KEM's gold output plunges due to blockade

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)