Irian Jaya province: An area rich in natural resources
Irian Jaya province: An area rich in natural resources
The province of Irian Jaya, the youngest province in the Republic of Indonesia, was formerly known as Irian Barat (West Irian) or West New Guinea before 1973 and as Netherlands New Guinea during the Dutch colonial years. With 421,981 square km, the western part of the world's second largest island, New Guinea, makes up almost a quarter of Indonesia's land area but only harbors 1 percent of its over 200 million population.
The population of this province is 1,649,000 (1990), with a density of 4 people per square km (1990). The capital of Irian Jaya is Jayapura.
Physical features of Irian Jaya: This province makes up half of the entire island of Irian (New Guinea). The area is covered by a mountain range with steep slopes and vast alluvial lowland plains. It forms one of the last real wildernesses with 60 percent of its territory being covered by barely accessible forests.
New Guinea may almost be considered a continent. Habitats range from the hot, wet and swampy plains of the south to the permanently snow- and ice-covered Puncak Jaya (5,090 meters). The majority of the island, with the exception of the south with its extensive and inaccessible swamps and mangrove forests, is mountainous. The highest peaks are found in the central mountain chain, extending from the Vogalkop Peninsula to the Owen Stanley Range in southeast Papua New Guinea. This mountain chain forms the backbone of the island and divides the island into northern and southern halves.
The climate in Irian Jaya is wet throughout the year with a relatively dry period between June and August. The driest part of Irian Jaya is found in Merauke regency, where the only area of savanna, part of the Wasurbiru National Park, occurs. The flora and, especially, the fauna of New Guinea are highly influenced by Australia. Flora in Irian Jaya's wet lowlands is a mixture of Asian and Australian species, whereas at higher altitudes and in the Merauke savanna, the flora tends to be Australian.
The primary products of Irian Jaya are agricultural -- food crops: rice, corn, peanuts and soybeans; commercial crops: coconuts, cloves, rubber, cacao, coffee and nutmeg; livestock: cattle, buffaloes, horses, goats, sheep, pigs, and rabbits; fishing -- fish products: tuna, skipjack tuna, bastern little tuna, anchovy, shrimp, mullet, common carp and tilopia; fresh- water fisheries area: 255 hectares; forestry -- forest products: rattan, resin, logs, sawn timber and mangrove wood; productive forest area: 72,100 hectares; mining: petroleum, copper, gold, silver and LNG; handicrafts: carving and plaiting.
As a whole in Irian Jaya, Mill Production of metal in 1997 was: 1,208,821,000 copper pounds; 1,853,960 gold ounces; 3,073,800 silver ounces. Given below is a list of the companies which are engaged in exploration or exploitation, or which are conducting feasibility studies in Irian Jaya:
* Aneka Tambang, PT -- Jl Letjen Simatupang, Lingkar Selatan Tanjung Barat, Jakarta; Darmoko Slamet (Director), phone 7891234; type of mineral: nickel.
* Freeport Indonesia Company, PT -- Sampurna Plaza 5th Floor, Jl HR Rasuna Said Kav x-7 No. 6, Jakarta; Hoedatmo Hoed (Director); phone: 8504555, 2520727; types of mineral: copper, gold, silver.
* Kepala Burung Mining, PT -- Jl Ampera Raya No. 9, Kemang, Jakarta Selatan; Michael J. Makenzie (Director); phone: 7892905; type of mineral: gold.
* Montague Mining, PT -- Wisma Kyoei Prince, 11th Floor, Suite 1103, Jl Sudirman kav.3-4, Jakarta; Setiawan Djodi (Director); phone: 5724135; type of mineral: gold.
* Nabire Bakti Mining, PT -- Jl Ampera Raya 118, Jakarta; D. Lochcam PT (Director); phone: 7800394; type of mineral: gold.
* Sentani Maju Minerals -- Jl Rasuna Said Kav. 600, Jakarta Selatan; type of mineral: gold.
Wide open opportunities for domestic and foreign investors
Huge reserves of oil and natural gas have been endowed by nature on archipelagic Indonesia, whose territory along the sunny equator assumes a magnetic function which moves oil magnates to centripetally cast their interest at lucrative crude and gas venture in this country.
Until the end of 1998, few domestic and foreign enterprises reportedly have made investments in such fields as oil and gas prospecting, well drilling, refinery plant and gas pump pipeline construction. This hectic work now underway is being encouraged even more by the price of the nonrenewable natural fortunes currently moving upward in the world market.
This year, Indonesia has offered prospective investors different forms of deals regarding on-shore and off-shore crude and gas explorations under the Production Sharing Contract (PSC) scheme in such locations as Bunguran in the Natuna Sea, Masalima in the South Sulawesi part of the Makassar Straits, Jayapura in Irian Jaya (both on- and off-shore), Sabaru in South Sulawesi (off-shore), Senyiur in East Kalimantan (off-shore), Pekalongan in Central Java (off-shore), the northern part of Central Java (off-shore) and Rangkas in West Java (off-shore).
Other PCS-based explorations on offer are for Anambus and Tazempa in the western part of the Natuna Sea, Tapaktuan in West Sumatra (both on- and off-shore), Bone in South Sulawesi (off- shore), Kaimana, Femin, Sabuda, and Samai in Irian Jaya (off- shore).
Law No. 44/1960 assigns to Pertamina the function as the prime driller leader for crude and gas prospecting with private interests being allowed to undertake exploration on the basis of the PSC scheme, under which Pertamina will get a stake of 85 percent and the contractors 15 percent each. For gas, a stake of 70 percent will go to Pertamina and 30 percent each to the contractors.
Investment in the oil and gas sector under the PSC scheme is on the increase as of 1997. Investment in oil and gas prospecting totaled US$4.7 billion in 1997 and rose to $6.37 billion in 1998. For well drilling, investment was registered at $1.99 billion in 1997 and $2.79 billion as of the second half of 1998.
Mining, gold and copper deposits, lucrative fortunes to exploit
In comparison with the rest of ASEAN, Indonesia is claimed to be the most potential in mineral deposits. The impact of continent-slab frictions working by its own force in time immemorial formed archipelagic Indonesia, whose geological structure created a mineral-rich landmass extending two million square kilometers, where a long range of active volcanic activities helped the occurrence of mineral formation into different kinds of sediments.
This geological configuration justifies the assumption that Indonesia's gold and copper deposits are the largest in the world. Copper deposits are found in Sumatra, Java, Kalimantan, Sulawesi and Irian Jaya.
The Indonesian government fully recognizes the importance of the country's mineral wealth and the share that the mining industry could make to the national economy. Therefore, the government desires to encourage and promote the exploration and development of its mineral resources. It has issued Contracts of Work (COW) for mineral development and a Coal Contracts of Work scheme which have been accepted by foreign investors worldwide as a reliable scheme which guarantees security for long-term investment in the mineral and coal sectors.
To stimulate foreign and domestic firms to embark on mining ventures in this country, the government introduced new regulations which require new applicants to submit a seriousness bond for every hectare of ground reserved for the contracts. The deposit of the bond, which amounts to $5 per hectare, is aimed at minimizing speculation by the parties acting as a broker with the main objective of holding the reserved ground temporarily before transferring it to another party for profit.
The government has introduced the Contract of Work of the 7th generation, which was aimed to permit a more stringent monitoring and control over the contract's performance throughout each stage of activity. In other words, it provides flexibility with regard to the time frame for the exploration stage.
The directorate general of mines announced recently that the total number of applications received for Contracts of Work of the 7th generation is 281, of which 38 were signed by the contractors and the government, 159 are still under process and 84 resigned. Meanwhile, Coal Contract of Work of the 3rd generation was signed between the government and 75 domestic and seven foreign investors.
Irian Jaya, the wealthy island
Irian Jaya is largely unexplored but deposits of oil, copper, uranium and gold have been found. Other resources include rattan, copra, fish and the widest variety of timber in Indonesia. Irian Jaya's commercial potential has increased due to foreign investments. Oil production in the province had begun in the 1930s but sizable production only began in the early 1970s near Sorong, on the western tip of the island.
Copper became an important natural resource after large deposits were discovered by Freeport in Erstberg and Grasberg in the Jaya Wijaya mountains of Irian Jaya. PT Freeport Indonesia's venture is one of the largest and most exciting mineral exploration programs in Irian Jaya. The company is conducting exploration activities along the "ring of fire" where the Indo- Australian and Pacific plates collide. This could potentially be one of the largest mineral zones in the world.
According to Fast Facts, issued recently by PT Freeport Indonesia, the company's contracts includes COW-A, which covers an area of 10,000 hectares in the Grasberg area; and COW-B, which is approximately 1.3 million hectares across Irian Jaya's mountain range. Its sister company, PT Irja Eastern Minerals, has a concession covering a further 700,000 hectares in Irian Jaya and is run by Freeport's Exploration Team (FET). FET comprises six major divisions: geology, logistics, drilling, government relations, safety and environment.
Freeport described that their reserves total over two billion tons of ore making it the world's single largest gold reserve of over 55 million ounces and the world's third largest copper reserve of over 20 million tons.
PT Freeport's current production statistics shows that 530,000 tons of earth are moved per day and 127,000 tons of ore go the mill each day. In addition, 1,759,000 tons of concentrate are produced per day containing over 526,000 tons of copper and over 1,760,000 ounces of gold.
PT Freeport is the largest gold and copper producer in Indonesia. The company is also the holder of a mining COW in Irian Jaya. In the Grasberg area there is an estimated 108 million ounces of gold and 34 billion kg of copper.
In 1997, the government issued COWs to 65 investors to carry out general surveys and explorations in 17 provinces in Indonesia. The investors spent between $5 million and $40 million depending on the hectares and COWs concessional area. Most of the mining companies are from Singapore, the Netherlands, Australia, the United Kingdom, the United States, Hong Kong, Canada, Papua New Guinea, South Korea, the Cayman Islands and Indonesia.
A mining industry observer said the newly discovered reserves need investments between $100 million and $150 million for a medium scale (10 years to 15 years) operation and over $1 billion for a large scale (about 30 years) operation.
Indonesia's mining development is an integral part of its national development program with the aim of supporting the country's industrialization by supplying the domestic industries with raw materials and energy resources; raising the state's domestic and foreign exchange earnings; and providing job opportunities for the people.
By virtue of government decree PP No.20/1994, the government allows state-owned mining enterprises and domestic and foreign undertakings to conduct mining explorations to exploit mineral resources. Private undertakings that work in this field can act either as contractors or as joint-venture partners with state mining firms.
Currently there are three state-owned mining companies -- PT Tambang Timah Tbk, PT Aneka Tambang Tbk and PT Tambang Batubara. In April 1967, the government, for the first time, introduced a Contract of Work generation to encourage mining. At that time, copper and gold mining were the only mining ventures, operating in Irian Jaya under PT Freeport Indonesia. In December 1991, Freeport signed the fifth modification generation of COW which incorporated the first generation COW. It essentially constitutes an extension and expansion under different terms and conditions of the previous contract.
The COW generation for Freeport will terminate in 2003, however, the company has been granted a new contract for another 30 years with a mining field possibly two times as large as the first location where the world-class copper and gold deposits in the Grasberg mountain range were discovered.
To date, 140 companies are operating under Contracts of Work and Cooperation Contract for Coal, of which 102 are doing general surveys; seven, exploration activities; 14, field explorations; five, construction work and 12, production process. Another 290 companies are working under the Processing Mining Rights Contracts or mining authorizations issued by the Directorate General of Mines. Of this, 19 companies are doing general survey activities; 205, field explorations; and 56, exploitation operations. Under the Coal Contract of Work, the government has granted 11 companies the first generation COW; eight companies the second generation COW; and 73 companies the third generation COW.
A U.S.-Indonesian joint venture, PT Freeport Indonesia Inc. is currently the only copper mining company in Irian Jaya, believed to be holding the world richest copper ore deposits. Freeport's mine reserves have been revised upward from 1.3 billion to 1.7 billion tons, sufficient to support production for another 45 years and capable of yielding some 38 billion pounds of copper. Studies also support an increase in their production from 200,000 tons to 300,000 tons per day in the next few years.
According to the Indonesia Source Book 1996, in 1995, copper production reached over one billion tons with exports valued at $1,537 billion. Output of copper ore and copper concentrate were projected to be in excess of 1.7 million tons by 1999. By that time also, Indonesia's first copper smelter plant which was officially inaugurated; in July 1996 had become commercial, enabling Indonesia to save $270 million annually on import of copper cathode and increased its export earnings to $320 million.
The smelter plant, a $700 million joint venture between Mitsubhisi Materials Corporation of Japan and PT Freeport Indonesia Inc., was designed to produce 200,000 tons of copper cathodes annually with byproducts including sulfuric acid, slag and gypsum. The basic input of copper ore of some 656,000 tons annually is supplied by Freeport's Irian Jaya mines.
Meanwhile, some 120 contracts for gold mines had come out with an output of 45,272 kilograms in 1995. In addition to copper, silver is also derived in substantial quantities from Freeport's copper mines. Freeport announced its extended reserves would yield a total of 47.6 million troy ounces of gold and 108.5 troy ounces of silver. Indonesia has an annual gold output of approximately 100 metric tons, making Indonesia the seventh largest gold producer in the world and second in Asia after China.
Mineral production in Indonesia, at a glance
Mining production in the last three years has been increasing, however, several types of output are decreasing because of the downward trend in international prices.
Gold production is continuing to rise with such well-known concessionaires as PT Kelian Equatorial Mining, PT Indo Muro Kencana, PT Aneka Tambang Tbk, PT Newmont Minahasa Raya and PT Barisan Tropical Mining.
Copper is produced by PT Freeport Indonesia, nickel matte is produced by PT Inco, ferro-nickel and bauxite are produced by PT Aneka Tambang. Tin is produced by PT Timah Tbk and PT Koba Tin. Coal is produced Kitadin Corp., PT Bukit Baiduri Enterprise, PT Bukit Sunur and cooperatives such as KUD Usaha Karya, KUD Bersama and KUD Madhuratna.
The mining law -- Law No: 11,1967 -- which sets rules on basic provisions for mining, regulates all basic legal aspects and technical activities in mining. Under the said law, minerals are classified in three groups: Group A -- strategic minerals; Group B -- vital minerals; and Group C -- minerals not included in either Group A and Group B.
Mining activities in Indonesia are conducted on a long-term program with time frames such as general surveys in one year to two years, explorations in two years and construction in three years.
So, welcome to the paradise of mining industries!