2008-2009 DATA CONSULT. All rights reserved.
February 2011



The performance of Indonesia's metal mining industry has not been up to expectation with shrinking production in the past year because of a number of factors and unfavorable condition. The productivity of some metal mines has been on the decline. Many reserves have been almost depleted after years of intensive exploitations. Heavy rains also contributed to the decline in production in 2010.

Meanwhile, the world's demands for metals are growing although decline has been recorded in the demands for certain metal such as nickel as a result of the earthquake triggered tsunami in Japan in March, 2011. The extent of the damage caused by the tsunami on mining industry in Indonesia, however, has yet to be estimated.

The executive director of the Indonesia Mining Association (IMA) Priyo Pribadi Soemarno said so far Indonesia had supplied 55% of the Japanese nickel requirement. Now, however, many factories in Japan have been out of function after the tsunami.  Nickel producers in Indonesia  are forced to look for buyers outside Japan. It will take some time before exports to Japan is normal again. Japan is expected to take at least two years for recovery.

Unlike nickel, demand for copper is expected to rise in the world market. The country's copper production, however, is expected to shrink 36% to 644,098 tons this year. The declining trend is expected to continue through 2012 with one of the major producers PT Newmont Nusa Tenggara (NNT), has been delayed in the expansion program of the US company.

NNT President Martiono Hadianto said the company's copper production is expected to continue to decline until 2012 as it has just started work in the 6th and 7th phases of its expansion program in Bata Hiram mine in West Nusatenggara.

The country's tin production also decline din 2010 both production of concentrate and metal.  Unfavorable climate was the main factor causing the decline. The production fell when the price of that commodity rose sharply.

The mining sector is a major export earner for Indonesia. It will remain a big contributor to the country's foreign exchange income in the coming years.

A number of problem, however, have remained unsolved hampering development of the mining sector such as overlapping in mining concessions and land controlled by forest concessionaires and land appropriated for industrial timber estates (HTI) and plantations and conflicting regulations issued by the central and regional administrations.

Indonesia' mineral reserves

Indonesia is known to be rich in mineral resources, but the reserves for metal mineral reserves have been reduced sharply after years of intensive exploitations.  Most of the metal reserves are estimated to last only for 24-33 years.  The iron ore reserves, however,   still have a longer lifetime.

Gold reserves in Papua, exploited by the US Company Freeport Indonesia are one of the largest gold reserves in the world. Freeport has reported large gold production every year from Papua. Indonesia ranks among major players in gold trade in the world.  The country's gold reserves, however, are estimated to have a life time of 33 years.  Similarly, the country's copper reserves estimated to total 27.7 million tons are expected to be depleted in 27 years.

Indonesia, which has supplied 50% of Japan's nickel requirement, has only remaining reserves   estimated to last only for 25 years to come.

Indonesia has potential reserves of iron sand, but the potentials are not yet sufficiently tapped. The potentials are believed to have an economic life of 130 years.

Grasberg gold reserves in Papua are the largest gold reserves in Indonesia even one of the largest in the world. The reserves have estimated resources of 3,117 million tons. The copper reserves in Batu Hijau, in Sumbawa, West Nusatenggara are estimated to reach 525 million tons.

Other copper mines with reserves of around 75 million tons to 114 million tons are found mainly in Central Kalimantan and North Sulawesi.

Metal Mining Companies

Mining companies in Indonesia consists of local and foreign companies. Some of them have started production, but other are still in the process of construction and explorations.

Large foreign companies and state companies dominate business in metal mining industry in the country. They operate in various areas in Papua, Kalimantan, Sulawesi and Sumatra.

Main players in metal mining industry

Some of the metal mining companies operating in the country are world class players. They are dominant in reserves, production and market.  Among them are PT Freeport Indonesia, PT Timah Tbk, PT Antam Tbk  and  PT Inco Tbk

PT Freeport Indonesia
PT Freeport Indonesia (PTFI) is a local unit of the US giant Freeport-McMoRan Copper & Gold Inc. PTFI has big copper, gold and silver mines in the regencies of Mimika in Papua. The mining complex of PTFI in Grasberg is one of the largest producers of copper and gold in the world. It has the largest proven copper reserves in the world and the world's largest gold reserves.

Currently PTFI uses two mining methods - open-pit mining using only trucks and big electric shovels in Grasberg, and block-caving mining for underground mining    or   Deep Ore Zone (DOZ).

Open pit mining in Grasberg
PTFI uses big shovels and trucks in Grasberg to produce materials classified as ores or waste depending on the economic value of the materials.

The ores are put into ore crushing equipment before being transported to processing mill. The overburden is disposed of using trucks in a certain places.

DOZ underground mining
In the DOZ  block cave, the LHD equipment loads  the mud into  an ore pass  leading to a sliding  channel to be loaded into trucks  which will carry the material to the crushing equipment. After being pulverized the ores are sent to the processing mill through a conveyor.

PT Timah Tbk
PT Timah Tbk, which is 65% owned by the state and 35% by investing public, is the largest tin miner in the country. It is the second largest tin company in the world in production capacity. It has an annual production capacity of 50,000 tons   with a 16% share of the world tin market.

In 2008, PT Timah Tbk verified its tin mineral reserves at 1.06 million tons estimated by Micromine, an independent consultant form Australia. The reserves are estimated to have an economic life of more than 10 years. However, part of the reserves has been damaged as a result of illegal mining. The operations of illegal miners are still a threat to both onshore and offshore reserves.

There are different types of tin  produced by PT Tambang  by quality  known as  Banka Tin (with 99.9% Sn content),  Mentok Tin (99.85% Sn content), Banka Low Lead (Banka LL)  and  Banka Four Nine (99.99% Sn content).  There are also different types by forms including Banka Small Ingot, Banka Tin Shot, Banka Pyramid   and Banka Anoda

PT Timah Tbk is also developing downstream tin industry. The company has built a factory to produce chemical tin in Cilegon, Banten. The factory has a production capacity of 10,000 tons per year. The capacity will be expanded later.

PT Aneka Tambang Tbk (ANTAM) is a publicly traded state mining company 65% owned by the government and 35% by investing public. The company produces several types of metal minerals mostly exported. Its products in clued ferronickel,  low and high grade nickel ores, gold, silver  and bauxite.

Antam also offers mineral processing  and  refining services. Currently it has four business units - nickel mining business units, (UBPN) in Southeast  Sulawesi, UBPN  in North Maluku, gold mining business units  (UBP)  and  precious metal refining and processing  business  units.
Antam has closed  the bauxite UBP in Kijang, on the island of Bintan, but later opened the Tayan unit in West Kalimantan to develop the reserve and process the bauxite into Chemical Grade Alumina in cooperation with Japan's Showa Denko K.K.

Antam's nickel commodities include ferronickel and nickel ores. Nickel ores are produced from its mining units in Southeast Sulawesi and North Maluku and ferronickel is produced from its factories in Southeast Sulawesi. Antam operates two nickel mines in Southeast Sulawesi including Pomalaa and Tapunopaka,  and two in North Maluku  including in Gee  and Buli,  and three processing plants producing ferronickel in Pomalaa, Southeast Sulawesi.

Antam's production of nickel ores for exports has a nickel content of 1% to more than 2%. All nickel production of Antam including nickel ores and ferronickel  has been exported. Ferronickel has been exported to South Korea and Europe, and high grade nickel ores are exported mainly to Japan  and  Europe and low grade  ore to Japan and China.

Antam has nine subsidiaries with majority share directly owned, one with majority share indirectly owned, and two other companies owned by the subsidiaries.  Those with majority share directly owned by Antam are : 

PT Antam Resourcindo which is a mineral exploration company  and operator of mines  with 99.98% controlled by Antam.

PT Indonesia Chemical Alumina (ICA), which is an alumina processing company  and mining contractor now developing the Tayan Chemical Grade Alumina project  with Antam having  a 80% stake.

PT Cibaliung Sumberdaya (CSD) which operates the Cibaliung gold mine in Banten with Antam having a 99.15% stake.

PT Indonesia Coal Resources (ICR) which operates in coal mines  and now developing the Sarolangun coal mine  with Antam  having a 99.98% stake.

Asia Pacific Nickel Pty. Ltd. (APN), an investment company wholly owned by Antam.

PT Mega Citra Utama  and  PT Borneo Edo International, both holders of bauxite mining concessions  99.5% owned by Antam.

PT Abuki Jaya Stainless Indonesia which is a stainless steel processing company 99.5% owned by Antam.

PT Dwimitra Enggang Khatulistiwa, which is a holder of bauxite mining concession  wholly owned by Antam.

In 2010, Antam's reserves of nickel ores and nickel mineral resources declined. Its Saprolite Nickel reserves shrank 17% and Limonite Nickel reserves dropped  20%,  while its gold reserves rose 4% and bauxite reserves increased 6%.

Proven  and available reserves  of PT Antam rose in 2010 -  Saprolite Nickel  by  8%,  gold  by  19%  and  bauxite by 1%.

PT International Nickel Indonesia Tbk (PT INCO)
PT INCO produces nickel  in matte, which is an intermediate material of lateritic ores  in its integrated processing facility near Sorowako  in  Sulawesi.

All production of Ni- in  Matte of  PT INCO is sold under long term contract to Vale Canada  and  Sumitomo Metal Mining Co.Ltd.

PT INCO's shareholders are :
Vale Canada Limited        :        58.73%
Sumitomo Metal Mining Co.Ltd        :        20.09%
Public        :        21.18%

Nickel proven reserves and inferred  reserves owned by  PT INCO  in 2010   declined  from 2009. In 2009 its proven reserves  totaled 82.3 million  tons down to 75.4 million tons in 2010. Its inferred reserves also fell  to 38.3 million  tons  from 38.8 million  tons in the same period. The decline followed years of exploitation.

Bad weather  hampers  production  of metal minerals

In general the country's metal mining production declined in 2010, but  increases were recorded in the production of some mineral metals like Converter Matte, Ni + Co in Matte,  and  ferronickel (Fe Ni).

The country's production of copper fell from 998,530 tons in 2009 to 878,376 tons  in 2010 ; gold production dropped  from 127,716 kg  to 104.600 kg  in the same period and  bauxite production shrank 783.097 mt to 104,692 mt  as a result of unfavorable weather  with high rainfalls.

Bad weather also caused a decline in the production of tin when the price of that commodity rose in the world market.

Gold production fluctuates

The country's gold production has fluctuated over the past years. In 2007, the country's gold production surged 42.8%, but in 2008, the production fell  deeper  by 45.4%, from 117,854 kg to  64,390 kg. A steep rise was recorded in 2009 when production shot up 98.3%  to 127,717 kg. In 2010, the  production gold shrank again to 104,600 kg.

PT Freeport Indonesia remains the largest producer. In 2010, that company produced 61,833 kg of gold or almost 60% of the country's total gold  production. PT Newmont Nusa Tenggara followed  as the second largest producer  of gold in Indonesia. Unlike PT Freeport, which recorded a decline in production  in 2010, PT Newmont Nusa Tenggara has continued to post an increase in output . In 2010, PT NNT  recorded an increase in production to 22,930 kg from 17,406 kg  in 2009.

The process of production  of PT Newmont Nusa Tenggara  was not affected by bad weather that it could continue to operate normally in its mines in Nusatenggara .

PT Nusa Halmahera Minerals recorded a substantial increase in production   from 10,434 kg  in 2009 to 15,122 kg  in  2010.

PT NNT  boosts copper  production  in  2010  before expansion

The country's production of copper metal  and (copper concentrate declined in 2010 . PT Freeport  attributed the decline to low  content of the mineral ores in the Grasberg mine. The production of copper concentrate of PT Freeport Indonesia  dropped  from 2,731,769 dmt  in 2009  to  2,575,006 dmt  in  2010, and that of copper metal fell  from 774,661 tons  in 2009 to 632,325 tons in 2010.

Meanwhile, the cooper concentrate  production of  PT Newmont Nusa Tenggara  rose from 752,355 dmt  in 2009 to 891,765 dmt in 2010  and its  production  of copper metal reached 246,051 tons in 2010 up from 223,869 tons in 2009.

The production of  PT NNT began to decline 2011  as it is in  the process of expansion with its 6th and 7th mining phases. The decline is expected to continue until 2012. ...

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ICN - February 2011



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