Legal uncertainty is a major problem for RI's mining sector<\/p>\n
Fitri Wulandari, The Jakarta Post, Jakarta<\/p>\n
State-owned general mining company PT Aneka Tambang (Antam) is
\none of the leading mining firms in Indonesia. Despite the
\noverall gloomy mining sector, the listed company is pressing
\nahead with the FeNi III smelter project. Antam's development
\ndirector Darma Ambiar spoke with The Jakarta Post's Fitri
\nWulandari about the company's current and future projects. The
\nfollowing is an excerpt of the interview.<\/p>\n
Question: How do you see the prospects of the mining sector?<\/p>\n
Answer: The prospects are gloomy. We are all familiar with the
\nproblems in the mining sector. Legal uncertainty is one. For
\ninstance, the exploration license of a mining company obtained
\nyears ago could be unilaterally annulled because the mining area
\nis located in a protected forest (Law No.41\/1999 bans open-pit
\nmining in protected forest. This law has become controversial
\nbecause many of the mining areas were not designated as protected
\nforest prior to the introduction of the law).<\/p>\n
We are working together with (mining firm) BHP to run nickel
\nmining on Gag island. But since Gag island (is now) located in a
\nprotected forest, BHP can do nothing.<\/p>\n
The law is still our biggest problem because most of the
\nmineral deposits are located in the forests. If all forests are
\nconsidered protected forest, we won't have any new mining areas
\nto work on.<\/p>\n
In addition, we have to face the problem of the high cost of
\ndoing business in those regions, where most of our working areas
\nare located. For instance, there is no clear rule how much we
\nhave to compensate residents whose houses and land are being
\nevicted for mining.<\/p>\n
The company has also set aside an extra sum of money to secure
\nmining operations.<\/p>\n
Can you explain how much of Antam's mineral deposits exist at
\npresent?<\/p>\n
High grade nickel (2.3%) is about 35 million tons of ore. We
\nhave 1.65 million ounces of gold, high grade bauxite is 1.3
\nmillion tons and low grade bauxite is 108 million tons.<\/p>\n
For the time being, there is no problem with nickel deposits.
\nOur nickel deposits are enough for 20-30 years. But with the
\ncurrent process and technology, we cannot increase production.<\/p>\n
The current technology only allows us to process high grade
\nnickel which has limited deposits.<\/p>\n
If we can get technology to process low grade nickel, we can
\nincrease our production because the low grade nickel is more
\nabundant than high grade.<\/p>\n
New exploration is carried out only to maintain reserves but
\nnot to increase production. It is because mining areas
\nparticularly for nickel are very limited. Nickel deposit areas
\nare scattered mostly around eastern parts of Indonesia.<\/p>\n
In the global market, there is a surge of demand for mining
\ncommodities from China. How is Antamb preparing for this?<\/p>\n
Basically, there is not much we can do. Buyers from China come
\nin suddenly and demand various commodities.<\/p>\n
Particularly for nickel, we don't have any reserves left to be
\nsold to China.<\/p>\n
China is particularly interested in iron sand and bauxite. And
\nwe are in talks with them about contracts for those. We already
\nhave a contract with China for bauxite amounting to 4 million
\ntons a year for four years. This commodity comes from our
\nreserves in Pulau Kijang, Sumatra.<\/p>\n
We are trying to redevelop our old iron sand mine in Central
\nJava.<\/p>\n
Initially, we didn't have any plans to develop the mine
\nbecause our only buyers, the cement producers, no longer needed
\nit. China said they need iron sand for about one million tons a
\nyear. But it (the contract) is still in a discussion stage.<\/p>\n
As for bauxite, we still face obstacles in meeting China's
\ndemand although the demand is very high. Our bauxite mining is
\nlocated in remote areas which means very high transportation
\nfees. Thus, it is not profitable to sell bauxite ore.
\nThe bauxite price has yet to reach the economic price level for
\nus to open new (bauxite) mining.<\/p>\n
China is also interested in other base metals such as lead and
\ncopper.<\/p>\n
Overall, the prospects would be good, but not there is not
\nmuch we can do to meet China's demand.<\/p>\n
How is the progress at the FeNi III project?<\/p>\n
The construction of a new smelter for the FeNi III project has
\nstarted. We are now in the engineering phase until February.
\nPhysical construction will began in mid December. The smelter is
\nscheduled to begin production in 2006.<\/p>\n
With FeNi III running, we hope for additional nickel
\nproduction of 15,000 tons a year. At present, from our two
\nsmelters (FeNi I and II) we produce 11,000 tons.<\/p>\n
All (of the facilities are) located in our nickel mining in
\nPomalaa.<\/p>\n
For financing of the project, around $60 to $70 million comes
\nfrom internal funds, while the remainder, comes through the
\nissuance of some $200 million worth of bonds. In case of a
\nshortage, we'll borrow from local banks.<\/p>\n
Any new projects in the future?<\/p>\n
We plan to open a new aluminum mine in Tayan, West Kalimantan. It
\nis still going through a feasibility study. It should produce
\ncommercial grade and smelter grade alumina. Commercial grade
\nalumina can be used for many purposes such as for water
\npurification and to make household utensils. While smelter grade
\nis for producing aluminum.<\/p>\n
The mining will produce some 50 different kinds of products
\nwith total capacity of 300,000 tons a year.<\/p>\n
This is to cater the Japanese market.<\/p>\n
Aside from that, we don't have plans for any big projects.
\nParticularly because financing opportunities have been lessened
\nas we have spent so much for FeNi III.<\/p>",
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