Illegal mining becomes major problem for coal producers
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Growing illegal mining activities and a lack of security and order have continued to undermine the operations of the country's mining companies, particularly those located in Central and East Kalimantan.
Most of the illegal miners operate within a concession area of a licensed mining firm but they can freely carry out their activities due to the lack of legal enforcement from the local security apparatus.
Illegal mining activities was not only harmful to the government and licensed miners but also detrimental to the environment surrounding mining areas. Unlike the mining companies with operating permits, the illegally operating companies, all of which are small-scale businesses, do not pay tax.
Besides illegal mine operations, many individuals, under the pretext of the public interest, have frequently staged demonstrations in several mining areas.
They have usually focused on sensitive issues such as the environment and land clearance in the protests, which are often used as a pretext to enable them to get jobs. The demonstrations have, however, turned violent and damaged the companies' assets.
Regional autonomy, introduced several years ago to empower the local economy, was wrongly perceived. With their additional power, local authorities often imposed a variety of taxes on local businesses, including mining companies. This has brought a heavy burden to coal miners' operating costs.
Despite the lingering concerns plaguing Indonesia's mining sector, several coal companies have reported an increase in production from year to year, thanks to stable demand.
The country's coal production reached 100 million metric tons in 2002, compared with 92.5 million tons in 2001. Coal production is projected to continue to increase to 105 million tons in 2003.
Indonesia is predicted to become the world's third-largest exporter of thermal coal in the near future after Australia and China. Indonesia has approximately 35 billion tons of coal reserves, of which 23 billion? tons are proven.
The Indonesian Mining Association (IMA) has warned that major issues such as legal and security uncertainties, combined with high tax as well as legal inconsistencies resulting from regional autonomy, could affect new mining development. No new major mining developments or project expansions are currently identified or under way.
Companies operating under contracts of work (COW) include PT Kaltim Prima Coal (KPC), PT Adaro Indonesia, PT Arutmin, PT Kideco Jaya Agung, PT Berau Coal and Indominco Mandiri.
KPC, which at present is equally owned by Rio Tinto and BP Plc, is located in northeast Kalimantan. Its production is 15 thousand, million, billion? tons annually. Three-quarters of the company's mining production is directly exported to Asian markets, including Japan, Taiwan and China, with the remainder going to Europe and the USA.
Local company PT Modern Resources shouldn't it be Bumi Resources? announced early last week that it had reached an agreement with Rio Tinto and BP to take over their entire 100 percent ownership in KPC.
PT Adaro Indonesia, with its four deposits in the Tanjung district of South Kalimantan province, commenced production in 1991 and has increased steadily since then. The company sold 18 million tons of coal, both to local and overseas buyers in 2001.
The company produced 20.8 million tons in 2002, compared with 17.7 million tons in 2001. It expects to produce 22 million tons this year.
PT Adaro's Indonesia administration manager Priyadi said that the demand for coal from the company had increased from year to year due to the quality of the coal.
The company's sales reached 21.2 million tons, compared with 18.8 million tons in 2001. The company is projected to sell 5.7 million tons in the first quarter of 2003 and 22 million tons for the whole of 2003.
Priyadi said that efforts were under way to further increase production capacity to meet the increase in demand.
He said that the company's product was in high demand because its product, envirocoal, was considered environmentally friendly. "Our coal is exceptionally clean, with low sulfur and low nitrogen, so when it is burned, the ash produced does not pose a threat to the environment," Priyadi said.
The company also focuses on different countries as its target markets to ensure stable sales of the product.
Meanwhile, PT Berau Coal's production reached 7,120 tons in 2002, compared with 6,740 tons in 2001, or a 5 percent increase.
PT Berau Coal's corporate secretary Ratmono said that the company's projected production for 2003 was about eight million tons. "The stable demand for coal from overseas and domestic consumers has contributed to the company's continued production since 1994," he said.
He said that the company sold 6.9 million tons in 2002, compared with 6.6 million tons in 2001. Its projected sale is 8 million tons in 2003.
The company's coal reserves in Berau regency, East Kalimantan, total 2.6 billion tons. Of that amount, about 260 million tons can be mined. "This means that we can produce approximately 8 million tons annually for 32 years," he said. -- Sudibyo M. Wiradji -JP