PT Tambang Timah to resume tin exploration

PT Tambang Timah to resume tin exploration

I Made Sentana, Dow Jones, Jakarta

Encouraged by improving world tin prices, Indonesia's PT Tambang Timah will resume offshore tin exploration in the second half of the year after suspending exploration in late 2001.

Thobrani Alwi, Timah's president director, told Dow Jones Newswires in an interview late Monday that the company will conduct offshore exploration in Riau and Bangka waters, off the coast of Sumatra. The company's main operations are onshore mining sites on the islands of Bangka, Belitung and Singkep, all off Sumatra.

"We will resume exploration as tin prices are expected to rise," Thobrani said.

The world's largest tin producer holds exploration and mining rights until 2025 for more than 7,700 square kilometers spread across several islands and offshore areas in the Java Sea.

The company halted exploration after world tin prices hit historic lows in 2001, falling below US$4,000 a metric ton. That year, Timah's net profit fell 89 percent to Rp 36.8 billion (US$4.1 million).

Illegal tin mining around the company's concession areas has added to Timah's problems by depressing the value of the commodity in regional markets. Asia's financial crisis of 1997-98 sparked a rise in illegal mining due to rising unemployment and a breakdown in law and order, the company says.

Uncertainty over mining regulations in Indonesia and social unrest also have discouraged mining exploration in the resource- rich country. Foreign mining companies have delayed new exploration until the government clarifies its regulations.

Timah recorded a net loss of Rp 38.68 billion in the first nine-months of 2002, but is expected to make a profit for the full year due to a late recovery of global tin prices in the fourth quarter, which it expects to continue in 2003.

Tin prices could rise to between $4,300 and $4,500/ton this year due to firming demand, Thobrani said.

"In 2004, tin price could be above $5,000 a ton," he said.

The company has also started looking at coal mining as a way of diversifying its mining operations.

"We are looking to diversify to other mining activities that are still within our competence," he said. "Naturally, coal mining is within our reach."

To begin with, Timah is looking to acquire small coal mines in Kalimantan, he said. The company isn't looking to buy large coal mines for the time being due to insufficient funds, he added without giving further details.

Timah is also looking into the possibility of processing asphalt with state-owned company PT Sarana Karya on Buton Island off Sulawesi in an effort to boost income. Its engineering unit has also received contracts to build crude palm oil plants in Sumatra.

Still, one of the biggest challenges for Timah is handling illegal mining, which has spread to more than 6,000 locations at Timah's mining sites. Timah buys tin ore from illegal miners as an arbitrary measure to handle it and also to control the supply in the market. But, the company can't control the production, Thobrani said.