Indonesian-Resources September-November 2013 by PaperlessTrail

September-November 2013

INDONESIA: AN AGILE BUSINESS ENVIRONMENT

OPPORTUNITIES FOR FOREIGN INVESTMENT IN INDONESIA

UNDERSTANDING MINERAL PROJECT EVALUATION

Current Resources

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LEIGHTONS

September - Nov. 2013

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Headlines in this issue

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Indonesia: An Agile Business Environment Opportunities For Foreign Investment In Indonesian Mining Companies Understanding Mineral Project Evaluation The National Forest Estate - A Controlling Stake In The Game

Mineral Resources

Altura On The Fast-Track To Indonesian Success

Barisan Receives A Positive Ruling On Upper Tengkereng Challenger Signs Up For ABBR Project Finders Finds Funds For Wetar Work Gold Fields takes $350m

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Resourceful Services

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HELI SGI Flying High Corrosion - â&#x20AC;&#x153;Prevention Is Better Than Cureâ&#x20AC;? Weir Expands Coal Offering With Aspir Acquisition Outotec Opens Jakarta Office

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Welcome

INDONESIAN RESOURCES

Selamat Datang

Mining, Petroleum & Energy Journal Issue 1 2013 September- November 2013 Indonsian Resources Journal is published independently for executives in Indonesian mining, forestry, energy and associated business sectors.

elcome to the inaugural edition of Indonesian Resources and thank you for taking the time to read our newest publication.

Publisher Elizabeth Galura Charismatic (WA) Pty Limited Consulting Publisher Greg Brimble Editor: Colin Sandell-Hay Sales and Marketing Kevin Lewis kevin@philippine-resources.com & Cecilia Pamular cecille@philippine-resources.com

Launched as a follow-up to the great success achieved by sister publication Philippine Resources, Indonesian Resources has a stated aim of reporting on one the most important areas of one of Asiaâ&#x20AC;&#x2122;s most dynamic economies. There is no doubt that this is a critical time in the lengthy history of the resources sector in Indonesia, with government and industry looking to achieve a balance of maintaining enough resources for its growing domestic market, while still bringing in all important export currencies.

Design/Production Elizabeth Galura

It is critically important that the Indonesia people receive their share of the benefits of this tremendous natural wealth, but it is also vital that the investors from the global and local mining, oil and gas and forestry sectors are treated fairly and with respect.

Journalists Paula Tolentino Kevin Lewis Steve Hill

In a time of dramatic upheaval within the global resources sector and financial markets, any negative policy moves can quickly translate into negative investor sentiment.

Contributors Erwan Santana Ben Jarvis David De Lemos Pires Michael Trainor

The Indonesian economy and some of its fiscal policy making is receiving ticks -of -approval at present from global financial and government leaders, but this can quickly turn on the back of ill thought out law making.

Manila publishing office Lomar Offices Paseo de Roxas Bldg, 3rd Floor 111 Paseo de Roxas Legaspi Village Makati, Metro Manila, Philippines Phone +632 815 8836 or +632 714 0029 ___ Individual contacts Greg Brimble greg@philippine-resources.com Australia: +614 172 20759 Manila: +63949 338 3664

4 Indonesian Resources

We hope you enjoy this very first edition of Indonesian Resources, we thank you for your support - and we look forward for that to continue as we grow with the Indonesian resources sector. Terima kasih â&#x2013;

PAGE 5 ASIA DRILL FP

COAL, MINERAL & GEOTECHNICAL Drilling Services

♦ Based in Indonesia ♦ 16 years of drilling experience (Incorporated 29th January 1997) ♦ Parent company Altura Mining Limited (ASX:AJM) Australia ♦ Operational experience throughout Indonesia and South East Asia ♦ Services provided to the mining exploration sector  Diamond drilling  Mud rotary  Mine wall dewatering (either angled or horizontal)  Water boring ♦ 11 large drilling rigs - depths up to 700 metres of HQ 96mm hole ♦ 23 Ultra portable rigs - depths up to 80 metres of NQ 76mm hole ♦ Down hole geophysical logging service also provided through Altura Mining Limited subsidiary Velseis Indonesia ♦ Operates under a stringent health, safety and environmental system Contact Details Jakarta Office: World Trade Center, 7th Floor, Jl. Jend. Sudirman, Kav. 29-31, Jakarta 12920, Indonesia Tel. +62 21 521 1241 Fax +62 21 521 1244 Balikpapan Office: Jl. Mulawarman RT. 23 No. 6, Balikpapan 76116, Indonesia Tel. +62 542 762 230

Steve Dann Manager HP +62 811 978 3550 Email: stephen.dann@asiadrill.com

Email: asiadrill@asiadrill.com Web: www.asiadrill.com

Jim Rush Operations Manager HP +62 811 910 2399 Email: jim.rush@asiadrill.com

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Indonesia: An Agile Business Environment

ndonesia promises great returns, though for these to be realised and then sustained, business must manage Indonesia for what it is, where it is heading and its destiny to be an economic powerhouse, and not what they would want it to be. In the 1980’s Indonesia was a buoyont yet autocratically controlled economy with entrenched power bases. In the 1990’s these power bases were eroded and Indonesia became a more fragile State. Today it has a booming economy, a functional democracy, and enjoys lucrative resources and manufacturing sectors that attract investment into Indonesia. Solid financial base

As a result, Indonesia has a solid financial base, and along with Thailand and the Philippines, comprises the new emerging “Asian Tiger” economies of SE Asia. Indonesia’s history as a autocratic nation that was led by Generals for much of that period has built an unusual foundation for a democracy. But after several orderly changes of Government Indonesia remains a challenging environment for foreign businesses. Indonesia’s modern history continues to influence its development. The historical struggle with Communism has influenced the thinking and development of many of the generals who occupy senior positions of influence within TNI, Golkar, newer political parties and the bureaucracy. The historical outbreaks of violence directed at ethnic Chinese Indone6 Indonesian Resources

sians is linked with this history and perceptions of economic inequity. Political initiatives such as Transmigration are ongoing and still dilute different ethinic groupings in geographic regions such as West Papua and Kalimantan with ethnicities from the West of Indonesia. The challenge confronting Indonesia is to spread the benefits of increased economic prosperity away from Java. The current Presidency will soon end and the positioning of his successor (most likely more nationalistic than SBY) will provide a challenge for Multi National Companies (MNC) as they fit into a changed power relationship with Indonesia, Indonesians, and the business environment. History’s Impacts

Most MNC do not make the effort to understand this history and its impact on business in Indonesia. As a consequence, they have not adapted their way of operating within this challenging environment, and as such, have not been able to take advantage of the lucrative benefits available in Indonesia. A modern nation founded by military officers, and an economy still regulated by public servants schooled in the ways of an earlier era, creates specific challenges. But these challenges provide opportunities. A detailed and practical understanding of Indonesia, Indonesians, and how to conduct business in Indonesia, is often lacking within expatriate management teams who are largely selected for their corporate loyalty and technical prowess.

When faced with an environment that produces unexplained losses and situations in which executives can confront legal difficulties, agile and well-supported executives and their businesses thrive. MNC must also understand the importance of the First Family when doing business in Indonesia. First families have shaped Indonesian society and therefore its business environment from Sukarno to Suharto to Yudhoyono, and possibly even to Prabowo in the future. When the President changes, the system at the top also changes, but the culture impacting business regulators does not change as quickly. The place of the military and police in Indonesian society and their role in business adds further nuances. The Suharto era laid a platform where an overly empowered security apparatus existed and was led by an all powerful autocrat. The police were part of the apparatus and were subordinate to the military. The military largely took their direction from the First Familiy and the police acted in line with their role as a subordinate authority to the military. The relationships that form when implementing these policies and directions produce lifelong relationships and networks that are entrenched in Indonesian society and business. This pre-eminence of the military and police in business presents a challenge for any MNC. Their requirements and their rigid interpreContinued on page 8>>

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When the MNC review the above issues they should think about the tation of staute law leads to busi- employment of management personness practices for which many MNC nel and advisers and how the MNC’s aren’t prepared, cannot comprehend, requirements should fall within the and struggle to adjust. MNC that fail following three categories: to attach sufficient priority to the importance of this situation when • Long term expatriates and Nationestablishing their business in Indone- als who have long and detailed expesia and develop plans that are incom- rience in Indonesia, and have through plete, will likely fail in that business hard experience and contacts, learnt environment. to consider the above issues as part of their daily decision making proThere are a number of important is- cesses. sues that MNC management should consider when developing their in- • Dynamic Indonesian executives country plans: who force themselves into MNC general managerial positions due to • Have the MNC aligned their home their talent and often their technical country’s mandatory laws on doing qualifications, and newer expatriates business in places like Indonesia with who have come to Indonesia to lead the political and business realities in in this new, promising and yet chalIndonesia? lenging environment. • Do the MNC decision-making processes allow for a nuanced approach to doing successful business? The reality is that Indonesia is a sophisticated country with increasingly advanced political, business, regulatory and judicial institutions. • Has the MNC acknowledged that there are many nuances in the business environment and will their HR resources be able to cope with these nuances when delivering on organizational goals? • Does the MNC in-country management team, which is often expatriate led, bring with them a decision-making process that is overly influenced, and perhaps even prejudiced by their home laws, their company policies and their own culture? • Building business opportunities in Indonesia is dependent upon recognising the increasing reality that having a high powered but figure head Indonesian on the Board won’t be acceptable to Indonesians and may even be considered insulting. 8 Indonesian Resources

• New expatriates who will be tasked by MNC to achieve short term goals and move forward with little consideration for the true nature of their new business environment. In doing so, they will seek legal counsels’ advice and base all decisions on their own laws and policies without due consideration on how to apply these decisions through their workforce. This category will inevitably spend three to five years in Indonesia, and in doing so will not understand the business environment. This failure will not be fully understood by their senior executive teams abroad and by their shareholders until it is too late.

provide the best approach for MNC looking to establish their business in Indonesia. Generally in Indonesia there is a recognition of the fact that the country’s business environment is both promising and challenging, agile yet at times frustratingly slow, low cost generally but with significantly high costs and unknown in some situations. This paradox isn’t understood because some MNC are not doing sufficent tailoring of their processes to match their processes to the Indonesian business environment. ABE

By getting that process right the MNC will place itself and its management team into the Agile Business Environment (ABE). It is important for MNC to develop a method to ensure they place themselves successfully into the ABE. The foremost critical decision is to hire Nationals and expatriates who can motivate and empower the local workforce to understand and apply the laws by which MNC must abide. This must be done in a way where the workforce understands their obligations and why these foundations are in the best interestes of the company AND in the best interests of the employee.

Most MNC fail to get this National and expatriate managerial balance right.They try with best intentions to This failure will follow the new ex- use their management and decision patriate re-deployment overseas and making processes from abroad in Inwill result in low morale in the re- donesia. They don’t fully appreciate mainder of the management team, the complex social and human envifailed retention strategies in the ronment and don’t adequately tailor MNC, and disillusioned and offended their management team or their desuppliers and associated stakehold- cision making processes. ers. Companies could benefit from balAPAC Assistance strongly recomContinued on opposite page>> mends that categories one and two

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tudes; and therefore by expenditure investments and then by experience.

ancing their local management teams based on APAC’s three tiered plan- The reality is that in Indonesia the ning and decision making system, complexities are such that the hiring which is outlined below: prerequisites for managers and staff at each level are not normally closely • Tier One sets long term strategy - defined by MNC. we call this Grand Strategy. Having decided on what category(s) • Tier Two undertakes operational to apply in the MNC business, what planning and short and mid term positive indicators will the MNC asstrategy – we call this Operational sess for effectiveness? Suggested posLeadership. itive indicators include: • Tier Three implements the plan – these empoyees are the doers, they do the day-to-day work, the logistics, the monitoring. They do not address strategy. The three tiers separate logically: the obvious but usually unacknowledged reality is that the three tiers are divided by natural ability and by apti-

• A work force focused on doing their own role, not criticizing their peers. • The existence of a strategically focused and clear thinking management team. • Good relations between National and expatriate managers (meaning open and friendly discussions that

are solving problems rather than ‘nice discussions’ but solutions are always deferred). • A managerial team that has been hired to fit the business environment. • A team that matches the functional management processes developed in Indonesia where culture dictates that solutions are reached with everyone’s input. The following negative indicators will indicate failure in effectiveness: • Staff repeatedly asking for courses (indicating their morale to be in a state that the MNC should fund their qualifications for their next job). • Government officials challenging expatriate visas. Continued on page 10>>

Page 9 International Drilling Exploration 1/2 Page

Indonesian Resources 9

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OPPORTUNITIES FOR FOREIGN

INVESTMENT IN INDONESIAN MINING COMPANIES AND THE DIVEStMENT REQUIREMENTS - TWO SIDES OF THE SAME COIN FOR FOREIGN INVESTORS By Erwan Sentana

ndonesia is a country consisting of hundred of islands with many coal reserves and various mineral resources, such as gold, nickel, manganese, iron ore, copper, bauxite, tin, zircon, etc. Many large foreign companies have operated in the coal and minerals mining industries and enjoyed available investment facilities in accordance with prevailing law regulations and strategic policy issued by the Government of Republic of Indonesia, which is reviewed from time to time to fully support and offer more advantages for foreign inves-

tors and in attracting other prospective investors in seeking coals and mineral concessions for their investment plan in Indonesian mining industries. On the other side, Indonesia applies restrictions in respect of divestment obligatory rules for foreign investors who hold shares in Indonesian mining companies. Divestment is deemed as a “domestic sentiment” which is merely intended to give more control on the operated mining companies from foreign investor to government or local owner. This article presents restrictions on divestment obligatory in mining sector be-

ing continuing issues for the investors. GENERAL OVERVIEW OF FOREIGN INVESTMENT IN INDONESIA

In principle, foreign investors, either as individual and/or as a company, which wish to conduct investment in Indonesia must have an Indonesian legal entity and registered domicile in Indonesia. The legal entity must be in the form of limited liability company (Perseroan Terbatas/PT) duly estabContinued on page 12>>

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• Local managers are always in important meetings with officialdom but key decisions are not forthcoming. • The expatriate managers are impatiently trying to force decisions. • There is a tense but undisclosed air or disharmony in the management team and the heaviest thing in the meeting rooms is the unsaid words. The challenge for MNC will be to develop a process that enables them to benefit from the great business opportunities that exist in Indonesia. They must continually assess and monitor whether they are achieving positive or negative indicators. In doing so, they must honestly critique their performance not be overly focused on criticism of the ABE but rather in positioning their profile within the ABE. To achieve sustainable profits tier one and two management with foresight and expertise in the ABE. In reality, a succesful and proven Tier One manager who is selected for reasons other than those articulated above could be catastrophic for the MNC and its long term impacts in Indonesia. Note: These same challenges exist in the other TIP economies although their evolution was different to that of Indonesia, and requires tailored and specific support for expatriate executives. ■ This article was contributed by APAC Assistance, a regional risk management and operational business continuity Consultancy. www.apacassistance.com 10 Indonesian Resources

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Continued from page 10>> lished under Law No.40 of 2007 regarding Limited Liability Companies (“Company Law”) and Law No.25 of 2007 regarding Investment (“Investment Law”), generally known as “PT PMA”. Foreign investment can be made after the minimum two participants, which may consist of all foreign participants or joint venture with local partner being the founders of proposed new PT PMA, lodge the application to obtain a Principle License of Investment (Izin Prinsip Investasi) from Indonesian Foreign Investment Coordinating Board (BKPM). Following the issuance of a Principle License of Investment, the incorporation of a new PT PMA, together with its Articles of Association in a notarial deed, can be made by the founders and will require the approval of Minister of Law and Human Rights of the Republic of Indonesia. PT PMA may start its production activities after holding Business License (Izin Usaha) issued by BKPM. Moreover, Article 5 (3) of Investment Law clearly provides that foreign investment can also be performed in PT PMA by the following mechanism: 1.

Share acquisition; and

2. Other ways in accordance with prevailing regulations, inter alia merger and acquisition. Prior to investment, it is very important for foreign investors to examine in detail the proposed business sector for the investment they wish. As described above, Indonesia applies investment restrictions. Refer to the Investment Negative List setting out types of business sector which is closed or opened with certain requirement for foreign investment. Government of Indonesia reviews provisions in the Investment Negative List from time to time based on regulation or policy, which is intended to open as many opportunities for foreign investment in Indonesia.

12 Indonesian Resources

Currently, the Investment Negative List is regulated in President Regulation No. 36 of 2010 regarding List of Business Sector which is Closed and Opened with Certain Requirement for Investment (“Regulation No.36”). In addition to examining the required Investment Negative List, it is also important to check the proposed business sector with the classification set out at KBLI (Kelompok Baku Klasifikasi Lapangan Usaha Indonesia)/Indonesian Standard for Business Field Classification) which is lastly regulated in the Regulation of Head of Statistic Center Board No. 57 of 2009. Article 1 of Regulation No.36 provides lists of certain business sectors which are expressly closed for investment covering areas of (i) agriculture, (ii) forestry, (iii) Industry, (iv) transportation, (v) communication and information, and (vi) culture and tourism. While Article 2 of Regulation No. 36 provides list of business fields which are opened with certain requirement, covering areas of 17 (seventeen) business fields including the sector of energy and natural resources. The Government of Indonesia is, however, currently considering reviewig the existing Investment Negative List set out in the Regulation No 36 by proposing to open 6 (six) business fields which are formerly closed for foreign investment. Such business fields will include transportation, industry, and communication and information fields. It is reported that even though the six business fields will be opened they will need certain requirements. Further, the current minimum value of investment required for PT PMA is expressly determined by BKPM. Pursuant to recent regulation issued by Head of BKPM No. 5 of 2013 regarding Guideline and Procedure of Licensing and Non Licensing of Investment (“Regulation No. 5 of 2013”), total investment value for PT PMA must be more than Rp.10,000,000,000 (ten billion Rupiahs)

or its equivalent in US Dollar (which is approximately US$1,000,000 based on the average current exchange rate) (excluding investment for land and building). The investment value is including the stocks equity of PT PMA and optionally can also include a loan to be obtained by PT PMA, provided that the minimum of Rp.2,500,000,000 (two billion five hundred million Rupiahs) or its equivalent in US Dollar (which is approximately US$250,000 based on the average current exchange rate) should be paid by shareholders for the issued stocks at the time of incorporation PT PMA. Regulation No. 5 of 2013 also provides that the minimum stock ownership of a stockholder who has the lowest percentage of ownership must be at the minimum of Rp.10,000,000 (ten million Rupiahs) or its equivalent in US Dollar (which is approximately US$1,000, based on the average current exchange rate). DIVESTMENT REQUIREMENT ON MINING COMPANY Divestment generally is defined as the transfer of shares owned by a foreign shareholder to local shareholder in PT PMA within a certain period of time and requiring a minimum level of percentage of shares. In the mining sector, divestment obligatory in PT PMA is specifically regulated in Law No.4 of 2009 regarding Mineral and Coal Mining (“Mining Law”). Article 112 of the Mining Law requires foreign shareholders who own shares in mining companies, and which hold Mining Business License (IUP) and Special Mining Business License (IUP-K), must divest their shares five years after commencing the mining production. The shares are to be offered to the Government, local government, state owned enterprises, local state owned enterprises or private national company. Continued on page 14>>

PAGE 13 PNG RESOURCES FP

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Continued from page 12>> The Implementation of the Mining Law, currently regulated under Government Regulation No.23 of 2010 in conjunction with Government Regulation No.24 of 2012 regarding Implementation of Business Activities for Mineral and Coal Mining (“Regulation No.24”), provides that the divestment must be made gradually so up to the tenth years, the local ownership must reach the minimum amount of 51% in the mining company. The ownership of local party in each year after the fifth year must be not be less than the following percentage of the total issued shares: 1.

6th year: 20%

7th year : 30%

8th year : 37%

9th year : 44%

10th year : 51%

The local owner is being protected from the divestment. This is regulated in Article 98 of Regulation No.24, which provides that in the event of any increase of capital in PT PMA, the percentage of local ownership must not be diluted so

become less than the above percentage. Procedures of mandatory divestment should comply with right of first refusal mechanism from foreign shareholder to local partner. Refer to Article 97 of Regulation No.24 on this subject to corporate approval for the divestment purposes under Company Law. Based on recent development on this restriction, the Government of Indonesia is now discussing with internal Mining and Industry Ministries proposing to review the existing Regulation No.24. It is reported that the Director General of Mineral and Coal of the Energy and Mineral Resources Ministry will consider giving more flexibility on the divestment requirements for Indonesian mining companies owned by foreign investors carrying on both upstream and also downstream business in a company. Although the divestment obligation stipulated in the Mining Law and Regulation No.24 is intended only for IUP and IUP-K holders, it should also apply to the Contract of Work (CoW / KK) and Coal Contract of Work (CCoW / PKP2B) made by and between mining companies (including the ones that owned by foreign investors) and Indonesian Government before the published date of Mining Law.

Such CoW and PKP2B are still in force but obliged to be adjusted with the provisions in Mining Law at the latest 1 (one) year after the published date of Mining Law. As the adjustment should cover all articles in the CoW and PKP2B, then it can be concluded that the divestment obligation stipulated in the Mining Law and Regulation No.24 should also applied in the amendment of CoW and PKP2B. The contracts are also required to be adjusted to obtain IUP through application of IUP not later than 6 months before the license of CoW and PKP2B expiry. Regarding the CoW and PKP2B made by the Indonesian Government and the PT PMA mining company, the adjustment on the divestment obligation can only be made by the involvement of the mining company in the renegotiation of the contracts. A current issue of divestment is PT Freeport Indonesia (“Freeport”), a giant US mining company holds gold and copper licenses which is planning to go public and have its stocks listed in the Indonesian Stock Exchange (IPO) while the obligation of divestment has not yet been performed completely. Government is now making re-negotiation with Freeport on the required divestment obligatory. Freeport holds CoW from the Government of Indonesia with total concession of 212,000 Ha. It is reported that Freeport would like to divest 15% of its existing shares and will offer 10% to Indonesian partner c.q Government of Indonesia, while the remaining 5% will be released to the Indonesian stock exchange. The Government now hold only 9.36%. If the Government refuses the offer, local government of Papua or State Owned Enterprise then can hold the offered shares. By the issuance of Regulation No. 5 of 2013, the Government of Indonesia should have clearer legal position that the divestment requirement of Freeport will not be effected Continued on page 16>>

14 Indonesian Resources

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Understanding Mineral Project Evaluation By David De Lemos Pires and Michael Trainor

rial costs, and changing regulatory requirements.

mineral projects. These questions comprise the following:

ining projects are extremely The role of mineral project evaluadynamic, where their tion plays a vital role for all resource profitability is dependent on companies. a number of highly variable factors. The art of mineral project evaluation The ultimate success of a mining involves understanding the key prinproject is very much dependent on ciples and project drivers, as well as understanding the level of confidence identifying and quantifying the level and degree of accuracy of the vari- of risk to determine the viability of a ous project drivers, in order to make project. This article outlines some of informed decisions rather than gut the key factors that need to be confeeling calls to protect and maximize sidered in evaluating mineral projects the financial viability of the project. and the effects of risks in this process.

1. Where are we now? Does the mineral resource have the potential for positive economics?

This is even more important in the current market conditions of falling commodity prices, fluctuating mate-

There are three key questions that must be answered before entering the process of evaluating

<<Continued from page 14

PT PMA which hold IUP or IUPK for carrying on mining business in Indonesia as set forth in the Mining Law and Regulation No. 24. This is also applied for CoW and PKP2B holders, although such obligation must be applied by the renegotiation of the contracts between the parties of the CoW and PKP2B â&#x2013;

by its proposed IPO, and the divestment must still comply with the percentage stipulated in Regulation No. 24. Another issue of divestment in mining activities in Indonesia also occurs in the CoW between the Government of Indonesia and PT Vale Indonesia Tbk, the holder of nickel CoW covering area of 190,000 ha in Soroako South Sulawesi. An intensive renegotiation is still in process in which PT Vale Indonesia Tbk has not agreed on the certain offer from the Government of Indonesia including the divestment obligation of 51% shares into local ownership and also and the extension of CoW to become IUP. Conclusion A divestment obligatory requirement for foreign investors is a must in every 16 Indonesian Resources

2. Where do we want to be?Typically, we would like the project to be a low cost producer and maximize value to the shareholders. It is important to note that the value includes managing the companyâ&#x20AC;&#x2122;s new investments and current operations to achieve sustainability, profitability, solvency, liquidity, growth (by adding value) and survival. Continued on opposite page>>

About the author Erwan Sentana is the managing partner at ES&P Law Firm Jakarta, Indonesia. He holds an Advocate License from Indonesian Advocate Association (PERADI) and is registered as a Capital Market Legal Consultant at Indonesian Capital Market Supervisory Agency (BAPEPAM). His areas of specialization are mining, corporate restructuring, M&A, capital market and litigation. He has been appointed by US Mining Company to acquiring coal concessions and also by Australian and European investors to undertake mining business opportunities in Indonesia.

Disclaimer This article is not intended as legal advice or legal consultation on any specific matters.The information contained in this article should not be relied on without first seeking the advice of an eligible attorney.

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3. How do we get there? How do we extract what is in the ground into a mineral product that can be used as a raw material, or finished product for customers at maximum return and minimum risk. In any mineral project the key areas of evaluation include exploration, geology, resources, reserves, mining, processing, infrastructure, hydrology, environment, capital and operating costs, economic analysis and risk evaluation. Risk is important in the assessment of a mineral project for two reasons. Firstly, the value of the project may differ from what it was forecast to be. This type of risk represents a potential loss to the owner of the project. Secondly, the risk of the project contributes to the risk for both the company and investors. The level of risk should be evaluated for each project item with a degree of contingency applied. The risk items often require the involvement of a Qualified or Competent Person (QP) to quantify the level of information attained for each project item, determine the associated level of risk and provide input on risk mitigation methods. A quantitative risk assessment is advocated for use in all financial evaluations and it is commonly based in accordance with international guidelines such as ISO 31000. These standards provide principles and guidelines on risk management. They also help identify an educated judgement of the probability or likelihood of occurrence of issues associated with each risk, the impact that these issues will have if they are (or are not) realized, and an overall risk rating based on the combination of both.

The life of a mine can be simplistically divided into three key phases that consist of preproduction, production and mine closure with each phase having their own project strategies. The Preproduction phase is associated with expenditure of available capital funds and the focus is managing project creep and securing production, as stakeholder expectations are high. These two strategies are becoming more evident throughout the world This period is often subject to high due to government rebates on caroperational expenditure (OPEX) bon emissions, restricted access to and capital investment (CAPEX) re- skilled labour and reduced supplies of quirements. Key project evaluation mining consumables and equipment. techniques include the following: • Management of subcon• Tradeoff study on Owner or tracting activities through the Contractor mining for all or part of negotiation of loading, haulmining activities during preproduc- ing, drilling and blast activities. tion years to reduce CAPEX and transfer skilled operator knowledge. • Optimising mine plans aimed at improving the NPV of operations • Reduced operating costs in owner operated method for life Mine closure is centered on alignof mine but the consequence is ing the final mining footprint with high CAPEX, but this may be off- environmental, health, safety and set with Joint Venture agreements. local legislative requirements. • Many mineral companies often increase the Net Present Value, (NPV), by placing operational expenditure incurred during this period within the capital expenditure, to show high initial investment but low operational cost throughout the project life. The production phase it is all about managing operational costs in order to payback the initial investment and maintain production to secure revenue at fluctuating metal prices. Common practices used to improve project economics during this period are:

The effort is designed to integrate low costs to remediate the mine and try to return the project site to a sustainable level of rehabilitation. Common activities include dozing of waste dumps and backfill of mined out pits. The evaluations of mineral projects are often commonly based on a Discounted Cashflow (DCF) methodology. A cash flow is designed to capture all cash inflows and outflows over the whole life of a project and avoid inclusion of non-cash accruals.

• Mining areas which have low The cashflow model must recogstrip ratios and high grade material. nize the time-value of money by discounting at an appropriate dis• Reducing operational costs count rate to obtain their present through low diesel emitting equipment value and other DCF criteria valsuch as autonomous mining fleets ues such as Gross Profit, EBITDA, and LCC (Life Cycle Costing) to get EBIT, NPV, IRR and Payback Period. more life from the mining equipment. Continued on following page>>

Indonesian Resources 17

Resources Commentary Sept - Nov. 2013

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The National Forest Estate a controlling Stake in the game PREFACE

This article on the Forests and Mining Series is aimed at improving the industry’s understanding of Indonesia’s National Forest Estate, the Ministry of Forestry, its laws and regulations, some of its politics, in addition to offering practical recommendations. In this article we explore the background of the National Forest Estate and its relevance to the industry. By Ben Jarvis, PT. eForest Management Consultants

’ve invested millions of dollars, prepared company documentation, secured a mining

<<Continued from previous page

The most common minerals industry software used for financial evaluation of mineral projects is RungePincockMinarco’s XERAS, which was designed specifically for the resource sector. Sensitivity analysis A sensitivity analysis is required to evaluate the economics of a project under various levels of sensitivity or risk for the key project drivers. There are many forms of conducting sensitivity analysis that include spider graphs, tornado diagrams, decision trees and Monte Carlo simulation to assess probability of failure and success. Figure 1 is an example of a project 18 Indonesian Resources

license, obtained all the pieces of paper and purple stamps under the Sun, developed an early works plan, even got a contract with the government … What now? Pinjam what? Ministry of Forestry? Another permit? [missing], I just want to start mining, not plant [missing] trees …” If this resonates then you’re not alone. A recent survey of mining stakeholders conducted by Price Waterhouse Coopers Indonesia (PWC) and the Indonesian Mining Association cites conflicts between mining operations and forestry regulations as being the top challenge for coal mining companies in 2012 and the third most important issue for mineral mining companies. In fact sev-

cash flow profile and sensitivity analysis. While any resemblance to an actual project is merely coincidental, this Figure does illustrate that with everything going well a project does provide a positive return, but changes in one or more key drivers, which can or cannot be controlled by a company, will quickly change a projects fortune. It is important to remember that all mineral projects have a value, but assessment of projects need to include all processes of the value chain from “Mine - Mill – Port - Customer”, it needs to cover the key risks and an understanding of these on the projects viability plus an evaluation of market supply and demand has to be assessed on economic, social and environmental merits to make a project both financially successful and sustainable. ■

en (*) and arguably eight of the top ten problems reported in the PWC publication (Table 1) can be directly or indirectly linked to forests, Ministry of Forestry, or administration of the National Forest Estate (NFE). Like many other places in the world, the government of Indonesia is responsible for managing the country’s forests in the best interests of its People (Forestry Law No.41, 1999). It achieves this through administration of the the National Forest Estate (NFE), otherwise known as Kawasan Hutan, a vast area of land making up approximately 54% of the country’s landmass, roughly equivalent to 105 million hectares. The NFE is categoContinued on page 20>>

References: 1. Addison, D, 2004. Pincock Perspective: Between a Rock and Hard Place, 2 p. 2. Crundwell, F.K, 2003. Finance For Engineers: Evaluation and Funding of Capital Projects, 12 p.

About the authors David De Lemos Pires is the Regional Manager Technology Consulting for RungePincockMinarco in Latin America, and Michael Trainor is General Manager, Indonesia for PT RungePincockMinarco You can find out RungePincockMinarco www.rpmglobal.com

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cal national spatial planning process. While genuinely important for national development, the process represents the front lines of deforestation, where strokes of a pen define areas that will be maintained as forest and those that will be converted. This boundary also defines the relative political power of the Ministry of Forestry, and is where the battle for control over business licensing between Central, Provincial and Regency government is ultimately fought. 1

Reproduced from Mine Indonesia 2013: 11th Annual Review of Trends in the Indonesian Mining Industry available at: http://www.pwc.com.au/ asia-practice/indonesia/assets/publications/mineIndonesia-May-2013.pdf

<<Continued from page 18

rized in to three broad categories: 1. Conservation Forest: land within the NFE with the primary function of preservation of plant and animal diversity including associated ecosystems. Conservation Forest is further subdivided in fully protected areas (i.e. Nature Reserves and Wildlife Refuges) and conservation areas where sustainable utilization is permitted (i.e. National Parks, Forest Parks, Tourism Parks, and Hunting Parks).

Signficant decrease

A hundred years ago Indonesiaâ&#x20AC;&#x2122;s intrusion and maintain soil fertility. forests covered more than 159 million hectares but since the 1950s It is its own category and is the area of forest has decreased managed under the jurisdic- to less than 105 million hectares. tion of local governments. The rate of deforestation con3. Production Forest: land within tinues to accelerate and is curthe NFE with the primary func- rently believed to be in the ortion of generating forest products. der of 2 million hectares per year. Production Forest comprises three sub-categories: Permanent Production Forest (HP), Limited Production Forest (HPT), and Conversion Forest (HPK). Production forest is administered by the Ministry of Forestry.

This forest loss is due in large part to systemic mismanagement, overharvesting, forest fire, illegal logging, shifting agriculture, clear felling for plantation, agricultural development and mining, as well as expanding infrastructure and population centers but these are just symptoms of an underlying genetic disorder.

The Ministry of Forestry manages The approximate area of land alall conservation forest, regardless of located to each forest function its location within the Archipelago. and the associated implications for mining are detailed in Table 2. The diagnosis 2. Protection Forest: land within the NFE with the primary function of The extent of the NFE is defined the buffering life support systems that during negotiations over boundaries If a doctor were conducting a medicontrol water flow, prevent flooding, between the NFE and Alternative cal examination on the NFE he might control erosion, prevent salt water Land Use (APL) during the cycli- note the following. Diagnosis: Tragedy of the Commons with severe complications of de facto versus de jeure land tenure. Condition: Chronic. Prognosis: Curable where action is taken. Treatment: Amputation. Cue: Politics, the Ministry of Forestry and its 54% stake in the game. Continued on opposite page>> 20 Indonesian Resources

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<<Continued from opposite page

Mining companies and other pinjam pakai applicants represent high value, dependable, long-term forest users – a recipe guaranteed to make the licensing and renewal process a prime candidate for legal innovation.

The Ministry of Forestry is the master of reinvention, maintaining relevance and keeping its grip on power. It does this by being one of the most prolific issuers of regulations of all government departments.

Indeed this process has already begun with new regulations issued in 2012 and 2013 that increase the burden on the pinjam pakai license holder, whilst introducing measures to improve their odds.

More than 600 laws At one point in time there were over 600 laws, regulations, decrees, and instructions prescribing activities ranging from licensing through the export of forest products, which were used to full advantage. With the decline of both the natural forest logging and plywood industries over the past decade the Ministry has been exploring ways

to tap in to the country’s growing economy, and in that respect the recent surge of interest in the mining sector could not be better timed.

Smaller license areas equals more applicants, more applicants equals more opportunities, and with elections on the horizon in 2014 the sentiment of the mining survey respondents echoes … it’s game on

Continued on following page>>

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Altura on the fast-track to indonesian success

ustralian Securities Exchange Listed Altura Mining Limited is on target to achieve its stated aim of becoming a key commodity provider in South East Asia over the next five years – with its stable of Indonesian coal assets set be a prime driver in helping it to achieve that success. Led by a board and executive management with extensive industry and South East Asia experience in the development of coal resources through to mine production, Altura became an Indonesian coal producer in February this year when it acquired a one third interest in the operating Delta Coal Mine in East Kalimantan. The Delta interest was acquired through a two stage payment totalling US$25 million, with an initial payment of US$12.5 million with the balance payable in equal instalments over the next 3 years.

<<Continued from previous page

About the author Ben Jarvis is an acknowledged industry expert with 15 years experience working on Indonesian forests issues. He is currently the Managing Director of PT. eForest Management Consultants - the pinjam pakai and forest solutions provider for businesses operating inside Indonesia’s National Forest Estate. Please send any correspondence to Gedung Manggala Wanabakti, Blok IV Fl.5 R. 519C, Jl. Gatot Subroto, Senayan, Jakarta Pusat 10270 or electronically to bjarvis@eforest.co.id ■ 22 Indonesian Resources

The acquisition is considered fundamental for the company, and part of Altura’s gradual evolvement from an explorer to a producer – with other

Indonesian coal mine developments also in the pipeline. Continued on page 24

Figures on the forest estate are considered estimates based on State of the Forest, 2002 (http:// pdf.wri.org/indoforest_full.pdf ) and the latest 2001 statistics reported on the Ministry of Forestry’s website http://www.dephut.go.id/uploads/ INFORMASI/STATISTIK/2001/BAP_01_N.htm 2

Presidential Regulation No. 28 Year 2011 regarding Utilization of Protection Forest for Below- ground Mining dated, 19 May 2011 3

Minister of Forestry Regulation No. 18 / Menhut-II / 2011 regarding Guidelines for Lease & Use of State Forests; in addition to its subsequent amendments: P.38 / Menhut-II/2012; & P. 14 /Menhut-II/2013 4

de jure designates what the law says, while de facto designates what happens in practice 5

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<<Continued from page 22

The Delta mine is situated on a 1,260 hectare Izin Usaha Pertambangan (IUP) or Mining Permit in the Mahakam River delta in close proximity to the nearby major centres of Balikpapan and Samarinda. The transaction provides a direct equity interest in PT Delta Ultima Coal (Delta Coal), the owner and operator of the PT Binamitra Sumberarta mining tenement. Mine

The Delta Coal operation produces and sells a medium energy thermal coal currently at a rate of 1.5 million tonnes per annum (mtpa). Plans are in place to lift production and sales to 2.0 million tonnes per annum by 2015. The mine has two defined resource areas with Gunung Lampu located in the east of the tenement and the Noni area located in the west. Both are serviced by a network of roads to the centrally located coal crushing plant.

tractors to carry out the overburden and coal removal and a single contractor to haul product coal from the processing plant to the barge loading facility.

Production during the 3 months to 30 June 2013 has not been without some challenges in particular a continuing late wet season which has Coal is mined via open pit methods, impacted achieved mining rates to crushed on site, loaded on barges at some extent. the nearby company owned loading facility located on a river in the Ma- However, Delta Coal mine managehakam delta, and then barged to the ment says it remains confident that offshore loading point of Muara Jawa. the target of 1.5 million tonnes during the 2013 calendar year is achievThe mine employs two mining con- able.

Coal Reserves

During the previous quarter Altura announced a JORC compliant Maiden Coal Reserve. This Coal Reserve estimate was compiled by Australian based mining group Xenith Consulting Pty Ltd (Xenith). Xenith estimated a current Coal Reserve of 12.5 million tonnes consisting of 10.4 million tonnes in the Proven classification and a further 2.1 million tonnes in the Probable classification. There is significant scope to expand the Coal Reserve estimate via further drilling and testing of lesser explored sections of the Delta Coal tenement. The Coal Reserve estimate is based on a revised JORC compliant Coal Resource estimate of 61.4 million tonnes, which was also announced on 5 June 2013. The Coal Resource estimate comprises 27.5 million tonnes in the Measured category, 14.3 million tonnes in the Indicated category and 19.5 million tonnes in the Inferred category. <<Continued on page 28

24 Indonesian Resources

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Barisan receives a positive ruling on Upper Tengkereng

anadian gold-copper porphyry explorer Barisan Gold Corporation has reported mixed results with its pursuit of licensimg clarity over its projects in Aceh Province on the northern tip of Sumatra Island.

Barisan Gold received some welcome news recently when it was determined that a material portion of the company’s Upper Tengkereng prospect is located outside of a forest area, which means that part of the tenement can be explored without the issu-

ance of a forestry borrow-use permit

<<Continued from page 24

Upon receipt of approvals, it is estimated that a lead time of less than 8 months will be required for the first coal production. Initial coal production will be at a rate of 500,000 tonnes per annum (tpa) ramping up to 1,500,000 tpa.

Pre-Production activities include the upgrade of an existing haul road, construction of camp and office facilities and construction of mine related support infrastructure eg workshops etc

Of the total resource estimate, 51.8 million tonnes are in the Gunung Lampu area and 9.6 million tonnes are in the Noni area. In addition, the coal resources are reported inclusive of the coal reserves (i.e., the Coal Reserves are not additional to the Coal Resources). Altura is also a majority participant in the Tabalong Coal Joint Venture in South Kalimantan with the majority 70% stake. Highlights of activities at Tabalong during the previous quarter included continuing the advancement of permit issuance to allow development works to proceed as well as production. It is expected that the appropriate permitting will be in place before the end of 2013.

The initial mining development will commence in PT Suryaraya Permata Khatulistiwa (SPK), the most northern tenement, and then progress south into PT Suryaraya Cahaya Cemerlang (SCC) and potentially east to PT Suryaraya Pusaka (SP) as coal resources are defined. Coal will be mined from SPK and hauled some 110 kilometers to an existing third party port site on the Barito River, where it will be loaded on barges and transported down the Barito River to an offshore anchorage point for vessel loading.

On the back of this information, the company has elected to re-initiate exploration and drilling activities Continued on page 28>>

Altura also has two further IUP’s to the south of SCC but adjacent to the haul road, PT Kodio Multicom (KM) and PT Marangkayu Bara Makarti (MBM). Besides bringing all of the five IUP’s listed above into production, Altura will, in the short term, be seeking to further clarify the resource capacities, of these five South Kalimantan tenements. Other Altura Activities

Altura owns AsiaDrill in Indonesia. AsiaDrill services the mineral exploration sector in Indonesia in general as well as providing these same services to Altura exploration activities. Altura has a 30% interest in the Mt Webber iron ore project currently being developed in a Joint Venture with Atlas Iron in the Pilbara region of West Australia. The project is currently being fast tracked with initial production scheduled for Q1 2014. Altura also owns a large world class JORC compliant lithium resource in the Pilbara region of West Australia, Pilgangoora, for which it is currently considering development options. ■

26 Indonesian Resources

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CHallenger signs up for ABBR Project

hallenger Deep Resources Corp. has announced that its wholly owned subsidiary, PT Bestindo Energy (BE), has signed a formal exclusive Mining and Marketing agreement for the coal mining and marketing rights for the ABBR Project in Central Kalimantan - with an initial term expiring in 2020 with an option to extend beyond that date. The ABBR licence lies adjacent to Challenger’s KEM license where drilling activity is taking place on the initial areas scheduled for production. Challenger said its due diligence

field work on the ABBR Project has confirmed the presence of at least 16 seams which are the strike continuity to the east of seams exposed in the KEM license area. Due diligence test pitting and outcrop sampling have confirmed coal quality ranging from GAR 6,022 to 6,330. Outcrop width of seams discovered to date vary from 0.2 - 2m. Drilling is to commence immediately on the extension of seams currently being drilled on the KEM license area. These seams are projected to strike for a distance of 1.8 km through ABBR license area.

<<Continued from page 26

hibits the issuance of new forestry borrow-use permits for all projects at Upper Tengkereng with drilling located in primary forest for an adtargeted to resume in late August. ditional two years until May 12, 2015. Baristan says it initially plans to drill up to 3,000 meters that will seek to target, expand and define the high-grade zones intercepted in Hole UTD-002 which returned 691 meters at 0.4g/t gold + 0.3% copper fully mineralized from surface to the bottom of the hole.

Abong Gold Deposit

The company has a geological team and two drill rigs on-site completing mine plan and exploration drilling. Ranjeet Sundher, President of Challenger, said the signing of the ABBR project is an integral part of the overall Barito Project for the company. “With the mining licenses and infrastructure in place, combined with the high quality of coal, we believe we can build a profitable coal production company that is sustainable and highly scaleable.” ■

wait to receive permission to proceed with its application from a local timber company who shares the surface and forestry rights at Abong.

Based on the recommendation of the regency government, the company Barisan Gold has also been held up with has decided to request a suspenits activities at the Abong gold deposit. sion of its Izin Usaha Pertambangan (“IUP”) at Abong while it seeks final While Abong is located in produc- support from the timber company. tion forest and hence is not restricted by the moratorium in force The suspension, valid for an initial by the Indonesian Government, the one-year period, allows Barisan Gold This exploration programme will company is still awaiting clearaces to protect its timetable for comcount towards the work com- to help further develop the de- pletion of exploration activities at mitment required under the posit which had an estimated ini- Abong. Under Indonesia’s mining law, company’s exploration license. tial resource containing 8.5 million exploration licenses (IUPs) are valid tonnes at 1.5 g/t gold + 10.7 g/t silver. for a period of up to seven years after However, the news wasn’t so good which they must either be converted on the company’s other five pri- The company reported recently it to mining licenses or be relinquished. mary porphyry targets which are all continues to work diligently with curently on care and maintenance. the various levels of governments Barsisan Gold stated that by suspendto obtain a forestry borrow-use ing its IUP, it guarantees that it will have These targets are all located in pri- permit for the Abong gold deposit. enough time to complete drilling and mary forest classification which is feasibility studies prior to the end of subject to the extended moratorium However, despite strong support the seven-year exploration period as of the Indonesian Government re- from the regency and provincial gov- suspension basically stops the clock. ■ leased on May 13, 2013, which pro- ernments, the Company continues to 28 Indonesian Resources

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Sept - Nov 2013

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FINDERS FINDS FUNDS FOR WETAR WORK

etar copper mine developer Finders Resources has raised A$14 million in capital to progress the project. The company recently announced it had received firm commitments from investors to raise the funds, which will used to upgrading and restarting the existing demonstration plant on Wetar Island and completing the updated Bankable Feasibility Study and bank financing among other things. Finders is planning increase the capacity of the existing demonstration plant from 1,800tpa to 3,000tpa and re-commence copper produc-

INSERVICA 1/2 Page H

tion in the fourth quarter this year. It said that at current copper prices, the upgraded plant would generate $1.75 million of revenue per month.

prises the development, mining and processing of sulphide copper deposits at Kali Kuning and Lerokis located on Wetar Island, Indonesia.

Finders’ chairman, Gary Comb wel- Mining will be carried out by concomed the successful placement. ventional open pit methods initially at Kali Kuning and from Year 3 also “We appreciate the continued sup- at Lerokis with ore hauled from the port from our existing shareholders open pits to the Kali Kuning ROM pad. which reflects the robust fundamentals of the Wetar copper project. Finders has operated a 1,825 tpa Cu I would particularly acknowledge demonstration plant on site that inthe contribution of Provident who corporates heap leaching, solvent through their experience and net- extraction (SX) and electrowinning works in Indonesia have proven (EW) in its flowsheet.The demonstrato be an excellent local partner.” tion phase of the Wetar Copper ProThe Wetar Copper Project com-

Continued on following page>>

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Sept- Nov. 2013

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Mining Finance Drops 56% in June Quarter

espite an extremely challenging first quarter, the mining finance environment became even more difficult in the three months to end-June. Falling metals prices, nervous bankers and risk-averse investors all contributed to a slump in funds raised in the mining sector. Only US$2.28 billion was received in the three months to end-June, compared with US$5.16 billion in the March quarter and US$6.12 billion in the second quarter of 2012. According to the latest State of the Market: Mining and Finance Report from IntierraRMG, the industry now faces a severe capital drought and concerning levels of debt. The Australian Stock Exchange (ASX) saw a slump in mining financing from US$1.41 billion in the March quarter to just US$0.45

billion in the quarter just ended. an end-June market capitalisation of over US$100 million raised just TSX US$1.43 billion in the June quarter, compared with US$4.08 billion in The Toronto Stock Exchange the three months to end-March.” and TSX-Venture did only marginally less business than in the This fall of almost 65% amongst March quarter (US$1.09 billion, the largest companies landed hardcompared with US$1.22 billion). est, not surprisingly, on the producers (with financing dropping from The London Stock Exchange (LSE) US$3.71 billion to US$1.24 bilwas the only major stock exchange lion). Funding by exploration comnot to report lower financing for panies fell 28% to US$1.04 billion. mining companies (US$0.50 billion, compared with the historically Dr Hinde concludes; “Cash holdvery low US$0.20 billion previously). ings for the junior companies are now at critical levels (with As IntierraRMG Editorial Direc- overall cash balances of untor, Dr Chris Hinde explains; “At der US$10 billion for explorers). the corporate level, almost the entire drop in financing has been felt Many of the smaller companies by the largest companies. The 555 will be unlikely to survive until the companies monitored by the In- end of this year unless there is a tierraLive mining database that had dramatic reversal of fortune.” ■

<<Continued from previous page

ject was successful, significantly de-risking the technical aspects of the project, with the following key achievements: · The plant achieved nameplate production during the first six months of 2010; an outstanding accomplishment which reflected the efforts of the site team to optimize heap and plant performance during the latter half of 2009. · Recoveries from Heap 3 exceeded DFS design reaching 80% copper recovery after ~21 months. · Reconciliation of heap residual material confirmed leaching of chalcopyrite, covellite and chalcocite.The confirmed chalcopyrite leaching is a global first for Finders. · Effective testing of all aspects of the planned commercial operation from mining to logistics and international sales, including training and development of local staff. 30 Indonesian Resources

· Over 1.2 million work hours have now been completed on the project with only 3 lost-time injuries. The Expanded Demonstration Plant (EDP) project phase involves the expansion of the existing heap leach SX EW demonstration plant to a nominal capacity of 7,000 tpa of cathode copper. The EDP will be operated in conjunction with the Main 18,000 tpa SX-EW Plant relocated from Whim Creek in Western Austraia. Neutralisation is also included, as the demonstration heap leach has shown that the ore is acid generating rather than acid consuming. The processing route for the ore has been designed to handle up to 1.65 Mtpa of sulphide ore to produce a total of 25,000 tpa of LMEA Grade copper cathode from both plants. The Updated Bankable Feasibility Study (Updated BFS) describes the technical and financial position of the project as at May 2012. ■

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Sept - Nov. 2013

www.indonesian-resources.net

HELI SGI FLYING HIGH

hartering helicopters can be very expensive. However, HELI SGI believes the significant experience it has in working in the resources sector will allow it to work in partnership to arrive at the best possible flying options for its clients. Reducing costs and increasing efficiency of flying hours wherever possible is one of HELI SGI’s key strategies. As the partnership relationship develops, HELI SGI aims to offer tailored made flying options and solutions, thus giving scope for even more cost savings. PT Sayap Garuda Indah (HELI SGI) is an Indonesian based and incorporated company, with its primary activity being the provision of rotary and fixed wing aviation services to the mining, tourism and corporate VIP sectors of aviation.

•Mapping

DGCA for a further 2 years.

•Urgent freight and equipment transfers

From the Board of Directors and Senior Management down, the HELI SGI team has a firm and demonstrable commitment to Health, Safety, Environment and Security (HSES), and has introduced significant policies to ensure these commitments and goals are realised and maintained.

•Crew and equipment ferrying to remote or inaccessible areas HELI SGI is associated with a number of aviation companies including some who have been in operation for up to 30 years within the resources sectors. These relationships provide the framework to allow HELI SGI to more predominately participate in providing aviation services and solutions to the resources sector in Indonesia. HELI SGI has again passed its annual and bi-annual DGCA audits and has recently had its AOC reissued by

HELI SGI is actively looking for the opportunity of working with other service providers and is open to supporting other aviation operators. Cost Effective Aviation Services HELI SGi says it wants to make sure that all of its clients receive the most cost effective aviation services from Continued on page 36>

Mining/Exploration and Seismic Operations HELI SGI has extensive knowledge and experience in supporting the mining and exploration Industry in Indonesia. Its pilots, all with many of hours of experience, have specialised in working in hot and high areas and long lining in Asia Pacific. The company’s mining and exploration services include: •Geo/magno/spectro surveys

and

seismic

•Mineral exploration and sampling •Equipment transportation and recovery •Personnel transportation Indonesian Resources 31

ResourceServices Services Resource Sept Sept- -Nov. Nov.2013 2013

www.indonesian-resources.com www.indonesian-resources.net

<<Continued from page 31

HELI SGI. To achieve this, the company says it must provide the right helicopter and the right crew for the project. A key part of achieving this aim is taking the the opportunity of speaking to potential clients in the early stages of a project which allows HELI SGI to design and tailor a service appropriate for the project requirements. This way it is able to advise its clients as to which are the most appropriate machines for the nature of the work that is required to be performed. This will also include providing the right crew and appropriate expertise i.e. experienced Loadmasters who can handle expensive drilling equipment and suitably experienced long lining pilots. HELI SGI has some of the most experienced long lining pilots in all of Asia Pacific. By making sure it offers the right machine and the right crew the company says it can, in turn, save money for its clients.

Basic Aviation Risk Standard (BARS) Registration HELI SGI has BARS (Basic Aviation Risk

Standard) registration following the audit conducted in April 2013 by AvLaw. Basic Aviation Risk Standard (BARS) managed by the Flight Safety Foundation is a new audit program aimed at the resource sector and aviation organizations servicing the mining industry. HELI SGI has an enviable record of safety in supporting previous operators across Indonesia. It knows the Asia Pacific area and the operations of its clients and will endeavor to work alongside those clients to maintain the integrity of itsoperations. The company says its recent BARS registration provides testament to its commitment towards all aspects of safety within the aviation sector. HELI SGI is an organisation that has the drive and determination to further move forward in the Aviation Industry.

And as part of its management restructuring exercise and new shareholders participation, HELI SGI will not only be introducing light helicopter capability to its fleet, but going forward light twin engine helicopters such as the BK117B2 (9 Passengers, 1,350 Kg on hook at sea level) and also heavy helicopters such as the Mil-8 (26 passengers, 4,000 Kg on hook at sea level). The company is also looking to expand its fleet to include BK’s, 412’s, MiL 8’s and MiL 26’s. This will ensure that we will be able to provide the most efficient and cost effective machines to all of its clients. HELI SGI Benoa Heliport Complex

Although built principally as a helicopter base, the beauty of the new hangar facility is that the company will be able to move passengers and freight more freely through a purpose built terminal, rather than through the restrictive and regressive Ngurah Rai Airport precinct. Given conditions imposed by Angkasa Pura, passenger movements are restricted and heavily regulated which sometimes causes delays and inconvenience to passengers. This will also preclude passengers from check in delays with security queues, queuing at check in booths, crowds, bus airside transfers and airport terminal taxis. The company’s new terminal at Benoa Harbour provides a comfortable VIP style waiting lounge for its client’s personnel, with Wi-Fi and internet. Furthermore HELI SGI can store and move freight for its clients as required, plus offer all of its client’s Continued on opposite page >>

32 Indonesian Resources

Resource Services

Sept - Nov. 2013

www.indonesian-resources.net

<<Continued from opposite page

Model 206’s 2-bladed conventional rotor.

personnel airport pick up/drop off, ticket and baggage check services for The rotor blades and hub use cominbound/outbound RPT connecting posite construction, have no life flights ex Ngurah Rai. limits, and provide improved performance and better ride comfort over The company has welcomed other the 206 models. The 407’s cabin is aviation operators to view these fa- also 18cm wider, increasing internal cilities. HELI SGI is open to providing cabin width and space, and features aviation support services from the 35% larger main cabin windows. Benoa Heliport Complex to other interested parties. The more powerful Rolls-Royce (Allison) 250-C47 turbo shaft allows an Bell 407 Aircraft Overview increase in max takeoff weight and improved performance at hotter temperatures and/or higher altitudes The Bell 407 is a civil utility helicop- – a significant consideration when ter, a derivative of the highly success- working with mining and exploration ful Bell 206 Longranger. The 407 uses clients. a 4-bladed rotor system with a rigid, composite rotor hub instead of the The aircraft typically seats 1 pilot and

Page 33

up to 6 passengers. HELI SGI would be pleased to sit down and discuss your aviation requirements. This way we can tailor our services to meet your specific needs. Our objective is to work in partnership with our resources clients. Providing aviation support services that forms part of the overall plan our clients have to make their project a success. The company’s aim is to build successful long term aviation business partnerships, which leads to its partners trusting HELI SGI to provide aviation services that meets their requirements, cost effectively.■

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Indonesian Resources 33

Resource Services Sept - Nov. 2013

www.indonesian-resources.net

Corrosion – “Prevention is better than cure”

he word corrode is defined from the Latin word corrodere, which means “to gnaw to pieces”. The general definition of corrode is to eat into or wear away gradually, as if by gnawing. Corrosion can be defined as a chemical or electrochemical reaction between a material, usually a metal and its environment that produces deterioration of the material and its properties.

fied over the years with the help of numerous chemicals. For this reason, much thought must be taken when considering what building materials should be used for the facilities.

In copper recovery systems, the acid solutions are both corrosive and hazardous. Safety and corrosion resistance are both important factors when considering material to use. Normally in coppery recovery operations, molded 1-1/2” square When corrosion is discussed, it is mesh grating is used extensively important to think of a combina- around vats in the electro winning tion of a material and an environ- process. The superior strength of ment. The corrosion behavior of a the integral, interwoven construcmaterial cannot be described unless tion and the bidirectional load distrithe environment in which the ma- bution of the 1-1/2” square pattern terial is to be exposed is identified. are ideal for the walkways and work platforms required for installation. Around the world, copper recovery and extraction is an important The corrosion of steel reinforcing bar industry. Though the industry has (rebar) in concrete can proceed out been around for a very long time, of sight and suddenly (or seemingly it is ever-changing. The process of so) result in failure or collapse of elecrecovery and extraction is a very trical towers, and damage to builddetailed one and has been simpli- ings, parking structures, and bridges,

etc., resulting in significant repair costs and endangering public safety. Economically, capital costs also are incurred because of corrosion. The useful life of manufacturing equipment is decreased by corrosion. For an operation that is expected to run continuously, excess capacity is required to allow for scheduled downtime and corrosion-related maintenance. Replacement, loss of product, and maintenance and repair are fairly straightforward and all avoidable. For over 40 years, Fibergrate grating has led the fight against industrial corrosion as well as slip and fall accidents. Standard meniscus top provides an aggressive slip resistant surface along with many other FRP benefits. Available in a variety of depths, resins and panel sizes molded grating is the perfect solution for many applications and environments. Fibergrate products can withstand the acid solutions used in copper recovery and extraction. The slip resistant surface of Fibergrate grating makes walkways safe for workers. Fibergrate’s products have created a long-term, low-maintenance solution Continued on page 36>>

34 Indonesian Resources

Resource Services

Sept - Nov. 2013

www.indonesian-resources.net

WEIR EXPANDS COAL OFFERING WITH ASPIR ACQUiSITION

eir Minerals is looking als’ commitment to best practice. Aspir centrifuges combine highto grow its business quality components with one of the offering into Indonesia Key on the list of products are As- most advanced drive mechanisms via the acquisition of coal centrifuge pir coarse and fine coal centrifuges. Continued on page 36>> manufacturer Aspir Pty Ltd. The Aspir brand is renowned in the coal processing industry for products that utilise the latest technology available in coal preparation and dewatering applications. The Aspir acquisition means Weir Minerals will now be able to provide increased minerals classification solutions and a more complete range of coal processing solutions. This expanded offer will continue to reinforce Weir Miner-

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Indonesian Resources 35

Resource Services Sept - Nov. 2013

www.indonesian-resources.net

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INSERVICA 29

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OUTOTEC OPENS JAKARTA OFFICE

lobal minerals and metals processing technology specialist Outotec has opened an office in Jakarta.

Officiating at the opening, Pertti Korhonen, CEO and President of Outotec, said Indonesia has some of the world’s largest resources of gold, nickel and tin as well as significant resources of bauxite, copper and silver and also has a large potential in renewable energy. Indonesia has steadily developed into one of Asia’s major economies. “Indonesia is South East Asia’s largest economy with a strong long term growth outlook. Through our industry leading technologies we want to make a strong contribution to sustainable development of Indonesia’s mining and metallurgical industry. “The Indonesian market offers attractive growth opportunities for Outotec. With the opening of our Jakarta office, we will take our capability to deliver sustainable technology solutions and services to our Indonesian customers to a whole new level.” ■

<<Continued from page 35 INTERNATIONAL DRILLING

in the industry to maximise service life with minimal maintenance costs. EXPLORATION SUPPLY

LEIGHTONS 1

The product range also includes wedge wire screens and flat panels, tile lined dense medium cyclones, sieve bends and underpans,WearStop ceramic repair compound as well as other complementary wear products. Following the acquisition, Weir Minerals will offer centrifuge spare parts as well as on-site inspections, and servicing along with high quality centrifuge rebuilds.

LOMAR 25

With Weir Minerals’ financial resources behind it, the R&D programme for Aspir™products will be accelerated, driving new innovations to market sooner, with a focus on improving industrystandards and positively changing the future of coal and minerals processing.

MINING AUSTRALIA

PHILIPPINE RESOURCES

Weir Minerals, which has a service centre in Indonesia, will now also offer aftermarket coal industry expertise that comes with the acquisition of the Aspir business. ■

PNG RESOURCES

<<Continued from page 34

RUNGE PINCOCK MINARCO 33

SMEC INTERNATIONAL

SURTECH 21 36 Indonesian Resources

in the harsh corrosive environment of the copper recovery operation. Fibergrate’s products are providing economical and safe solutions in the metals and mining industry. With its corrosion-resistant, slip-resistant and nonconductive properties, Fibergrate is used in recovery operations, processing, plating areas, conveyors and loading docks. Fibergrate - Molded Gratings comes from the inventor of molded FRP grating. For further info please contact nick.dyer@inservica. com ■

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