Illegal tin mining hits Timah's finances

The Jakarta Post, Jakarta

Widespread illegal tin mining in Bangka island has caused state-owned tin miner PT Timah to suffer a potential loss of up to US$ 26 million in the second half of this year.

Timah president Erry Riyana Hardjapamekas revealed in Jakarta on Sunday evening that illegal tin mining had contributed to the flooding of tin into the world market, and thus lowered tin prices.

Consequently, tin prices in the world market had declined to US$3,500 per ton now from over $5,000 last year.

Meanwhile, Timah corporate secretary Prasetyo B. Saksono said on Monday that Timah's cost of production remained high, at $4,300 per ton.

That made it impossible for PT Timah to operate normally, as it had sustained a deficit of around $5 million per month since July.

According to its unaudited financial report, Timah booked Rp 25 billion (about US$2.5 million) in net profit for the first nine months of this year, 92 percent lower than the profit booked in the same period of last year, which was Rp 296 billion.

This sharp decrease in net profit was recorded against the backdrop of increasing tin production.

The company's refined tin output increased by nine percent to 27,900 tons in the first nine months of this year, and tin-in- concentrate production was up by 20 percent to 34,384 tons.

Because of the deficit recorded since July, Prasetyo said PT Timah had been forced to cut the workload of its workforce.

Of its 5,221 employees, 3,000 had to take alternate days off. Worse still, about 1,440 dredger operators had to be sent home as the company had halted the operation of uneconomical or high cost dredgers and inland mining.

Timah has stopped the operation of 13 of the 20 dredgers it normally uses.

The company, nevertheless, is still paying staff on the payroll.

All this calamity started with the implementation of regional autonomy law, which allowed the Bangka Belitung provincial administration to license local companies to export tin.

This prompted illegal mining on Bangka island.

At present, there are 6,000 illegal mining operations, involving 30,000 illegal miners, on Bangka. They have even mined 32 percent of Timah's former mines.

Nevertheless, Timah claimed that it had reached an agreement with about 60 percent of those illegal miners to sell their tin ore output to Timah.

It is part of Timah's strategy to prevent illegal tin from entering the international market.

Another move was to spearhead the establishment of the "team of eleven", comprising representatives from Timah, PT Koba Tin, local administrations, the customs office, the police and local legislative councils.

The team, tasked to solve the problems related to illegal tin mining and trading, decided that no companies would be allowed to export tin ore. This would serve as the first step in reducing the problem of the illegal tin trade.