Mining news in brief

Down to Earth No. 76-77 May 2008

New regulation means cheap forests for mining

A new government regulation on non-tax income from forest areas has caused outrage among NGOs by setting low prices for the use of forests by mining companies and other non-forestry sector users.

The regulation - PP 2/2008 - sets the rate for mining in protection forests from Rp 2,250,000 - Rp3 million (around US$240-320) per hectare per year. In production forests, the rate is Rp 1.8 million - 2.4 million (around US$192 - 255) per year. Other uses, including oil and gas, geothermal and renewable energy, toll roads and electricity generation are set at Rp1.5 million ha/year for protection forests and Rp1.2 million ha/year for production forests.

"Indonesia should be ashamed of itself", said Siti Maemunah of the mining advocacy network JATAM, which is calling for the regulation to be revoked. Writing in the Indonesian daily, Kompas, in February, she said the move was proof that the president and his cabinet "do not understand the crisis that is faced by Indonesia's environment." JATAM calculates that the rate per square metre (Rp300/m²/year) is lower than that of a piece of fried banana from a street vendor.

Environment group WALHI, which also wants the regulation withdrawn, has mounted a fundraising campaign to rent forest areas and prevent mining companies getting to them.

Indonesia's 1999 forestry law banned open-pit mining in protected forests but intense pressure from powerful mining companies and a deteriorating investment climate prompted the government, in 2004, to allow thirteen companies to resume operations in these forests (see table below).¹

Conflicting statements have made it unclear whether the new regulation only applied to those thirteen companies, or whether it opens the door to more mining in forests.²

WALHI vs Newmont court case blow

The latest in a series of attempts to hold US mining company Newmont to account for pollution and health impacts from its now-closed North Sulawesi mine failed in December. In a case filed in March 2007, South Jakarta District Court ruled there was no proof that Newmont polluted the environment. In April last year, Newmont was also cleared of criminal charges linked to pollution in Buyat Bay.³ An appeal over that case was filed in late May with the Supreme Court.

WALHI said it would appeal the December verdict, while Newmont said it was considering a counter-suit against WALHI, even though a previous attempt to sue the environmental group for US$100,000 in damages has been rejected by the court. Last year too, the company agreed to settle a civil case without admitting wrongdoing, agreeing to pay US$30 million to an environmental foundation in North Sulawesi.⁴

Back in the US, Newmont was told to pay US$15 million to settle a shareholder class action, which accused the company of making false and misleading claims about the company's other main Indonesian interest, the Batu Hijau gold and copper mine in West Nusa Tenggara province. The company had claimed that the mine had reached the point of turning into 'one of our real cash registers', when in reality it had suffered a major pit failure that had a negative effect on mining operations.⁵

The Batu Hijau mine, on Sumbawa island, pipes over a hundred thousand tonnes of waste into the sea every day, around 50 times as much as ended up in Buyat Bay in Sulawesi, where the tailings have been linked to serious health impacts. In 2005, Indonesia's mining advocacy network JATAM accused the company of failing to alert the local community that there had been a leak from the tailings pipeline.⁶

Newmont has failed to meet a February deadline to sell a stake in Batu Hijau, despite threats by the Indonesian government to revoke the company's contract if it did not sell 10% to local governments. By January 28 it had only sold 2% of its share to Sumbawa district government for US$72.6 million.⁷

BHP to go ahead with Gag nickel project?

The Anglo-Australian company BHP is set to develop two Indonesian mining projects, according to the chairman of Indonesia's Investment Coordinating Board, M. Luthfi. The two nickel mining projects are in Halmahera and Gag Island, West Papua - projects that had been put on hold due to the protected status of the islands' forests. In late February, Luthfi said the BHP and state-owned mining company PT Aneka Tambang would sign agreements within the next two weeks, and that Aneka Tambang would hold 50% of the shares.⁸

In February last year, Aneka Tambang announced that it had signed an agreement to establish an alliance with BHP Billiton to explore the joint development of an extensive nickel deposit on the island of Halmahera in eastern Indonesia.⁹

BHP said in 2006 that it would not use submarine tailings disposal (dumping in the sea) for any mine on the island, and that it would not proceed with the mine if the area was gazetted as a World Heritage Site. The environment ministry submitted the Raja Ampat archipelago, which includes Gag Island, to the 'tentative list' for World Heritage Status in 2005.¹⁰

New mine planned for Lembata Island

Indonesian mining magnate Yusuf Merukh is planning to mine gold and copper on Lembata Island in East Nusa Tenggara, aiming to start production in 2011. Merukh who is one of the country's richest men, said he thinks the mine will take at least 70% of the island, or possibly the whole island. Merukh has also claimed he will build a city on the nearby island of Flores to house people moved from the mine area and that this will provide apartments, schools, hospitals and an international airport 'to compensate them and serve the mine'. According to NGOs, at least 60,000 people from 49 villages face eviction. According to Merukh, 90% of Lembata's local assembly voted to go ahead with the mine, but there have been widespread protests and strong opposition has been voiced by islanders. Merukh, through his company Pukuafu Indah, is a minority shareholder in Newmont Nusa Tenggara, operators of the Batu Hijau copper and gold mine on Sumbawa, in the adjacent province of West Nusa Tenggara.¹¹

Iron ore project in Java

An iron ore mining project on coast south of Yogyakarta district is causing controversy. It is an area of unique sand dunes which has been cultivated by local farmers for years. The operations of mining concessionaire, PT Jogja Magasa Mining, will put the farmers out of work as well as cause irreversible environmental damage. Local protests are apparently being ignored and an Australian investor, Indo Mining, has agreed to fund the project. Support for the project has come from the local government as well as Indonesia's parliamentary Commission VII on Environmental, Forest and Natural Resources.¹² In a recent television speech (April 30th) about the energy and food crisis, President SBY said that one of the strategies to deal with it was to make the extractive industries more attractive to investors.

Notes:
1. See DTE 61, 65 and 66 for more background.
2. Reuters 7/Mar/08; Jakarta Post 6/Mar/08; Kompas 21/Feb/08
3. See DTE 73
4. PlanetArk 19/Dec/07
5. Rocky Mountain News 12/Dec/07
6. See DTE 67
7. Minweb 22/Feb/08
8. Jakarta Post 29/Feb/08
9. Antara News 'Antam, BHP form alliance to develop Halmahera nickel deposits' http://www.antara.co.id/en/arc/2007/2/14/antam-bhp-form-alliance-to-develop-halmahera-nickel-deposits/ 14/Feb/07
10. See http://whc.unesco.org/en/tentativelist/ and, for further background: DTE 70, DTE 66). 
11. South China Morning Post 16/Dec/07
12. http://www.dpr.go.id/artikel/terkini/artikel_cetak.php?aid=3683