Major mining firms report good results

Hendarsyah Tarmizi, The Jakarta Post, Jakarta

Indonesia's major nickel, gold and copper mining companies are mostly performing well, despite the downward trend in the country's mineral production.

PT International Nickel Indonesia (Inco), PT Antam, PT Newmont Nusa Tenggara and PT Freeport Indonesia reported relatively good results in 2003, although they said the poor investment climate in the mining sector continued to hamper their mining operations.

In 2003, Inco, for example, booked a triple increase in its net earnings to US$104.2 million from $30.3 million in 2002, thanks to an increase both in nickel price and production.

The company produced 155 million pounds of nickel in matte (70,200 tons) in 2003, an 18 percent increase from 13.21 million pounds in 2002.

"Our annual production of 155 million pounds of nickel in matte was the highest in history and substantially above our initial goal of 140 million pounds for 2003," said Bing R. Robing, the company's president and chief executive officer.

Inco's realized price for nickel in matte averaged $7,117 per ton ($3.23 per pound) in 2003, up from $5,114 per ton ($2.32 per pound) in 2002.

Inco's senior supervisor for government relations and public affairs, Rajeshanagara Sutedja, said the company expected to increase nickel production to 160 million pounds this year to take advantage of higher nickel prices in the world's metal market.

Rajeshanagara is upbeat the increase in the price of nickel will continue this year in line with an expected worldwide increase in demand.

"Power supply remains the bottleneck in our operation. With more power, we could produce more nickel in matte," he said, adding that in cooperation with its Canada-based parent company Inco Ltd., Inco was now improving the power system in order to get an additional power supply of 10 megawatts by later this year.

Like Inco, diversified mining company PT Antam also reported good result in 2003.

Antam, which produces nickel, gold, silver, bauxite and iron sands, reported a consolidated operating profit (unaudited) of Rp 468 billion (about $55 million) in 2003, 66 percent higher than the previous corresponding year due mainly to increased revenue resulting from higher gold and nickel prices.

Gold prices rose 17 percent in 2003 while the prices of nickel, saprolite nickel ore and limonite nickel rose 37 percent, 30 percent and 82 percent respectively during the year.

In 2003, Antam's gold production reached 4,176 kg, exceeding the company's target of 4,100 kg, while silver production rose 12 percent to 28,570 kg over 2002.

The company's production of contained nickel in ferronickel totaled 8,933 tons in 2003, below its target of 10,000 tons.

For nickel ore, Antam largely met its internal target. In 2003, the company produced 3.3 million wmt (wet metric ton) of saprolite and 1.1 million wmt of limonite.

"In 2004, however, you should expect to see decreased ferronickel production and sales as we conduct the necessary full overhaul of the FeNi II smelting plant. For other commodities, we expect stable production and sales," Antam investor relations director Eko Indrawan told The Jakarta Post.

PT Newmont Nusa Tenggara (NNT), which operates the Batu Hijau gold and copper mine in West Nusa Tenggara, expects increased production within the next few years in line with the company's commitment to improving its operations in the area.

In 2003, Newmont produced 610,000 million pounds of copper and 585,000 ounces of gold at the Batu Hijau mine, one of the youngest gold and copper mines in the country. The copper production in 2003 is slightly lower than 657 million pounds in 2002 but the gold production is higher than 492,516 ounces in 2002.

"With continued improvements in operating practices, we expect similar level of production in 2004," the company's president director, Robert Gallagher, said.

PT NNT, which signed a fourth generation contract of work with the Indonesian government in 1986, has indicated a major improvement in production since the start of commercial production at the company's Batu Hijau mine in March 2000.

By December 2003, Batu Hijau's ore reserves were one billion tons containing 0.525 percent copper and 0.37 grams per ton gold. At the current production rate, Batu Hijau's mine life will continue until 2005.

The company is currently exploring other parts of its contract of work area, such as the Elang area.

As a contractor of the government, PT NNT contributes significantly to the nation's economy through employment, royalties and taxes, a large part of which return to the province of West Nusa Tenggara.

At present, PT NNT is responsible for the direct employment of over 7,200 people, comprising 4,200 employees and 3,000 contract employees. Of these, more than 60 percent are from the province of West Nusa Tenggara.

The company said it also contributed about $35.90 million a year in taxes, non-taxes and royalties to the Indonesian government.

Gallagher said that PT NNT would continue to improve its operations and increase production, as well as maintaining its commitment to open, transparent and safe operations conducted in an environmentally responsible manner that emphasizes partnership and sustainable development of local communities.

Freeport Indonesia also reported rosy 2003 results for the company's mining operation in Mimika, Papua. The company's Grasberg mine and surrounding minerals complex is well known as one of the greatest ore bodies in the world.

Freeport's senior manager for corporate communications department, Siddharta Moersjid, said that the company's gold sales volume increased 8 percent to 2.5 million ounces in 2003 from 2.3 million ounces in 2002 because of higher gold ore grades, partly offset by lower mill throughput.

Copper sales, however, declined 15 percent to 1.3 billion pounds in 2003 from 1.5 billion pounds in 2002 because of lower copper ore grades, production and mill throughput.

The company said that as a result of mine sequencing changes at the open pit, a portion of the higher grade previously forecast to be mined in 2004 is expected to be mined in 2005.

"We estimate 2004 production to be 1 billion pounds of copper and 1.5 million ounces of gold, and 2005 production to be 1.5 billion pounds of copper and 2.9 million ounces of gold," he said.