Gold, copper remain stable despite problems

The country's gold, copper and nickel production capacity has remained stable during the past five years, despite the problems hampering the country's mining sector.

The Indonesian Mining Association, however, warns that without new investments production will drop substantially within the next 10 years.

According to the association, the problems in the country's mining sector such as uncertainties in mining regulations and in security had significantly impacted on the inflows of new investments.

"During the last five years, no new exploration activities have taken place," it said.

The reclassification of forest status in some part of new mining concessions into protected forests is one of many factors that could further worsen the country's mineral production.

At least 22 companies have been forced to suspend their operations in rich mineral areas, mostly in eastern parts of Indonesia, due to the reclassification of some parts of their concessions into forest conservation areas.

The new forestry law, which was issued in 1999 long after these companies received their contracts of works, prohibits open-pit mining operations in protected forests.

The fact that several companies such as PT Kelian Equatorial Mining in Central Kalimantan and PT Newmont Minahasa in North Sulawesi are closing their operations due the depletion of their mineral reserves will further contribute to the drop in the country's mineral production.

The association said mineral production had been relatively flat since 2001 and would remain the same within the next three years despite an increase in the production of certain companies.

According to a report issued by the Ministry of Energy and Mineral Resources, Indonesia's gold production dropped to 142,238 kilograms in 2002 from 162,605 kg in 2001. Copper production increased slightly to 1.17 million tons from 1.04 million tons, while ferronickel fell to 8,804 tons from 10,302 tons in 2001.

Copper and gold production has increased sharply during the last five years as the result of increases in capacity at Freeport's copper and gold mine in Irian Jaya (Papua) and the continued increase in Newmont's Batu Hijau Copper and Gold Mine in Sumbawa, West Nusa Tenggara province.

A number of local mining companies, however, continue to report robust sales, despite the problems lingering the country's mining sector.

Publicly listed diversified mining company PT Antam, for example, reported a 50 percent increase its an unaudited consolidated net profit for the three months ending March 31, 2003, compared to Rp 62 billion in the same period of last year.

The company's gold production exceeded the quarterly target by four percent, reaching 1,033 kilograms on higher ore grades. In line with higher gold production, silver production also exceeded the target by 13 percent, reaching 7,048 kg. "Antam is on track to produce between 4,100 kg and 4,500 kg of gold in 2003," said Dohar Siregar, Antam's Corporate Secretary.

During the first quarter of 2003, Antam produced 1,800 tons of contained nickel in ferronickel, a 36 percent drop compared to the previous quarter and a 17 percent decrease compared to the same quarter of last year due to the shutdown of FeNi I smelting plant due to spot lining repairs, which took place over nine days in January.

PT Freeport Indonesia also reported a robust growth both in sales and in its copper and gold production at its copper and gold mine giant in Irian Jaya amid the worsening investment climate in the country's mining industry.

Freeport's communications manager Siddarta Moersjid said that metal sales for the first six months of this year performed very well. Copper production rose to 787,200 pounds during the first semester from 646,500 pounds in the same period last year.

Gold output also showed a significant increase reaching 1.43 million ounces as compared to 730,300 ounces in the Jan to June period of last year.

"Production and sales have been higher this year primarily because of higher ore grades and recovery rates," Siddarta said. He added that total sales this year were expected to reach 1.4 billion pounds of copper and 2.6 million ounces of gold.

Although the demand of copper would continue to increase in the coming years, Freeport did not have any plan to expand its production levels within the near future, he said.

Newmont's Batu Hijau which is located on a remote island in Sumbawa also reported a steady growth in its copper and gold production since the commercial production began in 2000.

PT Newmont Nusa Tenggara, which operates the Batu Hijau mine, expects to sell approximately 340 million to 360 million equity pounds of copper and 480,000 ounces (equity ounces) of gold this year.

2002 was a record year for PT NNT as it contributed a equity income of US$42 million to its parent company, the United States- based Newmont Corporation.

PT NNT sold 644 million pounds of copper (362 million equity pounds), essentially the same as year 2001, at a net cash of $0.31 per pound, 16 percent lower than in 2001. The mine also sold 494,000 ounces of gold (278 equity ounces), six percent lower than 2001.

Batu Hijau, one of the newest copper and gold mines in the country, is operated by Newmont in cooperation with an affiliate of Sumitomo Corporation of Japan and Indonesian company PT Pakuafu Indah. Newmont holds a 56.25 percent economic interest.-- Hendarsyah Tarmizi