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.