DtE 32, February 1997
BUSANG: FIGHTING OVER THE POT OF GOLD
When Bre-X Gold, a small Canadian exploration company discovered a huge
gold deposit at Busang in East Kalimantan last year, big companies and
powerful business players lined up to grab a piece of the action. Since
then, Suharto's children, international tycoons and company executives have
been fighting over the rights to profit from what may become the biggest
gold mine in the world.
No attention has been paid to the impact of this mine on local
communities, whether royalties will be paid to traditional landowners, for
example. Once again the bulldozers look set to start tearing up the land, as
company executives trust that local communities' capacity to object will be
too weak to make a difference.
The Busang saga started early last year when Bre-X announced that it had
struck gold in a big way, upping estimates from 15 million to 40 million
ounces of gold reserves. (Current figures given by the company are at least
57 million ounces of gold, with some estimates as high as 100 million.)
Scores of other Canadian companies signed up for contracts in
Kalimantan's 'gold belt' hoping to make similar finds, as Bre-X shares
skyrocketed on the Toronto stock exchange.
Among those expressing a strong interest in developing the deposit was
Vancouver-based Placer Dome, second biggest gold producer in North America.
But the real soap opera began in October. First, Bre-X shares plummeted
amid rumours that the Indonesian government was going to disqualify the
company from involvement in the mine's development. Bre-X fought back and
strengthened its bargaining position against take-over attempts by bigger
companies by making an alliance with Suharto's eldest son Sigit
Harjojudanto. Sigit's influence is reported to have cost Bre-X dearly: a 10%
stake in the mine and a consultation fee of US$1 million a month for 40
months. Some analysts were later to say Bre-X chose the wrong Suharto child,
when another Suharto offspring entered the story.
Tutut (Siti Hardianti Rukmana), the President's eldest daughter who some
consider more influential, allied herself with Barrick Gold, North America's
biggest gold producer. The government, predictably, then instructed Bre-X
and Barrick Gold to forge a partnership and to settle all outstanding
ownership disputes with local partners. It also demanded a ten percent stake
in the mine. An agreement in which Barrick gains 67.5% stake, Bre-X 22.5 %
and 10% as requested for the government, was finally hammered out and
submitted in December last year.
In early January it looked as though the Barrick deal would finally be
accepted by the government when, at the last minute, an other strategic
alliance was formed, this time by timber tycoon Bob Hasan and Placer Dome,
who had never given up on exploiting Busang and had protested when Barrick
was selected by Jakarta with no tendering process. First Bob Hasan gained
himself a stake in the mine by buying up most of PT Askatindo Karya
Minerals, one of Bre-X's local partners which holds a ten percent stake in
Busang. Then it was revealed that he had entered into discussions with
Placer. (It is not known what fee he will charge for his services.)
Bob Hasan used an investment company he heads, PT Nusantara Ampera Bakti
(Nusamba), to enter Askatindo. Interestingly, this company is 10% owned by
Hasan, 10% by Sigit and 80% by foundations chaired by the President.
Placer Dome has tried to make its bid more attractive than Barrick's by
offering up to 40% of the mine to Indonesian partners.
When DtE 32 went to press, the question of who will exploit Busang
remained undecided, with a deadline of February.
The whole episode has thrown Indonesia's reputation for doing mining
business into disrepute, since it means that companies coming to Indonesia
find anything but a level playing field, especially when a huge pot of gold
is up for grabs. There is bureaucratic nuisance too, as all other mining
business with foreign companies, including the renewal of some 100 contracts
of work has been delayed pending the Busang deal -- providing another gripe
for international investors.
For those whose lives will be most affected by such massive-scale
ecological destruction, it will probably make little difference who wins the
contract. The environmental standards of most major international mining
companies tend to deteriorate once they are off their home territory and the
record for social and environmental responsibility of local tycoons such as
Bob Hasan and Tutut leave much, if not everything, to be desired.
The Busang deposit lies in Kutai district of East Kalimantan province,
about 200 km north-east of the provincial capital, Samarinda. It is not
certain whether the site is located in pristine rainforest or logged over
timber concessions. According to the head of a mining company operating
nearby, "Busang is..hilly, in dense jungle without any infrastructure.." As
far as local population goes, the location is described as "thinly
populated". This does not necessarily mean that the area does not fall under
the traditional rights of local communities, of course, although these
rights would be denied under Indonesian law, where 'development' takes
precedence over local rights.
There is a 33 km logging road to Bre-X's base camp but, according to one
report, most of the terrain is only accessible by helicopter.
Infrastructure development is estimated at Rp 3 trillion (US$1.27
billion). According to Kutai district head, HM Sulaiman, this amount will
cover environmental management near the mine. The mine development is also
expected to help speed up the construction of a road connecting East
Kalimantan with Central Kalimantan.
Sources: Financial Times 13/1/97, Jakarta Post 13/1/97, The Globe and Mail
30/11/96, Vancouver Sun 5/10/96, Tempo 21/1/97, Straits Times 18/1/97, Asia
Wall Street Journal 15/1/97, Drillbits and Tailings 7/1/97, 22/11/96
(NB: it has now emerged that Freeport, not Barrick or Placer Dome will
operate the Busang mine)
DtE 29/30 August 1996
CANADIAN GOLD RUSH CONTINUES!
In our last issue we described how Indonesia, and especially Kalimantan's
gold belt has become a honeypot for Canadian companies. They are hoping to
strike gold in a big way, like Bre-X Minerals Ltd, which has discovered a
massive deposit now estimated to contain some 40 million ounces of gold.
Busang ranks alongside other mega-mines like Freeport/RTZ's Grasberg
world-beating deposit which has proven reserves of 50 million ounces. It
throws RTZ's nearby Kelian mine of 5 million ounces into the shade.
According to the Far Eastern Economic Review, the mine at Busang is likely
to be a low-cost, open-pit operation with a tributary of the Mahakam River
and existing logging roads serving as supply lines. The area comprises three
concession lying over logged over foothills, it reports.
The previous gold rush in Kalimantan was dominated by Australian
companies, (an Australian company Montague Gold actually explored Busang in
the mid-1980s) but this time, as the list below shows, it is the Canadians
who are hoping to divide between them the spoils to be found beneath
Kalimantan's forests.(Far Eastern Economic Review 21/3/96)
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Canadian companies with recently acquired interests
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Brett Resources Ltd.
Bre-X Minerals Ltd. (Bresca 25%)
PT Askatindo Karya Mineral (Minorca Resources [disputed by Bre-X)
Busang, Kalimantan
Celtic Minerals Ltd. &
Olympic Resources Ltd. CoW between Busang and Kelian
Condor International Resource Ltd.
Diadem Resources Ltd. &
Waseco Resources Ltd. Tewah, Kalimantan
Goldstake Explorations Inc. N.E. Kalimantan, Kutai
Gothic Resources Inc.
Indochina Goldfields Ltd. (Friedland) Kalimantan leases covering 3m ha
including concession 40kms N. of Busang; Java
International Skyline Corp.
Mutiara Resources 13.2m acres in W Papua
Ivanhoe Capital Corp
Birch Mountain Resources W. Kalimantan
Pacific Amber Wildcat Resources Ltd
Scorpion Minerals Inc.
South Pacific Resources Corp. 3 properties in Kalimantan, 4,500 sq km
Spire Ventures Ltd.
PT Semuang Khatulistiwa Mining Sokan Gold Project, 100kms S. of Sintang on
watershed between W. & C. Kalimantan
Yamana Resources Inc. near Busang
(From various business sources late 1995/1996)
[box:] state-owned companies go for gold
Joining in the gold rush are two of Indonesia's state-owned mining
companies, PT Tambang Timah and PT Aneka Tambang. In February they announced
a cooperation agreement to explore for gold and diamonds in Aneka Tambang's
concessions. Tambang Timah, one of the world's largest tin miners will
provide finance and manpower. It has been granted exploration rights for
gold in Natal, North Sumatra and is conducting preliminary surveys in three
areas of Kalimantan. (Jakarta Post 12/2/96) [end box]
Canada: big pals with Indonesia
When Canadian Prime Minister Jean Chretien visited Jakarta in January, yet
more business deals were clinched with Indonesia, underlining his country's
growing involvement in the Indonesian economy. Canadian mining companies
like Inco, Ingold and Placer Dome have long been active in Indonesia, and
Kalimantan's latest gold rush has brought in a flurry of new investors from
Canada.
Indonesia is already Canada's most important export market in Southeast
Asia, with two-way trade exceeding C$1.1 billion in 1995.
New deals clinched in January this year include an C$ 800 million
investment in gas by Asamera Overseas Ltd. and five-year wheat contract
between Canada's Wheat Board and Indofood, a large Jakarta
food-processor.(Southam News 25/1/96)
Canada is also hoping to win the contract to build Indonesia's first
nuclear power plant.
Island to be mined to oblivion?
Despite protests from 22 NGOs, the head of Kotabaru district, South
Kalimantan is standing by his decision to allow mining on the island of
Sebuku. Sebuku lies next to the far bigger Laut Island which houses a
recently-constructed coal export terminal. According to the NGOs, grouped
under the local chapter of the Indonesian Environmental Forum, WALHI, the
27,000-hectare island will disappear from the map in ten years' time if it
is mined continuously. The island, which has a population of 4,320, will end
up below sea level, according to a month-long study conducted by the
organisations. The NGOs have written to the ministers for mines, forestry,
environment and public works as well as the Indonesian Institute of Sciences
(LIPI) urging them not to issue a licence to the company. The island is part
of the Teluk Kelumpang nature reserve. Currently the company involved, PT
Bahari Cakrawala Sebuku, only holds an exploration licence.
District head MBA Bektam dismisses the NGOs' fears, saying mining will be
done at the centre of the island, not on coastal areas. He says plans have
already been drawn up to rehabilitate mined areas, by converting them into
irrigated rice-fields for the local people who currently make their living
by fishing.(Jawa Pos 29/1/96)
Coal damage
The neglect of mined areas and the damaging of roads by heavy coal trucks
is disadvantaging the local community in coal mining areas of Banjar and
Tapin, South Kalimantan. The vice-governor of the province, Bachtiar Murad
has called on the Director General of Mines to come and see for himself the
damage that has been done. He has also threatened to resign if nothing is
done to improve the situation. He accused state-owned company PT Bukit Asam
of totally ignoring mining regulations. PT Bukit Asam has a cooperation
agreement with Taiwanese company Chung Hua in this region.
In the past year 84 people have been killed in mining truck accidents.
(Jawa Pos 29/1/96)
[Box:]Coal expansion
It is not surprising that the negative impacts of coal mining are causing
concern, given the massive expansion of the industry in recent years. Coal
production has almost tripled in the nineties, from 10.6 million tonnes in
1990 to around 32 Mt in 1994. Most of it comes from the east coast of
Kalimantan and several areas in Sumatra. The largest producer is PT Kaltim
Prima, owned by CRA (50%) and BP (50%), exporting to Europe, Japan and
Hawaii. Indonesia is now the world's third largest producer after Australia
and South Africa, and has enough deposits to meet domestic needs for the
next 100-200 years. This fact is used by some in the argument against the
need for nuclear power.
Coal's use in Indonesia is currently far less widespread than oil,
however, which accounts for more than half the country's energy consumption.
Natural gas accounts for a quarter, while coal accounts for only 8.8% of
energy consumed (1994 figures). The government's energy diversification
policy aims to increase coal consumption to 50% of domestic demand and to
reduce oil to 30%, thereby saving more for export.
On top of PT Bukit Asam's operations, there are nine contractors
operating large mines in Indonesia:
PT Kaltim Prima (BP, CRA) E. Kalimantan
PT Arutmin (BHP-Utah) S. Kalimantan
PT Adaro (Spanish govt, New Hope Corp.) S. Kalimantan
PT Kideco Jaya Agung
(Korea Indonesia Development Company) E. Kalimantan
PT Multi Harapan (New Hope Corp.) East Kalimantan
PT Tanito Harum (domestic) E.Kalimantan
PT Allied Indo (Allied Indonesia Coalfields)
PT Kendilo Coal BHP-Utah, E. Kalimantan, Mitsui Corp.
PT Berau Coal (Nissho Iwai Corp.) East Kalimantan
Coal production by Indonesian companies is likely to increase in the
future. In August 1994, 19 domestic coal contractors signed cooperation
contracts with the government. (Mining Magazine, July 1995) [end box]
DtE 28, February 1996
INDONESIA: EXPLORATION HONEY POT FOR CANADIANS
As Jakarta opens the doors wider for foreign investment in mining,
Canadian mining promoters are getting excited about the prospects for
striking gold. At the centre of the action is the world's most notorious
mining investor, Canada's Robert Friedland.
Robert Friedland's private Singapore-based company, Indochina Goldfields
Ltd. has secured mining leases covering three million hectares in Indonesia,
including a concession located about 40kms north of the promising Busang
gold project, Kalimantan, which is held by another Canadian company, Bre-X
Minerals Ltd.
Bre-X's share price has soared amid speculation that Busang is shaping up
to become a so-called 'world-class' gold deposit with reserves that could
reach 10 to 15 million ounces. As a result, Bre-X's success has served as a
catalyst for dozens of exploration firms, including Friedland's company,
which hope to achieve similar success.
Indochina Goldfields has raised about US $18 million to finance
exploration on Kalimantan as well as on Java, where the company has many as
18 other projects.
Another Friedland company, privately-owned Ivanhoe Capital Corp, has made
a deal with yet another Canadian company, Birch Mountain Resources Ltd.
which will explore a concession in western Kalimantan. Indochina retains the
right to earn interest on the property.
Other Canadian companies involved in exploration in Indonesia include
Pacific Amber Wildcat Resources Corp, Gothic Resources Inc, Condor
International Resources Ltd and Brett Resources Ltd. Skyline Gold Corp,
Goldstake Exploration Inc., amd Scorpion Minerals Inc.
"The brokerage industry smells a big financing wave coming for Indonesian
plays," says John Kaiser, a US-based investment letter writer. "Right now
there is a lot of manoeuvering going on to get hold of exploration projects
in Indonesia..." (Globe and Mail (Toronto) 8/12/95)
What does this mean for the peoples and environment of Kalimantan?
Indigenous lands and resources will have been parcelled out by the
government in Jakarta, without their knowledge, let alone their consent.
Where hopes for striking gold are high, neither the Jakarta-based officials,
nor the incoming prospectors are likely to consider the consequences for the
people on the ground, or the potential damage to the environment.
Friedland's track record in the United States and Guyana, makes him bad news
indeed for Indonesia (see box).
Changing the course of the Kelian
Where exploration has proceeded to mining, the story does not improve. The
development of the Kelian gold mine in the East Kalimantan interior, for
example, has been punctuated by conflict with local communities over issues
such including rights, compensation and river pollution. (For more
information on this see the DTE/PARTiZANS publication "We only eat dust" Eye
witness in Kelian, September 1994)
Last year, RTZ/CRA, who operate the mine, was given the go-ahead to
switch the course of the Kelian River in order to exploit new gold deposits.
Environment Minister Sarwono said he approved the switch of 1.2 kilometres
provided it did not adversely affect the environment. The measure will allow
PT Kelian Equatorial Mining (PT KEM) to gain access to gold deposits
estimated at 34.5 tons under the river bed. Environmental organisation WALHI
has urged the government to make a "serious study of the environmental
impact of the project." WALHI said the company had not made its
environmental impact statement transparent to the local community and
accused the company of reneging on a promise it made in 1990 to allocate
management of the Kelian River to the local community.
According to the company, the project will extend the life of the mine by
two years and will earn Indonesia US $72 million. (Indonesian Observer 24/7/95)
PT KEM, which started commercial production in 1992, is majority owned by
Australian-based CRA which is in turn controlled by British mining giant
RTZ. RTZ, which also works with Robert Friedland, is Freeport's new partner
in its massive West Papua copper/gold/silver mining operation.
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Down to Earth
International Campaign for Ecological Justice in Indonesia
Carolyn Marr (dte@gn.apc.org)