Editorial Feature

Indonesia: Mining, Minerals and Fuel Resources

Indonesia, with a total population of 248,216,193 as of July 2012, is located in Southeastern Asia between the Indian Ocean and the Pacific Ocean. Indonesia covers a total area of 1,904,569 km2 and has a tropical climate. It is the largest archipelagic state and the third most populous democracy in the whole world.

The national flag of Indonesia.
Image Credit: CIA Factbook

After several years of colonization, the country obtained independence in 1949 as a result of long-term political negotiations. However, the country is still struggling with unemployment, poverty, corruption, a complex regulatory environment, inadequate infrastructure, and unequal distribution of resources.

The key natural resources of the country include silver, coal, fertile soil, natural gas, petroleum, gold, bauxite, tin, copper, timber, and nickel. Indonesia is a globally leading exporter of tin and thermal coal. The mining industry in the country makes up 11.9% of its GDP. In 2010, foreign investment in the mining sector exceeded $2.2 billion. Indonesia’s GDP is $1.139 trillion as of 2011.

Overview of Resources

Indonesia has abundant mineral resources, including tin, gold, natural gas, coal, nickel, and copper. Silver, bauxite, and petroleum are also available in smaller quantities.

Globally, the country is:

  • A leading producer of copper, nickel, and gold.
  • A leading exporter of liquefied natural gas (LNG).
  • The second-largest producer of tin.

Industrial Minerals

Indonesia’s chief industrial mineral is cement, and many cement companies in the country have planned expansions in order to increase the capacity of cement production by 2015. One such company is PT Semen Gresik, which has planned to construct two new cement plants and a power plant. The cement produced from this company is expected to increase from 19 Mt/yr in 2010 to 25 Mt/yr in 2012 and to 29 Mt/yr in 2015.

Metals

Indonesia’s Grasberg mine is the third-largest copper mine in the world and the largest gold mine in terms of output and size. In 2009, 1,444,000 ounces of gold were produced from this mine.

Indonesia has about 13,000 Mt of coal reserves and 400 Mt of iron ore reserves. In 2010, 9 Mt of steel was imported by the country to meet the domestic demand of 11 Mt.

In 2010, Indonesia was a leading global supplier of tin and the country exported 85% of its tin production. In the same year, the production of tin decreased by 6.1% to about 43,000 t due to several reasons that include severe weather conditions that hit the mining operations in the country, illegal mining activities, and declining reserves.

The map of Indonesia. Image Credit: CIA Factbook

Fossil Fuels

In 2010, Indonesia produced about 257 Mt of coal and was globally ranked as the second-largest coal exporter. The country’s leading coal-producing region is the Kalimantan Island, and the Central Kalimantan Province contains about 1,400 Mt of high-quality metallurgical coal reserves.

In 2010, the Natuna natural gas project in Indonesia accounted for 25% of the country’s overall gas reserves that are commercially recoverable. In view of the increasing demand for domestic gas, the country has plans to start coal-bed methane (CBM) production.

The government also has plans to produce 1 million barrels (Mbbl) of petroleum in 2012 by increasing the production in the Chevron’s field and in the Cepu Block.

Investment

The Indonesian government recently introduced a new rule according to which foreign companies will be required to sell their stakes in mines so as to increase the domestic ownership of the mines to about 51% by the 10th year of production carried out in the mines. Newcrest, the world’s third-largest gold miner, stated that this new rule will not affect its 82.5% stake in the Gosowong mine in Indonesia. The Gosowong mine is owned by Newcrest that already shares a partnership with PT Aneka Tambang. On the other hand, the US-based Freeport McMoRan Copper & Gold Inc is currently negotiating with the Indonesian government to run the Grasberg mine.

Indonesia is planning to carry out more exploration activities and discover new mineral deposits in the coming years. Two new iron plants are expected to start up in 2012 in order to increase the steel production capacity within the next four years and thus reduce the import of steel. Indonesia also plans to increase its production and export of coal by developing new thermal coal projects and exploring new coal mines.

Indonesia is keen on establishing itself as a globally leading exporter of LNG through its new Tangguh LNG plant and the existing Bontang LNG project. The country’s CBM production will further enhance its output and export of LNG.

Experts feel that Indonesia will see further growth in the mining and mineral industries in the future, thanks to these promising plans that will likely boost the country’s mining sector.

Disclaimer: The author of this article does not imply any investment recommendation and some content is speculative in nature. The Author is not affiliated in any way with any companies mentioned and all statistical information is publically available.

Sources and Further Reading

Disclaimer: The views expressed here are those of the author expressed in their private capacity and do not necessarily represent the views of AZoM.com Limited T/A AZoNetwork the owner and operator of this website. This disclaimer forms part of the Terms and conditions of use of this website.

G.P. Thomas

Written by

G.P. Thomas

Gary graduated from the University of Manchester with a first-class honours degree in Geochemistry and a Masters in Earth Sciences. After working in the Australian mining industry, Gary decided to hang up his geology boots and turn his hand to writing. When he isn't developing topical and informative content, Gary can usually be found playing his beloved guitar, or watching Aston Villa FC snatch defeat from the jaws of victory.

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