West Kalimantan, Illegal Mining Kalimantan and Sulawesi

Illegal Mining Has Reached Unprecedented Levels


Illegal mining has reached unprecedented levels, harming legitimate
companies and putting the economy and environment at risk
Issue cover-dated July 13, 2000

THEY COME EQUIPPED with scores of excavators and more than 500 trucks.
Their backers have wealth and influence. They have been known to cajole
and threaten. Over the past two years they have taken illegal mining to an
unprecedented level, pillaging three million tonnes of coal alone from the
two South Kalimantan concessions run by Australian mining company Broken
Hill Proprietary. BHP is the biggest but by no means only victim of a
phenomenon that has swept Indonesia since the economy nose-dived three
years ago. The government estimates there are 62,000 illegal miners across
the country, twice the number working legally. Mines and Energy Minister
Bambang Yudhoyono told parliament recently that annual losses amounted to
30 tonnes of gold, four million tonnes of coal, 2,800 carats of diamonds
and 3,600 tonnes of tin concentrate. Even without tax and royalties, the
export value is more than $150 million.

Government officials are frank about the problem. They acknowledge that
miners are being funded or backed by local and regional financiers,
military officials, bureaucrats and other powerful interests–and
supported by a network of international buyers. Organized illegal
operations are meanwhile being passed off as “indigenous mining,”
providing a veneer of legitimacy that distracted environmental activists
are willing to accept. Meanwhile, Jakarta seems unable to act against
newly emboldened regional power-holders who collude with the illegal
operators and criticize central government for siding with foreign mining
companies. As with illegal logging, which costs Indonesia $2 billion in
lost revenue a year, the benefits are shared by a few.

These developments bode ill for the spread of local autonomy.
Short-sighted provincial officials scrambling to line their own pockets
ignore the damage to the economy and environment of their provinces. “The
political and bureaucratic elite join together with the private elite;
they get power and they can do what they like,” says the government’s
director-general for mines, Surna Djajadiningrat.

State-owned mining businesses are also affected. In West Sumatra,
coal-miner Bukit Assam recently expelled thousands of industrially
equipped miners from its Ombilin mine. In West Java, Aneka Tambang says it
has whittled down the number of illegals at its Pongkor gold mine to
1,000. On Bangka and Belitung islands, off Sumatra’s southeast coast, tin
giant Tambang Timah has a different problem: Singaporean buyers, working
for Malaysian smelters, try to undercut the prices the company pays to its
300 contractors.

Elsewhere, authorities in Central Kalimantan have finally cleared illegal
miners from Aurora Gold’s Mount Muro mine–two months after President
Abdurrahman Wahid issued a decree instructing officials to deal with
illicit mining “in a functional and comprehensive manner.” But another
5,000 miners and migrant ancillary workers still occupy the company’s
promising gold deposit east of the North Sulawesi capital of Manado. Until
the local administration expels them, the mine can’t open, executives say.

Government officials, industry experts and researchers agree that illicit
mining is most serious in South Kalimantan, where it involves official
connivance in everything from the falsification of documents to the
protection and sanctioning of the mining and transport of coal.
Researchers say some of the excavators and trucks come from former
President Suharto’s failed $3 billion rice-growing project in Central
Kalimantan. Other equipment belongs to the regional government or to
scores of small-time construction contractors whose businesses have been
left idle by the economic crisis.

Along the banks of the Barito River, where it flows through the
canal-laced South Kalimantan provincial capital of Banjarmasin, mounds of
illegally mined coal lie on giant 5,000-tonne barges and in dockside
stockpiles. Coal looted from BHP’s Satui and Senakin pits is shipped out
from Sangai Danau on the eastern coast, and even through a state-owned
port lying next to BHP’s Pulau Laut coal terminal. Barges lug the coal to
South Sulawesi and Java, or transfer it to ships anchored off the coast
for delivery to overseas markets.

Officials and experts say the illegal operators use falsified quality and
export documents from firms that own barren concessions far away from
where the coal is actually mined. Some companies engaged in the illegal
trade hold permits that allow them to sell only bulk samples–which in
some cases are as big as 100,000 tonnes. Many firms are licensed for
exploration, not exploitation.

There’s no way to stop it,” sighs Satui mine boss Sumarwoto, unfolding a
map showing 81 illegal mining sites along the remaining half of BHP’s
14-kilometre coal seam. “Everybody shifts responsibility to someone else.
We have enough regulations, but not enough enforcement.” Not only has the
expected life of the Satui mine been slashed by five years but also the
illegal operators are damaging the environment. And they play havoc with
the mine by stripping off the top 10 metres of coal–the only part their
equipment can reach–and leaving the hole to fill up with water.

India, Malaysia, Japan, Taiwan and the Philippines are the main overseas
markets, accounting for about 80% of the illegal coal, which sells for as
much as $8 less than the market price of $19 to $20 a tonne. Domestic
customers include state enterprises, as well as dozens of private
companies. Surna, the mines director-general, says he has written to the
state-owned Paiton power plant and a South Sulawesi cement factory warning
them not to use illegally mined coal. But he and others acknowledge that
because of falsified papers, firms aren’t always aware of the origins of
the coal they buy.

New to the job, Surna is candid in acknowledging the role of the
cash-strapped Indonesian military. He recalls being telephoned by
three-star generals asking him to go easy on this or that company.
Sometimes callers warn him to be careful. “I ask them to come to my office
to talk to me face to face, but they never come,” he says.

Researchers from the privately funded National Academy of Technical
Development say individual military officers protect the enterprises
rather than get directly involved. They trace the history of the problem
back to the mid-1990s, when illegal miners forced Taiwanese firm Chung Hwa
off its deposit near Binuang, across the Meratus mountains from Satui.
When that mine started to run out, operations moved into BHP’s area and
later accelerated.

Thus far there are no answers to the problem. President Wahid’s decree
calls on the police chief and attorney-general to take “stern legal
action” against anyone involved in illegal mining–“both government
apparatus and community members.” But it also seeks to recognize the
rights of indigenous miners and calls on legal mining firms to provide
more help to local communities. In South Kalimantan and other areas,
however, the hard part is going to be cutting the umbilical cord between
the miners and their influential backers.


Mercury Timebomb


An ecological disaster looms over North Sulawesi’s Minahasa Peninsula.
Rampant illegal gold mining is pouring hundreds of tonnes of mercury into
the environment. The deadly flow threatens to undermine the economy,
contaminate food crops and leave a horrifying health problem for future

Driven by populism and greed, local officials either turn a blind eye to
the problem or play an active part in its making. Researchers have
identified a police officer as the owner of one of hundreds of crude
mills, or trommels, that use mercury to separate gold from ore.

The head of the government’s North Sulawesi environmental bureau merely
distributes posters showing how to handle mercury, which attacks the
central nervous system and causes appalling genetic disorders. Preoccupied
with foreign mining firms, Walhi, the country’s largest environmental
group, pays scant attention to the issue. The one organization that does,
tiny Manado-based Yayasan Bina Cipta AquaTech, puts the number of illegal
miners in North Sulawesi at 22,000, spread over five or six different
sites. Among them are 1,500 working on Australian mining company Aurora
Gold’s Talawaan gold concession, where more than 100 trommels are in
operation. Samples from the Talawaan River–used by residents for domestic
purposes and fish-ponds–show mercury levels 70 times higher than the
internationally accepted limit for drinking water.

YBCA co-director Inneke Rumengan says miners complain of trembling and
stomach and head pains: “They know the mercury is bad for them, but they
don’t know how bad.” Robert Lee, of the overseas-based Wildlife
Conservation Society, says miners in parts of the Bone Dumogg National
Park are letting mercury-tainted water seep into the Gorantalo city
catchment area.

According to the Bureau of Statistics, mercury imports reached 62 tonnes
last year, up from five tonnes in 1996. But people familiar with mining
and environmental issues say illegal mining consumes as much as 200 tonnes
of mercury annually in Talawaan alone.

That compares with the 60 tonnes of methyl mercury dumped between 1920 and
the mid-1960s in Minamata, Japan, scene of the world’s worst case of
mercury contamination. Methyl mercury is more easily absorbed than
metallic mercury, but the effects are the same, particularly if trommel
operators breath in the toxic fumes during the final burn-off. Says a
metallurgist: “They simply have no idea how dangerous that is.”

Miners get little reward for their huge risks. They use mercury during
initial crushing to extract about 35% of the gold from each 20-kilogram
load of ore. When the miner has gone, the trommel owner draws out the

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