KEM's gold output plunges due to blockade

JAKARTA (JP): Australian based mining company Rio Tinto Indonesia said on Monday that gold production of its subsidiary PT Kelian Equatorial Mining (KEM) had dropped by about 400,000 per troy ounce since locals blocked the road to its mine in East Kalimantan.

Rio Tinto president Noke Kiroyan said that production had dropped as the road blockade shut out diesel oil fuel and camphor supplies, which were essential during production.

"Until now we are still unable to operate the mine," Noke told reporters in a joint news conference with the Indonesian Forum for Environment (Wahli).

Given fluctuating gold prices, Noke declined to say how much the production loss had cost the company. He added that the current gold price stood at some US$270 per troy ounce.

The company, 90 percent of which belongs to Rio Tinto and 10 percent to local partner PT Harita Jayaraya, has an average production output of between 13 tons to 14 tons per year.

Locals have occupied the road since April 18, to pressure the company into negotiation over land compensation payments.

KEM continued to operate for 10 days until a shortage of supply led to the mine's closure.

However, Noke said, the present road blockade was less tight than last month, as locals allowed some of the supply material to pass the blockade.

"Although it's not enough for us to restart production," he added.

Noke expressed confidence that the mine would soon start operating again.

"I hope that within a few days locals would lift the blockade," he said.

He said his optimism was based on locals' growing confidence that a solution to the land dispute was in sight.

Noke said that locals and KEM agreed last week to resume negotiations over the land compensation payments.

"We want to resolve this dispute in a manner that we could be proud of," he said.

According to him, talks had come to a halt last year due to changes in KEM's management and the split of the Kutai regency -- where KEM was operating -- into three regencies.

"This stirred frustration among the locals that in the end has led to this blockade," he explained.

He said KEM was now operating in the West Kutai regency, which previously had no district head nor an office to govern the regency.

The local government had been a facilitator to negotiations between both parties.

The local government formed a verification team in 1998 to validate some 6,000 claims made by locals on the land that KEM's operation currently occupied.

KEM said it had already paid Rp 10 million ($1,200) in 1990 to each of the 444 land owners, as an incentive for leaving the land which KEM would occupy.

Noke said that the team had now completed its assessment.

"It validated that not all of the claims are true," Noke said.

According to the company, the area which locals have claimed exceeded KEM's total mining area of 1,285 hectares, some of which belonged to the government and the public.

However, Noke declined to name the amount of compensation that KEM offered to locals, saying that it might affect the present negotiation process.

Walhi chairwoman Emmy Hafild expressed her pessimism over a quick solution to the dispute, saying that negotiations thus far had already been too tedious.

Previous talks, she said, only concerned the parties that were allowed to represent the locals during the negotiations.

She conceded that land compensation payment was therefore a difficult issue to reach an agreement on.(bkm)