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 ANTAM Tbk
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. ...