MSM mine: community opposition continues as investor backs out

Down to Earth No. 76-77 May 2008

The Australia and UK - listed company, Archipelago Resources, is continuing preparations to mine gold in North Sulawesi, despite strong local opposition - both from communities and the provincial governor. Meanwhile, campaigners have welcomed the decision by German bank WestB to withdraw from the project, and have called upon other investors to follow suit.

Archipelago Resources is pushing ahead with construction at the Toka Tindung gold mine site in North Sulawesi even though it has no permit to mine there. Local people are already reporting problems. Work done at the site includes clearing forest; constructing a road, jetty, settling ponds and dams; diverting a river; and building a laboratory, workshop and office.

According to concerned local and national civil society organisations JATAM, ICEL, WALHI, YSN and AMMALTA, the forest clearance is believed to be one of the causes of a mudslide last year which affected six villages and killed fish in the river delta. According to Suara Nurani Foundation (YSN), the income of local fisherfolk has dramatically decreased since construction at the mine site began.

A joint press release from the organisations says that Archipelago Resources - a company listed on Australia's stock exchange and London's Alternative Investment Market (AIM) - is ignoring community protests, while failing to complete a new environmental impact assessment for the project, as required by law. Villagers who protest or who demand their rights are demonised as criminals and face confrontations with police and hired thugs. Two villagers and one activist were sentenced to 18 months' house arrest after a small guard post belonging to the company, was burned down on Rinondoran Beach.

"We regret that MSM shareholders continue to support the PT MSM gold mine project in our communities. The project is rejected by local communities" said a spokesperson for AMMALTA (Community Alliance to Reject Mine Waste).¹

The project, sited near the internationally-renowned Lembeh diving area, has been opposed by local people from the outset, and has a history of confrontation, inter-departmental legal wrangling and conflicting priorities between national and provincial level interests.²

WestLB pulls out; other investors' support in doubt

The local community's campaign to stop the mining project gained a major boost last year, when one of its European backers pulled out. The German Bank, WestLB, withdrew its lending to the project in December last year, after strong pressure from international campaigners, led by German NGOs Urgewald and Watch Indonesia. The remaining investors are Investec³ of South Africa, Société Générale (France), ANZ (Australia) and RMB (S Africa).⁴

According to a detailed report in the Asia Times,⁵ the indications are that these banks will not be willing to commit more funds to the project, unless it gets approval from the environment minister Rachmat Witoelar, and the North Sulawesi governor, Sinyo Harry Sarundajang. Both have publicly stated they will not give the go-ahead to the project, due to environmental concerns and local opposition. The Asia Times report describes how Archipelago's chief executive is trying to boost confidence and secure additional funds, by telling shareholders that the project's Environmental Management Plan (AMDAL) will be approved as soon as construction is 75% complete. The claim is linked to support for the project from the energy and mineral resources ministry (which has approved construction at the site, but not yet the actual mining). Yet other key players - the environment ministry and the provincial governor - show no sign of changing their position. Last year, both the fisheries and the social affairs ministers voiced their opposition to the mine. The German NGOs conclude that "the continuing media statements by Archipelago Resources claiming that gold production will soon commence, can only be interpreted as a desperate effort to prevent international shareholders and creditors from noticing that the final verdict on Toka Tindung has already been spoken."⁶

Continuing the Campaign

It is now imperative that the North Sulawesi governor maintains his pro-community stance in the face of any pressure from the energy and mineral resources ministry in Jakarta. The international campaign must meanwhile continue to press investors to join WestLB and withdraw for a socially and environmentally damaging project, which could also damage prospects for income generation from tourism.

The civil society network, BankTrack, is calling for the mine project's investors to withdraw their finance, and for Archipelago's direct shareholders (JPMorgan Chase, Prudential Financial and AXA) to divest.⁷

Notes
1. JATAM, ICEL, WALHI, YSN, AMMALTA Press Release, 'Archipelago starts to operate without community consent and environmental approvals', 4/Apr/08.
2. For more background see DTE 72 and 70.
3. This company bought out Rothschild Australia, which originally arranged the loan facility.
4. For more details on the financial side see http://www.banktrack.org/?show=dodgy&id=134
5. John Helmer, 'Another miner going nowhere in Indonesia', Asia Times 4/Apr/08.
6. Urgewald + Watch Indonesia! Press note, 'German Bank Pulls Out of Controversial Indonesian Gold Mine Scheme', 18/Jan/08.
7. For more information see http://www.banktrack.org/?show=dodgy&id=134 and http://www.jatam.org.)