Timah says price, illegal mining hurt: Report

State tin miner PT Timah Tbk, the world's largest integrated tin producer, said on Wednesday a combination of weak prices, illegal mining and a stronger rupiah would hurt the company badly this year, according to Reuters

It said prices had fallen to an all-time low of $3,650 a tonne from around $5,400 a year ago, partly because of a suspected increase in tin ore supplies from illegal mining and smuggling from Indonesia.

The other factor was the slowing down of industrial economies, weakening demand.

"Without illegal mining, tin prices would be much higher, at $4,000-4,500 per tonne, and at that price we could be booking 300 billion rupiah ($32 million) in net profit this year," Timah president director Erry Riyana Hardjapamekas told reporters.

Illegal tin mining at Timah's main mines on Bangka island alone was about 35,000 tonnes of tin-in concentrate a year -- roughly equal to the company's expected total 2001 output.

Hardjapamekas said Timah expected to post a much lower net income for the first half. Timah is due to announce its results for the first six months of 2001 within the next two weeks.

"It's still more than 100 billion rupiah ($10.75 million), but already much lower compared to last year's first half (of 250 billion rupiah).

"We still made profits in the first half, thanks to the weaker rupiah, but for the second half, it will be very difficult," Hardjapamekas said.

"In the worst case scenario, the first half net profit could be wiped out entirely."

Timah said illegal mining increased significantly in the past three years, blaming the breakdown in law and order as the world's fourth largest country was paralyzed by political and economic crises after the downfall of former autocrat Suharto in mid-1998.

Illegal mining, mainly by impoverished individual workers trespassing on mining claims and using small machinery, sometimes backed by pirate companies, is a growing problem for most mining operations in Indonesian.

Timah said it would also urge neighboring countries, particularly Singapore, not to buy tin from smugglers.

"It's been going on for a while, but we feel it more now because of the weak tin prices and the stronger rupiah," Hardjapamekas said.

Timah also said the recent strengthening in the rupiah since Megawati's election meant it would book much lower revenue in rupiah terms because it exports most of its production.(*)