THE INDONESIAN MINERAL MINING
SECTOR: PROSPECTS AND CHALLENGES
Djoko Widajatno, Irwandy Arif
Association of Indonesian Mining Profesional
GERMAN – INDONESIA MINING TECHNOLOGY SYMPOSIUM 2011
Hotel Borobudur, Jakarta – Indonesia 13-04-2011
1
Agenda
1
PROSPECT OF INDONESIA MINERAL RESOURCES
2
INDONESIA MINING MAP IN THE GLOBAL CONTEXT
3
INDONESIA MINING MAP IN THE INDONESIA
INVESTMENT CONTEXT
4
NEW MINING LAW
(UU MINERBA)
5
CONDITIONS AND ACTUAL CHALLENGES OF
INDONESIA MINING INDUSTRY
6
CONCLUSION
2
1
PROSPECT OF INDONESIA MINERAL
RESOURCES
3
DISTRIBUTION OF COPPER AND NICKEL DEPOSIT IN THE ASIA PACIFIC
REGION
7
6
28
14
15
5
17
9
4
16
27
10
2
1
12
11
13
3
Porphyry deposit
> 1.0 Mt Cu
8
18
25
24
23
22
Nickel deposit
> 0.5 Mt Ni
21
20
26
0
2000
kilometers
27
19
4
DISTRIBUTION OF GOLD DEPOSIT IN THE ASIA PACIFIC REGION
11
6
7
1
4
5
2 3
12
14
13
Gold deposit (> 5.0 Moz)
15
16,17
22
Gold deposit or occurrence
19
18
21
0
25
24 26
2000
kilometers
23
27
28
20
5
Source: Ministery of Energy and Mineral Resources Indonesia - 2010
6
MINERAL RESERVES AND RESOURCES IN INDONESIA
NOTES
Bauxite
Gold
Plaser Gold
Manganese
Nickel
Iron sand
Silver
Copper
Tin
7
MINERALS AND COAL RESOURCES
(As of December 31st 2007)
COMMODITIES
UNIT
RESOURCES
Tin (metal)
Ton
622,627
462,402
Nickel Ore
Ton
1,650,418,000
585,209,103
Copper (metal)
Ton
68,960,881
41,473,267
Primary Gold (metal)
Ton
4,163
3,394
Silver (metal)
Ton
505,151
23,026
Iron Sand (concentrate)
Ton
267,337,519
4,732,000
Bauxite (metal)
Ton
469,879,260
23,999,901
Manganese (metal)
Ton
866,795
105,000
Carat
539,800
93,565
Diamond
RESERVES
Granite (non metal)
Ton
54,731,230,000
-
Coal
Ton
104,943,590,000
21,131,840,000
8
Data from : Directorate of Mineral Resources Inventory
Indonesia Metaliferous Mineral Resources 2007
Million Tonnes
1650.42
1800
1600
1400
1200
1000
800
600
400
200
0
1565.20
741.30
382.24
267.34
10.58
Nic
kel
Iro
n
Or
e
5.78
1.64
71.31
23.70
Pla
Pla
La
Se
Pri
Pri
La
Ma
ter
ter
dim
ma
ma
ng
cer
cer
i tic
i tic
an
r
r
en
y
y
C
T
es
i
I
h
C
T
tar
t
I
r
r
a
rom
on
i ta
hro
on
e
niu
yI
n
m
ite
ium
ro n
m
ite
Or
e
Precious Metal Resources
Ton
622626.93
700000
505151.07
600000
500000
400000
300000
200000
13031.00
100000
4162.55
123.00
0
Tin
Platinum
Primary Gold
Placer Gold
Silver
Indonesian Mineral Resources for Metaliferous
2007
Base Metal Resources
68.96
Million Tonnes
70
60
50
40
30
20
5.99
0.00008
10
3.00
0.21
1.30
0
Mercury
Copper
Zinc
Lead
Molibdenum
Rare Metal Resources
Million Tonnes
648.87926
700
600
500
0.01
400
300
200
100
0
Bauxite
Monazite
Cobalt
IRON PLACER
Indonesian Mineral
Resources for
Metaliferous
2007
Millions
302.00
252.00
202.00
152.00
102.00
52.00
2.00
IRON ORE
402
302
202
102
Resources
Reserves
2005
Resources 73,050,035.47 165,075,794
5,332,000
4,732,000
Reserves
Millions
2
2004
2004
2005
2006
2007
320,462,611
320,462,611
368,493,173
382,243,211
2,216,005
2,216,005
2006
2007
165,108,739.9 267,337,519.3
4,732,000
4,732,000
RESOUCES AND RESERVES METALIFEROUS INCREASE
MANGANESE
Millions
35.00
30.00
25.00
NICKEL
20.00
15.00
Millions
10.00
1,500
5.00
Resources
Reserves
1,300
1,100
2004
2005
2006
2007
2,471,243.55
8,273,052
9,091,105.05
10,583,756.98
284,000
884,000
32,738,682
32,703,889
900
.
700
500
300
100
2004
2005
2006
2007
Resources
1,428,582,200
1,681,655,200
1,415,058,000
1,650,418,000
Reserves
450,590,000
437,504,950
588,887,776
585,209,103
Indonesian Mineral Production Survey
Data from : DPPMB - 2011
Resources and Production of non-metaliferous
2007
Indonesia non Metaliferous Production and Resources 2007
2
INDONESIA MINING MAP IN THE GLOBAL
CONTEXT
16
INDONESIAN MINING IN THE WORLD CONTEXT
1. 15th rank of world coal reserve: Coal resources estimated around 104
billion tons with mineable reserve approximately 21 billion tons
2. 7th rank of world gold reserve: Gold resources estimated around 4,163
tons with mineable reserve approximately 3,394 tons
3. 7th rank of world copper reserve: Copper resources estimated around
68.96 million tons with mineable reserve approximately 41.47 million tons
4. 5th rank of world tin reserve: Tin resources estimated around 0.622 million
tons with mineable reserve approximately 0.462 million tons
5. 8th rank of world nickel reserve: Nickel ore resources estimated around
1,650.4 million tons with mineable reserve approximately 585.2 million tons
(Source: Indonesian Mining Association, 2007)
17
COMPARATIVE ADVANTAGES
(NATURAL RESOURCES)
18
Policy Potential Index
Fraser Institute Index
2010-2011
19
Mineral Potential Index
Fraser Institute Index
2009-2010
20
Exploration and Spending Conditions based on Countries
(PricewaterhouseCoopers-mine Indonesia 2007)
21
Indonesia Mine Profitability versus Global Average
(PricewaterhouseCoopers-mineIndonesia 2007)
22
3
INDONESIA MINING MAP IN THE INDONESIA
INVESTMENT CONTEXT
23
STATE OBJECTIVE 2010 - 2014
Key Indicators
Economic Growth
Target
6.3 – 6.8% average per year
7 % average, 7.7 % by the year of 2014
Inflation
4 – 6 % average per year
Unemployment
5 – 6 % by the end of 2014
Poverity
8 – 10 % by the end of 2014
Investment
Rp. 1.950 trillion
Source : RPJMN 2010-2014 (Govt Reg. no 5, 2010)
2009
Growth (%)
GDP (Rp Trilion)
Infrastructure Demand 5% GDP
(Rp. Triliun)
2010
2011
2012
5.1 5.5
6.2
6.8
5,206.5 5,989.5 6,718.3 7,632.3 260.3 299.5 335.9 381.6 2013
7.3
2014
7.7
8,611.0 9,523.3 430.6 476.2 Total Infrastructure Investment Demand (2010 – 2014) Rp. 1,923.8 Trilion
Source: Bappenas, Paparan Menteri Bappenas dalam Rakor Menko Ekonomi tentang Investasi Infrastruktur Agustus 2010
Trends in the Indonesian mining industry
(PricewaterhouseCoopers-mine Indonesia 2007)
The mining industry is important to Indonesia. It is a substantial
provider of export earnings, economic activity and employment, and
support regional development.
The government remain passionate about the potential untapped
mining reserves in Indonesia. With some further improvements to
the business environment there is no reason why this resource
would not be developed and Indonesia could once again attracts
more share of global mining exploration allocation.
2006 was another spectacular year for the mining industry, both in
Indonesia and globally-and with the commodity prices at their
current highs, 2007 and 2008 will see even better financial results.
Globally, investor confidence in the sector and its prospects has
remaining strong, fuelled by a sustained rise in commodity prices,
and as witnessed by a year of significant growth in market
capitalization on both international bourses and the Indonesian 25
exchange.
To be an important contributor to the
Indonesian economy
The mining industry is important to Indonesia. It is a
substantial provider of export earnings, economic activity and
employment, and support regional development.
The government remain passionate about the potential
untapped mining reserves in Indonesia. With some further
improvements to the business environment there is no reason
why this resource would not be developed and Indonesia
could once again attracts more share of global mining
exploration allocation.
The mining industry contribution to the overall Indonesian
economy increased significantly in 2011 in comparison with
previous years. Owing to the high commodity prices, mining
products accounted for approximately 6.2% of the total
Indonesian GDP, up from 1.1% in 2009 (Badan Pusat Statistik26
Indonesia).
REALISATION AND ESTIMATE OF INDONESIA COAL PRODUCTION
370
400
320
Million tonnes
280
300
193
200
100
0
Domestic
240
225
196
145
48
2006 ®
Export
147
148
49
50
2007
2008
Production
220
198
150
150
75
90
2009
2010
150
130
2015
170
150
2020
150
2025
begining of Electricity acceleration PLN
Notes :
- Production realization 2006 (32 PKP2B = 162 M ton, KP- PTBA = 9.2 M ton, 130 local KP = 22 M ton);
- Production Increase at 2006 due to production capacity increase of PKP2B 10 M ton ( PT Adaro Indonesia, PT
KPC and PT Indominco Mandiri) and production increase of local KP 12 M ton;
- 2007-2010 acceleration of generating coal Powerplant 10.000 MW
- Government Reg No.5/2005 about National Energy Policy, 2025, coal domestic market for 33% of production
27
CONDITION OF MINING COMPANY IN INDONESIA - 2006
PU.
EKS.
SK.
KONTR
EKT.
TERM.
JUMLAH
KK
2
19
6
2
12
194
235
PKP2B
1
21
24
6
28
61
141
PU.
KP
50
EKS.
299
PU
= General Survey;
EKS. = Exploration;
SK
= FS;
KONT. = Construction;
EKT. = Exploitation/Production;
TERM. = Termination;
KK
= COW Generation 1 – 7
(1967 – 1998);
PKP2B= Coal Contract,
Generation 1 – 3 (1981 – 2000);
EKT.
433
A/J.
85
O/M.
8
TERM.
JUMLAH
1186
2061
KP = Mining License coal and mineral
A/J = Transportation and sales;
O/M = Processing and refining;
28
MINERAL AND COAL INVESTMENT
Coal and Mineral Investment Statistic
1,200.00
in US $ m illion
1,000.00
800.00
600.00
400.00
200.00
0.00
Mineral dan Batubara
2004
2005
2006
980.03
880.40
1,125.91
Year
29
29
STATE INCOME FROM MINING SECTOR
Source: Ministery of Energy and Mineral Resources Indonesia - 2010
4
NEW MINING LAW
(UU MINERBA)
31
Basic Principles in the New Mining Law
l
Mining activities will be grouped into: mineral mining and coal
mining
l
Mineral mining will be grouped into: radio active mining, metal
mining, non metal mining and rock mining
l
Clarification of Central Government, Provincial and District Authority
l
Establishing of Mining Zone; Mining Estate
l
Establishing “State Reserve” for the special national interest.
l
There are only mining license and mining special license, and mining
agreement. There will be no more direct contract between company
and government
l
Foreign mining company may have an agreement with the State
Owned Mining Company/Representative Agency to develop “state
32
reserve”
Basic Principles in the New Mining Law
z
License will be issued through tender mechanism based on equality and
transparency
z
Licensing system will be simplified and grouped into two: exploration
license (general survey, exploration and FS) and operation license
(construction, mining, processing, transportation and marketing)
z
Puts more attention to environmental protection (reclamation) and post
mining
z
Puts more attention to the community development aspects
z
The Existing of License Authority and Agreement will be honored vs 2-5
years transitional period (Commission VII DPR?)
z
z
Processing and refining have to be conducted in Indonesia
z
A clear sanction to mining players who violate the law
33
POLICY ON COAL AND MINERAL
DEVELOPMENT IN INDONESIA (1)
z
To develop optimum economic benefit through
optimization of production and income
z
To provide much needed conducive climate for
investment
z
To create optimum value added for the
development of extractive and energy industries
z
To strengthen capability of local people as well as
to promote technological development for
Indonesian
(clean
coal
technology,
coal
gasification,
coal
liquefaction,
exploration
technology, processing technology, etc)
34
POLICY ON COAL AND MINERAL
DEVELOPMENT IN INDONESIA (2)
z
To respect contract sanctity
z
To promote good mining practices
z
To promote good corporate governance
z
To enhance the domestic utilization of mineral
and coal
z
To strengthen community-based development
program with more synergistic cooperation
among the government, private sector and local
people
35
5
CONDITIONS AND ACTUAL CHALLENGES OF
INDONESIA MINING INDUSTRY
36
ACTUAL CHALLENGES
„
„
„
„
„
„
„
„
„
„
Law uncertainty and business operation
Overlapping of mining area with forestry area (Law 41/1999)
Regional autonomy: duplication and contradictions between central
and regional government regulations;, etc
Taxation issues (tax incentives, VAT on gold and coal, corporate
tax rate)
Regional demand on the equality of income between central and
regional and reattribution which is not stipulated in the contract
Illegal mining
Paradigm shift to triple bottom line
A more stringent environmental standard
Unfairness in divestment of foreign interests and mine closures.
Implementation of Good Mining Practice.
37
37
CONCEPT OF SUSTAINABLE MINING
IN INDONESIA
z
Mining commodity is transformed into human resources
development and sustainable economic potential
z
People living in the vicinity of mining area must get benefit
from the existence of the mining
z
Sustainable mining should be based on 3 pillars: economic,
social and environmental sustainability
38
38
6
Conclusion
39
Conclusion of
Indonesia Mining Industry 2010
•
Indonesia is still abundant with mineral reserves and
holds a promising geological potential.
•
Improvement on the Indonesia mining business
condition must be done immediately by all
stakeholders.
•
Mining activities must be conducted based on the
principle of Good Corporate Governance and Good
Mining Practice which is founded on triple bottom line
approach
•
Socialisation of a positive Indonesian mining industry
image.
40
REFERENCE
1. Bambang Setiawan
2. Dedy Aditya Sumanagara
3. Fraser Institute
4. Irwandy Arif
5. Price WaterhouseCoopers
6. Purnomo Yusgiantoro
7. Simon Sembiring
8. Darwin Zahedy Saleh
41
Thank You