Overlapping concessions pose threat to miners: Alwin

The Jakarta Post ,  Jakarta   |  Mon, 09/22/2008 12:37 PM  |  Business

Alwin Syah Loebis has been the president director of state-owned nickel miner PT Aneka Tambang (Antam) for only a few months, yet already faces a global decline in nickel prices.

The Jakarta Post recently spoke with Alwin about a variety of issues affecting the sector. The following is an excerpt from that interview:

Question: You have just been appointed the new president director of Antam. Can you share your vision and goals for the company?

Answer: Our mission is basically to make Antam the leading player in the mining sector -- not only in Indonesia, but in the region as a whole.

To do that, we must, first, be able to expand our existing business and second, continue with our diversification programs, either in the upstream or downstream sectors.

We realize this country still holds a lot of promise, with our abundant mineral resources and our experience in the mining sector. We hope we can take advantage of these conditions.

About improving the performance of existing business, what is your strategy to deal with declining nickel prices?

From the cost side, we will reduce our budget for non-production activities by 10 percent to offset high production costs related to rising oil prices. Second, we will improve our production performance.

We hope to increase production volume to lower the cost per unit, increasing from 17,000 tons to 18,000 tons this year.

How do you see the overall nickel business next year?

Maybe I'm a bit optimistic, but I expect it *the price of nickel* to recover slightly by the end of this year. I predict it will be around $10 a pound by November.

The reason for this is that stainless makers will once again use nickel in their production process, after the price of chrome -- which is the preferred substitute for nickel -- reaches its peak this October and November.

In 2009, I see the nickel price possibly hovering between $10 and $12 a pound. And it will stay at that level because the world's stainless consumption will be stagnant, as the global economy is slowing down.

Mining companies have been hit by the problem of overlapping concession areas in certain regions. Is that the case with your company as well?

Certainly, we've experienced a lot of this at some of our mining sites. This is due to the high price of nickel, which creates a lot of interest in the mining business, with many wishing to exploit it disproportionately.

In our case specifically, the problem started when nickel was only $3 a pound -- in 2002 -- and we delayed a plan for exploration. In 2007, people were suddenly coming to our concessions, claiming the land was theirs.

We are now dealing with two cases, which are still being processed in the courts: One regarding our mining site in South Halmahera in Maluku and the other in North Konawe in Southeast Sulawesi.

Aside from that, we also have an on-going case in Morowali. We hope we can end the dispute amicably, out of court. We know we need to maintain a good relationship with the local community, for the sake of our long-term business goals.

The government plans to establish a holding for state miners. Your opinion?

I think it's a good idea, but we have to think of the procedure to be used before we can realize this concept.

But from our part, I think we can benefit from it in terms of having huge funds available whenever we need them, as the holding company could be a good tool for obtaining loans with a lot more value than what Antam as a sole entity could generate.

But on the operational level, we still don't know much about that. We just let the government run that process. In the meantime, we wait.

A number of agreements have been signed with credible partners to diversify your business, but it is moving slowly. Your comment?

Right now, we are focusing on our plan to build a chemical grade alumina plant. We expect to secure the loans by the end of this year.

After that, we'll start construction, which will last for the next three years, until 2012, when the plant will start producing.

And for our other projects, such as the acquisition of coal concessions and other types, we are in the midst of processing them. We're still conducting feasibility studies at this point. -- Ika Krismantari

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