Sat, Oct 27, 2001 page19

• Illegal miners proliferate across Indonesia and move tin market

  Illegal mining hubs bedevil domestic and foreign investors across the archipelago. As tin's price falls, a big producer is threatening to withdraw its operation

  • By Grace Nirang / REUTERS
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  Suhardi sweats profusely under the midday tropical sun, using makeshift machinery to illegally mine tin on Indonesia's Bangka island.

  The 45-year-old former driver operates two small wooden towers with water pumps to wash sand and separate the ore on what was once a beautiful beach on the eastern side of Bangka island.

  "I used to be a driver and rent out my car, but I sold it and used the money to start this more than a year ago," Suhardi said, gesturing to his equipment, one of dozens of illegal mining operations on the beach.

  A few minutes drive away, Erry Riyana Hardjapamekas frets at the impact the illegal tin mining operations are having on his firm, state-run PT Timah Tbk, the world's largest integrated tin producer.

  PT Timah now produces less than the combined output from the illegal miners operating on its land without permits. Those operations in Indonesia's tin heartland have helped flood the world market, driving down prices.

  "We have had to temporarily stop operating two of our dredgers. We have also suspended activities in 100 sites," the president director of Timah said glumly from a port office, pointing out one of the idle dredgers lying just off another beach.

  "Tin prices are now below our production costs ... We have to suspend high-cost activities."

  Authorities sympathize

  Timah last month threatened to quit Bangka if action was not taken to curb the illegal miners. Authorities said they sympathized but wanted to tread lightly because many people on the island depended on the operations.

  Besides Suhardi, dozens of other tin miners have set up wooden towers in one of a plethora of illegal mining hubs that bedevil domestic and foreign investors across the resource-rich Indonesian archipelago.

  Illegal mining exploded when former autocrat Suharto fell from power in 1998, worsening a breakdown in law and order that had accompanied the Asian financial crisis.

  Nowhere is it more apparent than on Bangka, 450km north of Jakarta.

  Illegal miners here are mainly impoverished workers trespassing on mining claims but sometimes they are backed by wealthy businessmen.

  Already weakened by sluggish demand due to a global economic slowdown, world tin prices have been dragged down further by a doubling in supply of tin ores and tin-in-concentrates from Indonesian illegal mining activities.

  Tin prices on the London Metal Exchange are around 30 percent below levels at the beginning of the year.

  Stockpiles are high and tin consumption in the West is expected to fall by some 4.9 percent this year.

  Timah says the 5,000 illegal miners on Bangka and neighboring Belitung island will produce an estimated 42,000 tonnes, exceeding the company's output last year of 40,000 tonnes.

  Profit drop expected

  Timah's production this year is seen as steady. It said last month it expected its net profit this year to drop four fifths to 64 billion rupiah (US$6.5 million) and warned of a loss of up to 516 billion rupiah next year if tin prices kept falling and rampant illegal mining went uncontrolled.

  Prices of tin, used mainly in can making, fell from about US$5,400 a tonne last year to about US$3,500 a tonne in early October.

  Illegal mining in Bangka and Belitung really took off when workers who lost their jobs in big cities during the Asian financial crisis returned home.

  The two islands produce about 85 percent of Indonesia's total tin.

  It's certainly a lucrative business in a country with a per capita income of around US$500 a year.

  "I collect 40kg to 50kg a day," Suhardi said. "The 15 million rupiah (US$1,500) I used as capital was back after three months in operation,"

  The number of illegal miners has risen even further since officials in June issued tin export licences to businessmen following the introduction of new autonomy laws in January.

  Under the laws, regional authorities are given more say in managing their affairs, including mining.

  "Exporters mostly get the ore from illegal miners. We know they exported 9,900 tonnes of tin ore from July to September," Hardjapamekas said. "It's a free-for-all commodity now."
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