T

he government is encouraging the development of aluminum refinery plants in Indonesia’s two largest bauxite producing provinces; Riau Islands and West Kalimantan.

The provinces have a total bauxite reserve of 3.47 billion tons, Energy and Mineral Resources Ministry’s data shows.

As a bauxite-producing nation, Indonesia does not yet have smelters to process bauxite into alumina and therefore all ore produced in the country is exported to Japan and China, while to supply alumina to aluminum plants in the country, material is mostly imported from Australia.

In Riau Islands, there are 32 companies holding mining licenses over 34,993 hectares. The estimated
reserves in the province are estimated to be 180.97 million tons, scattered across four regions — Lingga (93.36 percent), Bintan (2.33 percent), Tanjung Pinang (1.61 percent), and two other regions (1.06 percent).

In West Kalimantan, 49 companies currently operate on 557,259 hectares. The province has total reserves estimated to be 3.29 billion tons.

The ministry’s data records that in 2010, Indonesia’s bauxite production was 10.29 million tons. From 2008 to 2010, the output grew by 2 percent a year.

A report from the economic team of the ministry’s minerals and coal directorate general, which is available on the ministry’s website, says that there is an indication of over-exploitation of mineral resources as many miners try to avoid the ban on exports of unprocessed minerals.

According to the new mineral regulation issued early this year, beginning in May this year the government will ban export of unprocessed minerals.

The government has said that the ban will be imposed to ensure that miners comply with the mining law, which requires them to process their production before being exported by 2014.

“If the government insists on banning exports in May, hundreds of people will lose their jobs and the regional economic growth and Indonesia’s export revenue may decline around 20 percent (US$46 billion) from the target,” the report said.

“The other negative impact that may come is the growing amount of bauxite smuggling which may be counter-productive for the country’s mining sector,” the report continued.

Publicly-listed state miner PT Aneka Tambang (Antam) has planned to build smelter grade alumina and chemical grade alumina with the capacity of 300,000 tons and 720,000 tons respectively in West Kalimantan.

The two processing facilities are estimated to be capable of absorbing a total of 3.42 million tons of bauxite a year. Antam’s mining site in Sanggau, West Kalimantan, will supply the raw material. The site has total reserves of 188.30 million tons.

To build additional smelters in West Kalimantan and the Riau Islands, the government suggests that mining license holders team up and create a consortium to set up processing and refining facilities for their ore.

On that idea, Indonesian Mining Association (IMA) executive director Syahrir Abubakar argued that persuading license holders to form a consortium would be a difficult job considering their limited financial and technical capabilities.

“It is more feasible if the government invites other investors to build smelters in the two provinces,” he told The Jakarta Post on Tuesday.

He emphasized, however, that there were several prerequisites the government had to provide, so that the investors would be interested in conducting business in the provinces.

“First, the government has to ensure energy supply for the planned smelters. Second, it has to be able to coordinate license holders in the provinces to supply their ore to the smelters. The last would be transportation infrastructure, such as roads and ports, which must be improved,” Syahrir said.