Saturday, April 26, 2014

Iron Ore in Indonesia: Much Ado About …?


Iron Ore in Indonesia: Much Ado About …?

Mining in Indonesia is a vast subject to address, and within my blog I physically have no ability to cover all the issues. However, there are some things that I want to pinpoint:

- At the first glance it is obvious that the major commodity in the country is coal; copper, nickel, tin, bauxite and gold - the other commodities that are being talked about;
- In 2010 24 IPOs raised US$3.4 billion on Indonesian Stock market - coal producer Harum Energy raised $290 million; and there are seven coal producers or contractors listed in Indonesia. Coal miner Adaro raised $1.3 billion in June 2008;
- Last year Nathaniel Rothschild agreed to invest $3 billion in two Indonesian coal companies through Vallar Plc, creating one of the biggest coal mining companies in the world.

Thus, there is a lot of buzz about coal – but can we speak of iron ore? Indeed, those who follow the news may notice that there is very little talk about iron ore in Indonesia, even in the world ranking of iron ore producers the country is notably absent. Yet Bumi Resources Minerals, a unit of the coal mining giant Bumi Resources stated that part of the proceeds of its 2010 IPO (that was, BTW oversubscribed by 29.89 times) would be used to develop its iron ore mine in Mauritania. So, it seems that iron ore business in Indonesia is a sad story? Is it nothing? Or something to talk about? Well, let us look into what we may find in the news over the last three years.

In 2009 Australian company Coal Fe Resources Ltd. looked into 4 iron ore concessions in Central and West Sumatra, Indonesia. However, there was no other developments, since there in no mention of iron ore in current company’s Website.

Since 2009 another Australian company - Lincoln Minerals Limited in a Joint Venture with Indonesian Samusa Corporation of Jakarta, develops Samusa’s Desa Mirah Kalimantan iron ore mine in the South central area of the Indonesian island of Kalimantan (Borneo). Details of the operations are available here as well as data on the JV.

 Coziron Resources Limited has an 80% interest in a joint venture with PT Galian Endapan Buana (“GEB”) to develop the Agam Iron Sand Project in West Sumatra, Indonesia.  The project, comprises two licenses totaling 3,960ha, has concentrations of heavy mineral sands, principally magnetite. The first reports on the program are listed in 2006, and this April it was announced that the company has commenced a review to determine the best way to proceed with the Agam Iron Sands Project.

Australian Indo Mines Limited is developing 70%-owned Jogjakarta Iron Project in southern Java where it has defined a 605 million tons resource. In mid-2011 a bankable feasibility study examining the development of a 2 million tons a year iron concentrate operation will be completed with production at this rate targeted from mid-2012. It is anticipated that operations will begin in the first half of 2011 targeting production of up to 250,000 tons of iron concentrate for sale. Details of the project may be found here.

Since 2008 Earthstone Resources alongside with GJR develops and produces iron ore in Nalo Baru mine on Sumatra.

In 2010 it was reported that Merukh Enterprises, has formed a joint venture with the Indian company Salgaocar Mining Industries Pty Ltd to develop two iron ore mines on Sumba island.  The two mines are estimated to contain reserves of ±690m tons. Merukh Enterprises is also in talks with several potential partners to develop five other iron ore mines also located on Sumba. PT Merukh Iron & Steel, a subsidiary of Merukh Enterprises, plans to build two iron ore plants in Sumba Timur and Sumba Barat regencies in East Nusa Tenggara at a total cost of US$48 billion.

In January 2011 a group of Chinese investors examined iron ore mining opportunities in  Musi Rawas regency, South Sumatra, and discussed plans to invest in mining.

 In March 2011 it was announced that there is a deposit of 300 million tons of iron ore in Kulon Progo,  Yogyakarta, and that the government will support exploitation of the mineral by investors. There are some discussions on setting up of  a steel processing facility with a capacity of 500,000 tons with subsequent increase  to 2.0 million tons per year.

A really interesting announcement was made last March regarding Polo Resources Limited (a globally focused natural resources and mine development investment company) . The company arranged a convertible loan agreement with Polo IndoIron Holdings Limited to fund due diligence and related project development costs in respect of iron ore opportunities in Indonesia.

In April 2011 it was announced that Bumi Pertiwi Makmur Sejahtera,is stepping up its development of  iron sand mine in an area of about 1,200 hectares in Sukabumi District, West Java, Indonesia. The estimated capacity of the iron sand is approximately 100 million metric tons onshore and 500 million metric tons offshore.


 Mineral industry in Indonesia is rapidly developing, however, this expansion is really slow. It took almost 10 years to introduce a new Mining Law with relevant regulations. A very slow pace is noted in this statement of a recently formed Forum for Exploration and Mining Development Indonesia (Forum Explorasi Pertambangan Indonesia - FEMDI / FEPI):
“While exploration investment in Indonesia has only averaged US$20 million a year over the past decade, in just one year, 2008, US$470 million was spend in Brazil and US$3.3 billion in Canada. Studies show that spending of at least US$500 million annually is needed just to sustain Indonesia’s current production levels.” This is exactly true in the case of iron ore. In many news reports and professional publications it is stated that the country’s iron ore potential is still unexplored. 

Here I will attempt to take a glimpse of iron ore mining landscape in Indonesia. This is not a scientific or precise report – rather it gives a general understanding. The numbers that are presented here are taken mostly from the published data of Ministry of Mines; mostly they are not up to current date, but they are reasonably new and represent the general picture. We should also remember of a big potential for new deposits. 

Indonesia has a number of types of iron ore (these two references describe the types well: Iron ore and its beneficiationGLOSSARY OF TERMS/ DEFINITIONS
COMMONLY USED IN IRON & STEEL INDUSTRY). However, there are three types that have commercial value:
-        laterite iron ore – 75%
-        primary iron ore – 17%
-        iron sand – 8%

  Source: Directorate of Mineral Resources Inventory, 2004, 2007

Laterite Ore
 Laterite ores are the products of rock decay that have content of the oxides of iron. In Indonesia, mostly it occurs as the limonite in the form of nickel mines over layer (overburden). There are also other types present: saprolitepyrite and peridotite.   The large deposits of laterite ores are in South Kalimantan, North Maluku, Papua and South-East Sulawesi. Usually it has a low Fe content and it is not widely utilized for steel industry. According to available information, PT. INCO and PT. Antam Tbk are processing limonite ore; and there are some plans to use it as coal liquefaction catalyst. Limonite is actively processed from the nickel Soroako deposit in South Sulawesi by PT INCO.
Major deposits are:
·                  Kota Baru (Batulicin), South Kalimantan – Fe: 39% - 55%, ore – 485.2  million tons, metal – 229 million tons;
·                  Luwu (Nuha), South Sulawesi – Fe: 49% , ore - 371.5 million tons, metal – 182 million tons;
·                  Raja Ampat, West Irian Jaya – Fe: 30% - 44%; ore – 287.2 million tons, metal – 94.8 million tons.
 Primary Ore
 Primary iron ore is usually found in the form of slabs of rock that contain magnetite and hematite.  As a rule it has Fe  50%-70%. In Indonesia it is found in the areas of South and West Kalimantan, Belitung, Nanggroe Aceh Darussalam and Papua. The country’s resource in primary ore is 76+ million tons, but it is not yet utilized. The biggest deposits are:
·                  Ketapang, Kendawangan, West Kalimantan – 280 million tons of iron oxide ore with 159.6 million tons of metal; Fe 40%-70%;
·                  Pasaman, West Sumatra, with 25.6 million tons of ore;
·                  Kutai, East Kalimantan – 18 million tons of ore, 9,9 million tons of metal;
·                  North Minahasa, North Sulawesi – 17.5 million tons of hematite ore, 5.25 million tons of metal
·                  Sukarame, South Lampung – 5.6 million tons of ore, 3.2 million tons of metal
According to the Ministry of Mines, the total value for the country’s primary iron ore deposits is 363,564,042 tons with projected exploitation for 52 years.

Iron Sand
Iron sand in Indonesia contains high titanium oxide, which makes it not exactly fit for iron making process. This titanium may be separated during smelting as titanium slag – to produce steel. Fe content maybe up to 58%, however, titanium (TiO2) is around 10%-12%. This processed iron sand – titanomagnetite may be the source of ferrotitanium – thus making development of iron sand deposits economically viable. The technology of transformation of iron ore to steel is nicely described in this New Zealand story. In Indonesia iron sand developments started way back in 1910 along the South coast of Java Island. However, it was only in 1971 when the first commercial production started by PN Aneka Tambang.  At the end of the XX century iron sand was extensively used for cement industries, which later lowered due to new substitutes used in cement production.
The biggest deposits are:
·                  Ende (Nangapanda), East Nusa Tenggara – Fe – 15% ore: 57.1 million tons, metal – 8.57 million tons
·                  Kulonprogo, Bantul,  Yogyakarta – Fe: 50%-59%; ore 38.2 million tons, metal – 20.9 million tons
·                  Bolaang Mongondow, North Sulawesi – Fe: 57.99%; TiO2: 9.85%; ore 31.4 million tons, metal 18.21 million tons
 As an example, you may look into Agam Iron Sand Primary Report by   Coziron Resources Limited that estimates the inferred resource of 9,720,000 Metric Tons.

This Website represents another iron ore project in East Java Paseban and Wotgalih Iron Sand Mining – with detailed description of mineral.

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