Legal uncertainty is a major problem for RI's mining sector
Legal uncertainty is a major problem for RI's mining sector
Fitri Wulandari, The Jakarta Post, Jakarta
State-owned general mining company PT Aneka Tambang (Antam) is
one of the leading mining firms in Indonesia. Despite the
overall gloomy mining sector, the listed company is pressing
ahead with the FeNi III smelter project. Antam's development
director Darma Ambiar spoke with The Jakarta Post's Fitri
Wulandari about the company's current and future projects. The
following is an excerpt of the interview.
Question: How do you see the prospects of the mining sector?
Answer: The prospects are gloomy. We are all familiar with the
problems in the mining sector. Legal uncertainty is one. For
instance, the exploration license of a mining company obtained
years ago could be unilaterally annulled because the mining area
is located in a protected forest (Law No.41/1999 bans open-pit
mining in protected forest. This law has become controversial
because many of the mining areas were not designated as protected
forest prior to the introduction of the law).
We are working together with (mining firm) BHP to run nickel
mining on Gag island. But since Gag island (is now) located in a
protected forest, BHP can do nothing.
The law is still our biggest problem because most of the
mineral deposits are located in the forests. If all forests are
considered protected forest, we won't have any new mining areas
to work on.
In addition, we have to face the problem of the high cost of
doing business in those regions, where most of our working areas
are located. For instance, there is no clear rule how much we
have to compensate residents whose houses and land are being
evicted for mining.
The company has also set aside an extra sum of money to secure
mining operations.
Can you explain how much of Antam's mineral deposits exist at
present?
High grade nickel (2.3%) is about 35 million tons of ore. We
have 1.65 million ounces of gold, high grade bauxite is 1.3
million tons and low grade bauxite is 108 million tons.
For the time being, there is no problem with nickel deposits.
Our nickel deposits are enough for 20-30 years. But with the
current process and technology, we cannot increase production.
The current technology only allows us to process high grade
nickel which has limited deposits.
If we can get technology to process low grade nickel, we can
increase our production because the low grade nickel is more
abundant than high grade.
New exploration is carried out only to maintain reserves but
not to increase production. It is because mining areas
particularly for nickel are very limited. Nickel deposit areas
are scattered mostly around eastern parts of Indonesia.
In the global market, there is a surge of demand for mining
commodities from China. How is Antamb preparing for this?
Basically, there is not much we can do. Buyers from China come
in suddenly and demand various commodities.
Particularly for nickel, we don't have any reserves left to be
sold to China.
China is particularly interested in iron sand and bauxite. And
we are in talks with them about contracts for those. We already
have a contract with China for bauxite amounting to 4 million
tons a year for four years. This commodity comes from our
reserves in Pulau Kijang, Sumatra.
We are trying to redevelop our old iron sand mine in Central
Java.
Initially, we didn't have any plans to develop the mine
because our only buyers, the cement producers, no longer needed
it. China said they need iron sand for about one million tons a
year. But it (the contract) is still in a discussion stage.
As for bauxite, we still face obstacles in meeting China's
demand although the demand is very high. Our bauxite mining is
located in remote areas which means very high transportation
fees. Thus, it is not profitable to sell bauxite ore.
The bauxite price has yet to reach the economic price level for
us to open new (bauxite) mining.
China is also interested in other base metals such as lead and
copper.
Overall, the prospects would be good, but not there is not
much we can do to meet China's demand.
How is the progress at the FeNi III project?
The construction of a new smelter for the FeNi III project has
started. We are now in the engineering phase until February.
Physical construction will began in mid December. The smelter is
scheduled to begin production in 2006.
With FeNi III running, we hope for additional nickel
production of 15,000 tons a year. At present, from our two
smelters (FeNi I and II) we produce 11,000 tons.
All (of the facilities are) located in our nickel mining in
Pomalaa.
For financing of the project, around $60 to $70 million comes
from internal funds, while the remainder, comes through the
issuance of some $200 million worth of bonds. In case of a
shortage, we'll borrow from local banks.
Any new projects in the future?
We plan to open a new aluminum mine in Tayan, West Kalimantan. It
is still going through a feasibility study. It should produce
commercial grade and smelter grade alumina. Commercial grade
alumina can be used for many purposes such as for water
purification and to make household utensils. While smelter grade
is for producing aluminum.
The mining will produce some 50 different kinds of products
with total capacity of 300,000 tons a year.
This is to cater the Japanese market.
Aside from that, we don't have plans for any big projects.
Particularly because financing opportunities have been lessened
as we have spent so much for FeNi III.