150 mining projects postponed, abandoned

A report by PricewaterhouseCoopers (PwC) reveals that 150 mining exploration projects in Indonesia have been postponed, abandoned or not active in the past three years (1997-2000) because of the international low prices of minerals and the multi-crisis in the country.

The report, entitled "Indonesian Mining Industry Survey 2000" is a result of PwC's confidential surveys against 30 producing mining companies, and more than 250 exploration companies that were involved in exploration activities in Indonesia in the period of 1995-1999.

Out of the 150 postponed or abandoned projects, PwC reported that most of new exploration companies had withdrawn from the mineral sector in Indonesia because they lacked funding and marketing supports.

"The fall in exploration activities has drawn concerns because the long-term success of Indonesia's mining industry depends on sustainable explorations and new finding as well as the development of new sediments," the 45-page report said.

PwC report explained about success rate toward economically-viable exploitation (generally having minimum ratio), and the length of process starting from the finding of minerals until production. It also stressed the importance of more exploration activities to date.

In the report, PwC recorded a decline in spending for exploration and feasibility studies in the five-year period of 1995-1999, totaling only US$1.2 billion. In 1999, the spending for exploration and feasibility studies reached only US$165.5 million, or only 67 percent of average annual spending in the past five years.

The 1999 spending for exploration and feasibility studies centered in South Kalimantan, accounting for 57 percent of national spending, and Irian Jaya, 19 percent.

Mining spending the past five years had especially been boosted by Rio Tinto Exploration that spent US$100 million for its exploration in Freeport in Irian Jaya. Rio Tinto is one of Freeport's shareholders.

The report also revealed a stagnant exploration spending in Indonesia, compared to the global exploration spending. Exploration spending in Indonesia did not move upward, accounting only 6.1 percent of the global exploration spending in 1999.

Exploration spending in Indonesia compared to global spending reached its highest level in 1997, when it reached 6.8 percent of global exploration spending, a sharp increase from only 6.0 percent in 1995. (*)