52.0 -- -- -- 7.0 6.1 52.0 2. Tayan 4.1 8.8 47.3 3.7 14.5 47.5 3.8 12.8 47.4 Grand total 4.1 12.2 47.8 Location Resources Washed Bauxite R-Si02 Fe203 A1203 % % % 1. Wacopek -- -- -- -- -- -- -- -- -- 2. Tayan 3.1 16.4 46.9 -- -- -- 3.1 16.4 46.9 Grand total 3.1 16.4 46.9 Source: PT. Antam Table-6 Mining Companies Recorded in Directorate of Mineral and Coal Enterprise Operational Stage/Company Minerals Mining Site 1. Production Stage PT ANTAM Gold, nickel, Bangka, Riau, Maluku bauxite PT TIMAH Tin Bangka Belitung PT Freeport Indonesia Copper, gold, Papua silver PT International Nickel Nickel Sulawesi Indonesia PT Newmont Nusa Tenggara Copper, gold, Sumbawa/NTT silver PT Newmont Minahasa Raya Gold Minahasa, N. Sulawesi PT NewmKoba Tin Tin Bangka PT Gunung Kikara Mining Tin Bangka PT Karimun Granit Granite Karimun/Riau PT Lusang Mining Gold Bengkulu PT Ampalit Mas Perdana Gold Central Kalimantan PT Monterado Mas Mining Gold Luwu, Rappang/South Sulawesi PT Prima Lirang Mining Gold Maluku PT Kelian Equatorial Gold West Kutai/East Mining Kalimantan PT Indomuro Kencana Gold W. Barito/C. Kalimantan PT Barisan Tropical Gold South Sumatra Mining PT Avocet Bolaang Gold Bolaang Mongondow, Mongondow North Sulawesi PT Galuh Cempaka Diamond Tanah Laut, South Kalimantan PT Natarang Mining Gold Construction PT Nusa Halmahera Gold Halmahera / N. Maluku Minerals 2. Construction Stage PT Kasongan Bumi Gold Tanggamus / Lampung Kencana PT Meanus Halmahera Gold Minahasa/N. Sulawesi Mineral PT Nusa Halmahera Gold North Halmahera/ Mineral N.Maluku 3. Production Stage PT Meratus Sumber Mas Gold Kotabaru/S. Kalimantan PT Paragon Perdana Gold S. Lampung Mining PT Nabire Bakti Mining Gold Paniai, Fakfak/Papua 4. Exploration Stage PT Irja Eastern Mineral Gold Fakfak, Paniai/Papua (suspended) PT Newcrest Nusa Gold Toli-toli, Bolaang Sulawesi (suspended) Mongondow/ N. Sulawesi & Gorontalo PT Wula Aceh Mineral Gold Nagroe Aceh (suspended) PT BHP Sumba Mineral Gold Sumba/East Nusa (suspended) Tenggara Timur PT Citra Palu Minerals Gold Luwu, Palu, Poso / (suspended) Central Sulawesi PT Newmont Horas Nauli Gold South/North Tapanuli, (being sold) Mandailing, Natal / N.Sumatra PT Ersbera Kalteng Gold Kota Waringin /Central Mining Kalimantan PT Iriana Mutiara Gold Jayawijaya / Papua Idenburg (suspended) PT Iriana Mutiara Mining Gold Jayapura / Papua (suspended) PT Kalimantan Surya Gold Sintang / E. Kalimantan; Kencana Barito / C. Kalimantan PT Kumamba Mining Gold Jayapura / Papua (suspended) PT Kutaraja Tembaga Pura Gold Wyla Aceh Besar / Nagroe (suspended) Aceh PT Pasifik Masro Mineral Gold North Barito/ Central Kalimantan PT Tambang Tondano Gold Minahasa, Bitung/ Nusaraya (suspended) North Sulawesi Source: DMCE Table-7 Mineral Production by Commodity Mineral Unit 2000 2001 1. Copper 000 dmt 3,366 3,289 Concentrate 2. Copper 000 Ton 1,012 1,049 3. Gold Kg 109,419 151,932 4. Silver Kg 275,655 350,575 5. Tin Ton 55,654 61,883 Concentrate 6. Tin Metal Ton 47,129 53,796 7. Bauxite 000 MT 1,151 1,237 8. Converter Ton 70,243 80,163 matte 9. Ni + Co in Ton 55,589 63,471 matte 10. Iron 000 MT 489 469 Sand 11. Nickel 000 MT 3,039 3,619 Ore 12. Ni In Fe Ni Ton 10,111 10,302 13. Granite 000 Ton 5,941 3,975 Mineral 2002 2003 2004 1. Copper 3,788 3,238 2,810 Concentrate 2. Copper 1,172 1,006 840 3. Gold 142,829 139,822 101,326 4. Silver 293,519 284,205 262,935 5. Tin 88,142 71,694 73,079 Concentrate 6. Tin Metal 67,455 66,284 60,697 7. Bauxite 1,283 1,263 1,331 8. Converter 75,529 89,515 92,056 matte 9. Ni + Co in 60,319 71,211 73,283 matte 10. Iron 379 245 90 Sand 11. Nickel 4,366 4,395 4,095 Ore 12. Ni In Fe Ni 8,804 8,933 7,945 13. Granite 4,966 3,939 3,637 Mineral 2005 2006 1. Copper 3,554 2,938 Concentrate 2. Copper 1,064 818 3. Gold 143,205 82,538 4. Silver 328,749 237,522 5. Tin 78,404 80,933 Concentrate 6. Tin Metal 67,600 65,357 7. Bauxite 1,082 0 8. Converter 97,781 92,123 matte 9. Ni + Co in 77,471 72,782 matte 10. Iron 32 5 Sand 11. Nickel 2,546 0 Ore 12. Ni In Fe Ni 3,985 0 13. Granite 4,303 5,218 Notes: Wmt = wet metric ton; dmt = dry metric ton Source: Direktorat Pengusahaan Mineral dan Batubara (DMCE) Table-8 Gold Production by Company, 2000-2006 Company 2000 2001 2002 2003 1 PT Antam 4,210 4,263 4,093 4,497 2 PT Freeport 77,121 108,178 97,844 99,682 Indonesia 3 PT Kelian Equatorial 826 14,501 16,875 13,595 Mining 4 PT Indo Muro 3,002 0 0 0 Kencana 5 PT Newmont Minahasa 6,635 9,702 4,870 2,892 Raya 6 PT Newmont Nusa 10,197 16,765 15,501 18,679 Tenggara 7 PT Nusa Halmahera 7,428 8,786 3,646 326 Minerals Total 109,419 157,932 142,829 139,822 (Kg) Company 2004 2005 2006 1 PT Antam 3,953 3,495 0 2 PT Freeport 58,560 108,448 57,268 Indonesia 3 PT Kelian Equatorial 8,645 2,390 0 Mining 4 PT Indo Muro 0 311 1,270 Kencana 5 PT Newmont Minahasa 2,065 0 0 Raya 6 PT Newmont Nusa 22,257 22,761 13,926 Tenggara 7 PT Nusa Halmahera 5,846 6,064 8,526 Minerals Total 101,326 143,158 80,990 Source: DMCE-MEMR Table-9 Copper Concentrate and Copper Production by Company 2000-2006 Company Unit 2000 2001 2002 I. Copper Concentrate 1. Freeport Indonesia 000 2,523 2,418 2,851 dmt 2. Newmont Nusa 000 743 871 935 Tenggara dmt Tota1 3,266 3,289 3,786 II. Copper Metal 1. Freeport Indonesia 000 t 776 756 873 2. Newmont NusaTenggara 000 t 236 292 298 Tota1 1,012 1,048 1,171 (Kg) Company 2003 2004 2005 2006 I. Copper Concentrate 1. Freeport Indonesia 2,306 1,803 2,646 2,224 2. Newmont Nusa 932 1,007 908 714 Tenggara Tota1 3,238 2,810 3,554 2,938 II. Copper Metal 1. Freeport Indonesia 718 520 794 612 2. Newmont NusaTenggara 288 320 270 206 Tota1 1,006 840 1,064 818 Source: DMCE-MEMR Table-10 Tin Production by Company, 2000-2006 Company Unit 2000 2001 1. PT TIMAH, Tbk 1.Tin concentrate Tons 40,050 40,535 2. Tin metal Tons 35,550 38,081 2. PT Koba Tin 1. Tin concentrate Tons 15,604 21,328 2. Tin metal Tons 11,579 15,715 3. Total Tin concentrate Tons 55,604 61,863 Tin metal Tons 47,129 53,796 Company 2002 2003 2004 1. PT TIMAH, Tbk 1.Tin concentrate 55,038 43,948 37,212 2. Tin metal 43,328 45,906 34,544 2. PT Koba Tin 1. Tin concentrate 33,104 27,746 36,868 2. Tin metal 23,927 20,378 26,054 3. Total Tin concentrate 88,142 71,694 73,080 Tin metal 67,255 66,284 60,598 (Ka) Company 2005 2006 1. PT TIMAH, Tbk 1.Tin concentrate 42,515 51,818 2. Tin metal 41,799 44,637 2. PT Koba Tin 1. Tin concentrate 35,889 29,115 2. Tin metal 25,801 20,720 3. Total Tin concentrate 78,404 80,933 Tin metal 67,600 65,357 Notes: PT Gunung Kikara Mining not operating since 1994 Source: DMCE-MEMR Table-11 Nickel Production by Company, 2000-2006 Company Unit 2000 2001 2002 1. PT ANTAM Nickel ore 000 3,039 3,619 4,366 wmt Ferro Nickel Mt 47,749 47,769 42,308 Ni-in Ferronickel Tons 101,111 103,001 8,804 2. PT INCO Converter matte Tons 70,243 80,163 75,529 Ni+Co in matte Tons 55,589 63,471 60,319 Company 2003 2004 2005 2006 *) 1. PT ANTAM Nickel ore 4,395 4,095 2,546 - Ferro Nickel 43,894 39,538 20,036 - Ni-in Ferronickel 18,933 7,945 3,985 - 2. PT INCO Converter matte 89,515 92,066 97,781 92,123 Ni+Co in matte 71,211 73,283 77,471 72,782 Notes: *) provisional figures Source: DMCE--MEMR Table-12 Mineral and Metal Production by Company 2000-2006 Company Unit 2000 2001 2002 Aneka Tambang Tbk, PT Nickel ore wmt 3,038,809 3,619,141 4,366,325 - Ni-Lg wmt 931,355 1,120,978 725,530 - Ni-Hg wmt 2,107,454 2,498,163 3,640,705 Ferronickel mt 47,749 47,769 42,306 Ni-in Fe Ni ton 10,111 10,302 8,804 Gold kg 4,210 4,263 4,093 Silver kg 28,587 29,614 26,868 Bauxite mt 1,150,776 1,237,006 1,283,485 Iron sand wmt 489,132 469,376 378,587 Timah Tbk, PT Tin concentrate ton 40,050 40,535 55,038 Tin metal ton 35,550 38,081 43,528 Free port Indonesia, PT Copper concentrate dmt 2,522,670 2,418,110 2,851,190 Copper ton 776,048 756,385 873,414 Gold kg 77,121 109,178 97,844 Silver kg 136,931 163,803 192,574 Koba Tin, PT Tin concentrate ton 15,604 21,328 33,104 Tin metal ton 11,579 15,715 23,927 International Nickel Indonesia (Inco), PT Conv. matte ton 70,243 80,163 75,529 Ni+Co in mette ton 55,589 63,471 60,319 Newmont Nusa Tenggara, PT Copper cont. dmt 743,697 871,389 935,505 Copper ton 236,006 292,309 298,312 Gold kg 9,948 16,064 15,319 Silver kg 37,797 54,962 56,184 Nusa Halmahera Minerals, PT Dore bullion kg 16,482 21,736 11,538 Gold kg 7,803 8,845 3,400 Silver kg 4,688 10,944 7,054 Avocet Bolaang Mongondow, PT Dore bullion kg - - - Gold kg - - - Silver kg - - - Indo Muro Kencana, PT Dore bullion kg 40,297 - - Gold kg 3,002 3,792 - Silver kg 37,295 80,630 - Kelian Equatorial Mining, PT Dore bullion kg 21,586 25,495 28,755 Gold kg 10,516 14,100 16,779 Silver kg 10,145 10,502 10,839 Newmont Minahasa Raya, PT Dore bullion kg 12,487 11,130 5,164 Gold kg 11,395 10,155 4,803 Karimun Granite, PT Granite ton 594,139 3,975,434 4,965,753 3 Galuh Cempaka, PT Diamond kg - - - Gold kg - - - Company 2003 2004 2005 2006 *) Aneka Tambang Tbk, PT Nickel ore 4,395,429 4,095,478 2,545,580 - - Ni-Lg 1,088,696 943,058 708,812 - - Ni-Hg 3,306,733 3,152,420 1,836,768 - Ferronickel 43,894 39,538 20,036 - Ni-in Fe Ni 8,933 7,945 3,985 - Gold 4,497 3,953 2,496 - Silver 29,855 28,558 25,471 - Bauxite 1,262,705 1,330,827 1,081,739 - Iron sand 245,409 89,644 32,203 5,489 Timah Tbk, PT Tin concentrate 43,948 37,212 42,515 51,818 Tin metal 45,906 34,644 41,799 44,637 Free port Indonesia, PT Copper concentrate 2,306,200 1,803,234 2,645,550 2,223,678 Copper 718,203 520,118 793,505 612,018 Gold 99,682 48,560 108,448 57,268 Silver 183,093 147,973 224,293 167,931 Koba Tin, PT Tin concentrate 27,746 35,868 35,889 29,115 Tin metal 20,378 26,054 25,801 20,720 International Nickel Indonesia (Inco), PT Conv. matte 89,515 92,056 97,781 92,123 Ni+Co in mette 71,211 73,283 77,471 72,782 Newmont Nusa Tenggara, PT Copper cont. 932,106 1,007,099 908,258 714,331 Copper 287,634 320,200 270,344 205,778 Gold 18,688 22,359 22,761 13,926 Silver 60,320 70,307 68,214 50,429 Nusa Halmahera Minerals, PT Dore bullion 1,902 13,006 13,396 19,433 Gold 477 5,883 6,064 8,526 Silver 1,151 6,918 5,962 9,814 Avocet Bolaang Mongondow, PT Dore bullion - - 1,863 1,925 Gold - - 1,476 1,512 Silver - - 305 350 Indo Muro Kencana, PT Dore bullion - - 2,514 9,509 Gold - - 311 1,270 Silver - - 1,756 8,998 Kelian Equatorial Mining, PT Dore bullion 25,804 19,708 2,393 - Gold 14,583 10,191 1,327 - Silver 10,786 9,179 992 - Newmont Minahasa Raya, PT Dore bullion 3,345 2,164 - - Gold 3,092 1,990 - - Karimun Granite, PT Granite 3,938,975 3,637,441 4,302,849 5,217,807 Galuh Cempaka, PT Diamond - - 21,608 46,856 Gold - - 11 37 Notes: Eight companies ceased their operation since before 2000 *) provisional figures Source: DMCE-MEMR Table-13 Mineral Domestic Sales by Commodity Mineral Unit 2000 2001 2002 1. Copper Tons 188,876 188,447 217,407 2. Gold Kg 17,159 30,093 24,464 3. Silver Kg 36,708 63,725 76,636 4. Tin Metal Tons 2,142 1,940 0 5. Iron Sand wmt 433,101 439,327 340,459 Mineral 2003 2004 2005 2006 *) 1. Copper 125,381 118,612 0 - 2. Gold 17,783 10,340 1,724 - 3. Silver 30,318 31,171 17,895 - 4. Tin Metal 2,362 1,967 974 1,927 5. Iron Sand 108,555 107,937 23,267 6,051 Notes: *) provisional figures Source: DMCE Table-14 Mineral Export by Type of Commodity Mineral Unit 2000 2001 2002 Copper Tons 844,763 826,919 918,633 Gold Kg 82,937 122,931 103,563 Silver Kg 166,505 160,771 191,670 Tin Metal Tons 43,504 56,652 62,031 Bauxite 000 1,424 1,218 1,260 mt Ni+Co in Ton 54,083 61,293 62,780 matte Nickel Ore 000 2,088 2,861 3,429 wmt Ferronickel MT 47,311 46,854 37,086 Nickel in Ton 10,200 10,274 8,218 ferronickel Iron Sand wmt 0 0 0 Granite 000 Ton 4,380 4,002 3,539 Mineral 2003 2004 2005 2006 Copper 855,018 717,911 1,054,778 744,085 Gold 112,154 74,475 140,321 83,718 Silver 215,529 282,968 306,603 234,451 Tin Metal 54,967 59,555 66,920 61,422 Bauxite 1,094 1,327 1,039 0 Ni+Co in 71,521 76,003 77,218 72,879 matte Nickel Ore 3,240 3,907 2,688 0 Ferronickel 40,976 36,122 24,463 0 Nickel in 8,288 7,157 4,930 0 ferronickel Iron Sand 0 103 0 0 Granite 3,280 3,499 3,856 5,161 Source: DMCE Table-15 Gold Export by Company, 2000-2006 (Kg) Company 2000 2001 2002 1. PT Antam 4,123 1,940 1,780 2. PT Freeport Indonesia 50,726 71,237 60,691 3. PT Kelian Equatorial Mining 826 14,501 16,875 4. PT Indo Muro Kencana 3,002 0 0 5. PT Newmont Minahasa Raya 6,635 9,702 4,870 6. PT Newmont Nusa Tenggara 10,197 16,765 15,501 7. PT Nusa Halmahera Minerals 7,428 8,786 3,646 Total 82,937 122,931 103,363 Company 2003 2004 2005 1. PT Antam 2,080 1,595 753 2. PT Freeport Indonesia 74,882 37,067 47,407 3. PT Kelian Equatorial Mining 13,595 8,645 2,815 4. PT Indo Muro Kencana 0 0 349 5. PT Newmont Minahasa Raya 2,892 2,065 0 6. PT Newmont Nusa Tenggara 18,679 22,257 22,761 7. PT Nusa Halmahera Minerals 326 5,846 5,861 Total 112,454 77,475 81,951 Company 2006 *) 1. PT Antam 0 2. PT Freeport Indonesia 58,287 3. PT Kelian Equatorial Mining 0 4. PT Indo Muro Kencana 1,341 5. PT Newmont Minahasa Raya 0 6. PT Newmont Nusa Tenggara 13,849 7. PT Nusa Halmahera Minerals 8,665 Total 84,148 Notes: *) provisional figures The following companies are no longer exporting gold: 1. PT Prima Lirang Wing since 1998 2. PT Indo Muro Kencana since 2001 3. PT Barisan Tropical Mining since 2000 4. PT Lusang Wing 5. PT Ampalit Mas Perdana 6. PT Monterado Mas Mining 7. PT. Neemont Minahasa Raya 8. PT. Kelian Equatorial Mining Source: DMCE-MEMR Table-16 Nickel Export by Company, 2000 - 2006 (Kg) Company Unit 2000 2001 2002 1. PT ANTAM 1. Nickel ore 000 2,038 2,861 3,429 wmt 2. Ferronickel mt 47,311 46,854 37,086 3. Ni-in Ton 4,123 1,940 1,780 Ferronickel 2. PT INCO Nickel Ton 64,063 61,293 62,780 Company 2003 2004 2005 2006 *) 1. PT ANTAM 1. Nickel ore 3,240 3,907 2,688 0 2. Ferronickel 40,976 36,122 24,463 0 3. Ni-in 2,080 1,595 753 0 Ferronickel 2. PT INCO Nickel 71,521 73,575 77,218 72,879 Notes: *) provisional figures Source: DMCE-MEMR Table-17 Tin Export by Company 2000 -2006 Company Unit 2000 2001 2002 1. PT TIMAH, Tbk -Tin metal tons 34,106 39,999 42,833 2. PT Koba Tin - Tin metal tons 9,398 15,653 19,199 Total 43,504 55,652 62,031 (Kg) Company 2003 2004 2005 2006 *) 1. PT TIMAH, Tbk -Tin metal 43,011 33,492 41,123 40,684 2. PT Koba Tin - Tin metal 11,976 26,063 25,797 20,738 Total 54,987 59,555 66,920 61,422 Note: *) provisional figures Source: DMCE--MEMR Table-18 In 2005, Antam production is as follows: Description 2004 2005 Nickel ore (000 Wmt) 4,095 2,546 Ferronickel (mt) 39,538 20,036 Ni-in ferronickel (ton) 7,946 3,985 Gold (Kg) 3,953 2,496 Silver (Kg) 28,558 25,471 Bauxite (000 mt) 1,331 1,082 Iron Sand (000 ton) 35 42 Source: Aneka Tambang Table-19 COW Mining Companies Status by the end of 2004 Generation Period Number of Company/Contract Signed G.S. Expl. F.S. I 1967 1 - - - II 1968- 1975 16 - - - III 1976 - 1984 13 - - - IV 1985 - 1990 95 - - 2 V 1991 - 1994 7 - 3 1 VI 1995 - 1997 65 - 13 - VII 1997 - 1998 38 - 9 - Total 1997 - 235 - 25 3 Now Number of Company/Contract Generation Cons. Prod Termination I - 1 0 II - 3 13 III - 2 11 IV 2 3 90 V - 1 2 VI 1 1 50 VII - - 29 Total 3 11 193 Source: Directorate Mineral Coal Energy (DMCE) Table-20 Companies allowed to continue open mining operations in protected forests Companies Location Countries of Type of origin minerals Freeport Indonesia Papua USA Gold, copper Karimun Granit Riau Islands USA Granite Inco Sulawesi Canada, Japan Nickel Indominco Mandiri Kalimantan Germany Coal Aneka Tambang Halmahera Indonesia Nickel Natarang Mining Sumatra Britain Gold Nusa Halmahera Halmahera Australia Gold Minerals Source: Data Consult-ICN Table-21 Companies banned to operate open mines in protected forests Name of Location Countries of company origin Pelsart Tambang Kalimantan Australia Kencana Interex Sacra Kalimantan Indonesia Raya Weda Bay Nickel Halmahera Canada Gag Nickel Island of Gag, BHP Billiton, Papua Australia Sorikmas Mining Sumatra Aberfoyle, Australia Aneka Tambang Sulawesi Indonesia Name of Types of company mineral Pelsart Tambang Gold Kencana Interex Sacra Coal Raya Weda Bay Nickel Nickel/cobalt Gag Nickel Nickel Sorikmas Mining Gold Aneka Tambang Nickel Source: Data Consult-ICN Table-22 Projects of Austindo Resources Corporation Projects Mining license Mineral Cibaliung Mining authority Gold mine, KW 96PP0019 on Banten, behalf of PT Indonesia ANTAM Pekalongan Mining authority Gold mine, Central Decision of Java, Pekalongan regent Indonesia No. 545/90 2005 on behalf of PT Source Mineral Nusantara Aisasjur Mining authority Copper, mine, Papua Decision of n Gold Indonesia Papua Governor No.228 in 2005 on behalf of PT Alam Papua Nusantara Trenggalek Mining authority Gold mine, East Decision of Java, Trenggalek Regent Indonesia no. 702 in 2005 on behalf of PT Source Mineral Nusantara Projects Stage of Shareholder development and stake Cibaliung Development Austindo mine, of mining and (89.75%) Banten, processing PT ANTAM Indonesia facilities (10.25%) Pekalongan Explorations Austindo mine, Central (95%) Java, PT Source Indonesia Mineral Nusantara (5%) Aisasjur Explorations Austindo mine, Papua (20%) Anglo Indonesia American (80%) Trenggalek Explorations Austindo mine, East (95%) Java, PT Source Indonesia Mineral Nusantara (5%) Source: Austindo Resources Corporation Table-23 Potential of gold mine of PT Cibaliung Sumber Daya Mining Ore (t) Gold Silver Gold Reserves (000's) Grade Grade Equiv. (g/t) (g/t) Grade (g/t eq) Total 511 11.4 82 12.4 Proven Reserve Total 592 8.8 84 9.9 Probable Reserve Total 285 7.5 67 8.3 Inferred Resource Total 1,388 9.5 80 10.5 Mining Gold Silver Gold Reserves Ounces Ounces Equiv (oz Au) (oz Ag) Ounces (000's) (000's) (oz eq) (000's) Total 188 1,347 204 Proven Reserve Total 167 1,604 188 Probable Reserve Total 68 609 76 Inferred Resource Total 423 3,560 467 Source: Austindo Resources Corporation Table-24 Nickel reserve of Weda Bay in Halmahera Nickel reserve Ore Ni Co (million tons) Measured 154 1.45% 0.09 % Estimate 123 1.53% 0.08 % Total 277 1.49% 0.09 % Source: Weda Bay Minerals Table-25 ANTAM's three large projects until 2010 Projects Working Production partners target Chemical Showa, Japan 300,000 ton Grade STAR, Alumina, Singapore Tayan Marubeni, Japan Ferronickel Posco, Korea 30,000 tons IV, Halmahera High International 50.000 ton Pressure partner Acid Leach, Halmahera Projects Investment Start up plan Chemical US$220 Before 2010 Grade million Alumina, Tayan Ferronickel US$ 650 2010 IV, million Halmahera High US$ 1 billion 2010 Pressure Acid Leach, Halmahera Source: ANTAM Table-26 Antam's Chemical Grade Alumina (CGA) project in Tayan Project Partners Name of joint venture Showa Denko (SDK), PT Indonesia Chemical STAR Singapore, Chemical Grade Marubeni Corp. Japan Alumina (ICA) Alumina factory Project Stake % Start up Antam 49% 2010 Chemical Showa 30% Grade STAR 15% Alumina Marubeni 6% factory Source: PT ANTAM Tbk Table-27 Nickel reserves of PT INCO Nickel 2005 2004 *) reserves Million tons %grade Million tons % grade Proven 57 1.78 44 1.81 Probable 88 1.81 63 1.85 Total 145 1.80 107 1.82 Source PT INCO *) reaffirmed