Mine prospecting falls in economic, political crisis

JAKARTA (JP): Mining explorations in the country have significantly dropped this year amid the monetary and political turbulence, the Indonesian Mining Services Association (Aspindo) said on Tuesday.

Association secretary general Umar Sirait said many foreign companies, which dominate the country's gold explorations, delayed their exploration activities due to the slump in the world's gold prices and uncertainties in the country's political situation.

Many local investors, which dominate the country's coal exploration, also delayed their explorations following the sharp depreciation of the rupiah against the dollar since the middle of last year, he added.

"We estimate preliminary mining activities, including exploration, feasibility study, have dropped by 40 percent this year," Umar told The Jakarta Post.

As a result, Umar said, the majority of the about 400 mining service companies of the country -- mainly comprising local companies -- which provide services to support such activities, currently toiled to survive amid the monetary and political crisis.

Mining sector is one of the few sectors which are believed not only to survive but also prosper amid the downfall of the rupiah since its products are for exports.

However, according to Umar, the windfall profits, which have been pouring into the mining sector amid the monetary crisis, are mostly enjoyed by the mining companies which are in production together with a few giant mining service companies which provide heavy equipments to support their operations.

"Most of the mining companies would rather handle all their activities by themselves than hiring mining services companies once they start production," Umar said.

Heavy equipment providers to productive mining companies include PT Pama Persada, John Holland of the Netherlands, PT Petrosea, and an Indonesian-Australian joint venture Dharma Hemwa.

"The rest of the mining services companies provide services like field surveys, drilling, laboratory tests and environmental impact analysis, are now on the brink of collapse due to the lack of orders," Umar said.

Umar called on the local businessmen to put their money for gold explorations, saying they would get a high return on their investment.

He said investors need to invest only between $1.5 and $4 million to complete the exploration of one contract area, but if the explorations are successful, they can easily sell the exploration results for twice as much to foreign mining companies.

"Thus far, our businessmen are not interested in mining sector because they thought it needs a lot of investment.

"It's true that the construction of mining field needs a lot of money. But, the fact is that you can make a lot of money by only doing exploration," Umar said, adding that many foreign exploration companies have came to explore gold in the country in an expectation that they can later sell the exploration results at high prices to mining companies. (jsk)