Monday, 12 December 2011 02:46

As costs escalate, mines take stronger operational control, discussed at LHA.

Indonesian mining industry headed for an overhaul

Come 2014, the archipelago’s miners will be obliged to export only processed materials

SINGAPORE (11 August 2011) – In three years’ time, mining companies in Indonesia can no longer export raw materials to major markets in China, India, Japan, Korea and Taiwan. A 2009 Law on Mineral and Coal Mining mandates that only processed products can be exported, thus prohibiting export of low-rank coal. The incoming law, which comes into effect in 2014, orders all miners to process raw commodities, ranging from precious metals like gold to base metals like tin, before being shipped overseas. In the very near future, coal miners can only export coal that is at least 5,600 kilocalories. This bodes well companies like Total Sinergy International (TSI) which recently launched its GEO-COAL technology that upgrades energy of low-rank coal by 50 to 100 per cent.

Apparently, the central government is banning the export of raw mining materials in a bid to boost investment in processing facilities, add value to exports and create jobs. According to Deddy Saleh, director general of foreign trade at the Trade Ministry, the government will increase the export tax for raw commodities including low-calories coal in 2014. Alwinsyah Loebis, managing director of state miner PT Aneka Tambang (Antam) announced on 27 June that the company will cease to export raw materials, thereby leading the industry overhaul.

For miners to turn low-grade coal into high-grade types, Supriatna Suhala, director executive of the Indonesian Coal Mining Association (APBI) estimates that building such facilities costs between $70 million to $80 million. Indonesia is the world’s top exporter of thermal coal with Australia being a distant second. The Indonesian Coal Mining Association (APBI) represents 240 companies including Bumi Resources. It projects that miners will produce 340 million tons of coal this year, an increase of 23 per cent from 275 million tons in 2009. 20 per cent of that amount – around 70 million tons – is to fulfill domestic demand while the remaining 80 per cent will be for export.

Integrated energy company, PT Indika Energy Tbk, is targeting to increase its coal production up to 31 million tons this year from 29.1 million tons in 2010 while Berau Coal Energy says it will increase production to 20.3 million tons of coal this year, up from 17.38 million tons last year.

Construction of a smelter is already underway for International Nickel Indonesia (Inco) and its Chinese JV partners, Baosteel Resources and Pan China International. This year, Antam and state utility Perusahaan Listrik Negara are also cooperating on an integrated ferronickel smelter and power plant in eastern Indonesia.

Already, there are backers for the radical regulatory changes. Sukrisno, president director of Tambang Batubara Bukit Asam – a state-controlled coal miner – supports the value-adding initiative, commenting that it would provide jobs. Olivier Bolligon, spokesman for Weda Bay Nickel added that, “We are in agreement in implementing the rules of not exporting raw mining materials. We support what the government is planning for this”. As we near the mandate, it is important for industry operators, mining giants and local players alike to strategise and collaborate in order to build smelters and other processing facilities in time. Register for Load & Haul Asia 2011 today to network with other operators and better grasp industry ongoings.

With little time, we should perhaps delve deeper into these issues:

• How exactly do the regulatory changes affect my day-to-day operations and bottom-line?
• How is the definition of operational excellence going to change and how can it be achieved?
• Are tyre management strategies in place for optimal haulage?
• How can we reduce haulage costs and enhance productivity?

Load & Haul Asia 2011 comes at a time when miners are faced with great earnings growth potential and obstacles that intimidate daily business procedures, operations and the ability to meet demand – translating directly to higher operational costs. Operational challenges include rising fuel costs, shrunk supply of skilled labour and acute tyre and equipment shortages cause costs to escalate, adding to operators’ woes. This forum is the only operations-focused forum, gathering peers, proactive solutions, expertise and technologies to help you minimise haulage costs, improveoperational performance and achieve your production targets.

The Center for Energy Sustainability and Economics (Center for Energy) is an industry research centre (IRC) that works to bring top executives together in communities of learning and practice to act as a catalyst for generating high-value energy business insight and channel top expertise to where the world needs it most. Meetings by the Center for Energy are managed by Arc Media Global, the world’s first B2B/G2B integrated marketing specialist headquartered in Singapore. Reach us at +65 6818 6344 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it