A broad view of the Indonesian metallurgy world.
The ITB metallurgy alumni organized the MET CONNEX two-day international metallurgical conference and expo that was held in Jakarta on 7 – 8 August 2019. Some 200 people attended (about 12% women), including 40 ITB students. Most of the presentations were in English. It seemed most of the audience were experienced in the Indonesian metallurgy industry, and perhaps less than a handful might be described as newcomers. The metallurgical industry has far less exposure than its sister industries of geology and mining. This conference was an excellent opportunity to gain a broad view of the Indonesian metallurgy industry. It was also an opportunity to network with some of the icons of the industry, and to view booths of companies and consultants showing their strong support for the Indonesian metallurgy industry. Some of this report on the Conference carries a bias towards geology and exploration, wherein many of those attending may have taken away a different perspective of the conference. I apologize for any errors or omissions from this personal outlook of the conference.
- Government Bodies.
The Coordinator Minister for Maritime, Minister of Energy & Mineral Resources, Minister of Industry and President Director of Inalum were all invited to give keynote addresses, but each only sent their representatives. This failure to show up in person was a great disappointment, as the metallurgy industry is making great efforts and sacrifices to implement the governments ambitious policy of developing the mining industries downstream sector. This would have been a great opportunity for these government leaders to simply show up and say “thank you”, and provide further encouragement. There was no opportunity for a question session after each presentation, that was a further disappointment to the audience.
Each of the presentations were largely about providing some background of their ministry, often with only broad generalizations of today’s metallurgy industry. These presentations suggest the Indonesian Ministries are suffering under Indonesia 4.0 technology leaps, where industry is advancing at a much faster rate than regulators can keep up with. Overall the impression is that the government is pleased with the smelter program to date.
A few of the thought-provoking points include;
1.1 Dr Ir Ridwan Djamaluddin, Deputy III Bidang Infrastrutur Kementarian Kopoordinasi Maritime / Ketua Umun Ikatan Alumni ITB read out the minister’s speech: – There are some conflicting views within the industry about the future of allowing some raw ore exports to help fund the development of new smelters. The ministry encourages the industry to continue with the ore value adding program to develop the smelter industry. The government is reviewing the smelter toxic waste issue.
1.2 Ir. Ego Syaurizal from the Ministry of Energy and Mineral Resources. Under the raw ore segment, it was mentioned 1) that it is intended to improve exploration performance through evaluation of budget exploration to revenue ratio and area coverage. 2) Facilitation of miners’ smelters (IUP OP). 3) Encourage mining in forest areas.
1.3 Ir. Zakiyudin. Pit Director of Metal Industry, Ministri of Industri (MOI). Various ongoing issues with the smelter industry are: – 1. Limitations of the company’s cash flow to build smelters. 2. Utilization of smelter products in the form of slag / slag including toxic waste (further licensing is still needed to utilize this waste). 3. Imposition of royalty rates that do not differ significantly between raw ore and downstream products. 4. Energy supply and road infrastructure are limited (there is no specific tariff for smelters). 5. Difficulties in supply of raw materials, especially for those who do not have a mine. 6. Barriers to licensing for land use change (overlapping). 7. There are still overlaps in business licensing between IUP and IUI. Another issue implied is the Government’s stated program to completely ban all raw ore exports by 2022, as this may disallow the option to raise finance through ore exports for the construction of new smelters. Another area of concern is to see if GR 45/ 2019 on tax incentives can be applied to the exploration, mining and smelter industry. Further discussion on related research topics welcome.
1.4 Ratih Amri, Executive Director Mining Mineral Industry Institute PT. Inalum. Inalum has difficulty in sourcing new funds for many planned downstream projects and researching other opportunities. MMII is providing research awards for projects to advance to the trial commercial phase. www.mmii-award.id
- Producers Update.
Each of these presentations was accompanied by a brief project description, and then much focus on technical data. It is clear that much effort goes into designing and building a smelter, but this is just the start – whereupon continuous improvements are ongoing. It was particularly encouraging to see the China presentation (in English) and booth competing head to head with other Western competitors in this International conference. The ensuing discussion period highlighted the low cost of smelting copper in China ($2,800/ton) verses the high cost in Indonesian ($6 – 8,000/ton) wherein the government is called upon to support the smelting industry through tax incentives, cheaper electricity, and easier land acquisition etc. Environmental constraints are trending towards a similarity between China and Indonesia.
2.1 Riza Pratama, Vice President Corporate Communication PT. Freeport Indonesia. The feasibility study shows the proposed new smelter is not feasible, but the company is proceeding in good faith. Impressive ground preparation works are ongoing. The long-term outlook is that there is a global excess copper smelting capacity.
2.2 Antonius Prayoga, Technical Services Department Manager PT. Smelting. The existing copper smelter at Gresik has seen a modest drop in copper cathode production, in part due to the increase in sulphur in the ore feed. The smelter has completed a number of upgrades to improve performance, with ongoing works to focus on further improving capacity, and extending the life of the furnace. Issues being studied include trend of impurities in content. The business aspects of smelting in Indonesia could be reviewed and improved.
2.3 Wira Dharma Putra, Senior Manager PT. Agincourt Resources. The Martabe gold project is adopting a policy of” Make Things Better”. Mill throughput has been increased, improved recoveries of gold and silver, operation costs reduced. Further studies for improvement include ball mill expansion, improved recovery from intermediate sulphide ore, and gold recovery from primary ore (> 2.5% sulphides).
2.4 Liu Kai, Senior Engineer of Copper ENFI, MCC China. Outlined ENFI’s experience in world wide copper smelting. Outlined many styles of copper smelters, with their pro’s and con’s. The development of SKS & BCC technology that uses a bottom injection of oxygen is now seen as the leading technology, with good environmental performance, low energy consumption, low capital cost, high flexibility of raw materials.
- Contractor Smelter Technologies.
These presentations focussed on various products. Examples from Indonesia were generally not included to comply with confidentiality arrangements. General discussion included the encouragement for Indonesia to follow Australia standard (used in Papua and other countries) in permitting deep sea tailing disposal, particularly for the bauxite and nickel industries.
3.1 Christoper Ecott, Technology Manager – Base metal Nickel Hydromet Outotec. Test work requires suitable samples to fully represent the ore feed. Outotec have conducted Nickel atmospheric and pressure leaching tests, and undertake a wide range of works.
3.2 Fabio Paris, Sales Manager as Aqseptence Group Sri. Dry stacking process tailings is becoming more in demand, as lower grade ores are being processed (more waste), and as operations footprint limited by available land use areas.
3.3 Sun Haikuo, Senior Engineer of Nickel ENFI, MCC China.The nickel laterite industry in China evolved though various phases, wherein the RKEF process is now commonly adopted throughout China. ENFI have developed Pyrometallurgy and Hydrometallurgy projects.
- Investment Profile.
4.1 Ir. Alma Karma, Director of Promotion Development BKPM. The mining sector is becoming more important in supporting Indonesia’s economic growth, and providing jobs. The BKPM seek to improve overall investment through adjustments to the negative investment list, tax incentives, online integration investment licensing and application-based investment. However, this presentation was thin /absent on specifics relating to the smelter industry.
4.2 Rofyanto Kurniawan, Chairman of Centre of State Revenue Policy, Fiscal Policy Agency (BKF), Ministry of Finance. Slowing global growth is affecting Indonesia, including the exploration, mining and smelter industries. Fiscal incentives for the mining sector include 1) Income tax incentives, 2) VAT incentives, 3) Import duty exemptions, 4) Specific incentives for certain regions. The global part of this talk provided much detailed figures, but there were no figures provided on of how much the Indonesian fiscal incentives had been taken up, or had contributed to boosting the smelter industry. Rofyanto is open to further discussion on how to strengthen the smelting industry.
4.3 Ahmad Bastian Halim, Assistant Deputy Extractive Industry Coordinating Ministry for Economics. Some repetition from Ir. Zakiyudin earlier presentation. Some 9 issues are identified to confront the smelter industry;- 1)cash flow, 2)toxic tailings, 3)royalty, 4)power & infrastructure, 5)restrictions on raw ore sales, 6)professional workforce, 7)overlap permits, 8)quality of ore delivered to smelter, 9)lack of domestic offtake from smelters. Obstacles for further smelter development include; – 1. The downstream mining industry is greatly affected by multi-dimensional global conditions. 2. Foreign investment entering Indonesia in general is part of an industrial tree in one group. 3. The existence of cheaper imported products. The smelting industry is not just subject to the direction of local politics, but is also subject to global supply and demand. Further a) innovation, b) exploration to deliver more reserves, and c) stronger international competitive smelting with d) encouraging regulations are sought.
- Service Providers.
5.1 Alexander Senaputra, PT. Geoservice Indonesia. Have been supplying assay and metallurgical test services to Indonesia for 47 years. In setting out the optimal test program it is important to understand the sample to represent process feed, and the choices of process plant technology. Numerous options shown for test programs that include properties for crushing, milling, extraction of the ore minerals and the nature of the ore waste (material & water). Many assay techniques and wide range of element detection were shown.
5.2 Jinghong Wang, Industry Manager (Asia). PT. Air Products Indonesia. Supply oxygen (and other gasses) along with technology for the secondary melting of aluminium, copper metals for making consumer products. Their technology can increase fuel efficiency, reduce pollutants and reduce metal loss etc.
5.3 Evren Oeren, Allmineral. Various gravity based mineral / rock separation equipment have been patented by Allmineral. This includes various types of jigs, magnetic separators and flotation etc. Have supplied coal washing equipment to the Sekako and plan to support the SMM coal mines in Kalimantan.
5.4 Rob Gobert, Senior Process Engineer, COMO Engineers. Many different metallurgical plants for a wide variety of commodities have been designed and built around the world. Now have an Indonesian PT. Como company to support Indonesia. Particular speciality is modular plants, and supply of ancillary equipment (pumps etc). Have undertaken recent works for the Tujuh Bukit gold mine.
- Research & Development.
This section presented ongoing research into various matters that may be engaged by the smelter industry. Very few questions raised by the audience, reflecting the technical nature of these presentations.
6.1 Dr. M.Zaki Mubarok, Department of Metallurgical Engineering Institute Technology Bandung (ITB). “The critical parameters of atmospheric leaching of nickel laterite ore and synthesis of nickel hydroxide precipitate”. Included the interesting concept of using sea water to precondition the ore to reduce the negative effects of sulphur on smelting.
6.2 Dr. Erik Prasetyo, (and Fajar Nurjaman) Research Unit for Mineral Technology, Indonesian Institute of Science (LIPI), Lampung. “Alkaline leaching of copper and zinc from electric arc furnace dust using amino acid”. Alkaline leaching of Cu & Zn from EAF dust using monosodium glutamate (food additive MSG) had a positive effect with respect to pulp density and leaching time. Further research is required.
6.3 Ir. Nuryadi Saleh Sariman, Senior Researcher Mineral and Coal Technology Research and Development Centre (TEKMIRA) Ministry of Energy and Mineral Resources (MEMR). “Preliminary Study Enrichment of Ionic Nickel Content in Leach Solutions Using Ionic Exchange, Seplite LSC 710 Resin”. Typical recovery of nickel from leach fluids can leave behind up to 10% of the nickel in solution. The aim is to increase the recovery of nickel from leach solution. Need to pre-treat the resin according to the concentration of nickel in leach solution. This resin approach may also allow the eventual recovery of other elements.
6.4 Dr. Eng. Himawan Tri Bayu Murti Petrus, Chemical Engineering Department University of Gajah Mada (UGM). “Sustainable Approach on Valuable Metals Extraction from Secondary Resources; Urban Mine and Industrial Solid Waste”. Various research options, included recovery of elements from lithium batteries.
- Tax and Markets.
7.1 Ali Mardi, Tax Partner at Deloitte Indonesia. The benefits of understanding the Indonesian tax system can influence the overall economics through selecting the preferred structure of the smelter and mining business. The talk introduced the audience to the issues of Corporate income tax, Transfer pricing (miner & smelter), Thin capitalization, Depreciation, Tax holiday facilities, Tax allowance facilities, VAT mechanism, Import of capital goods. This is clearly a short introduction to an important and complex aspect of the smelter industry.
7.2 Dr. Maydin Sipayung, President Director, PT. Indeks Komoditias Indonesia. ‘nickel market review and pricing strategy”. China clearly dominates the world nickel production and price. Indonesia has developed a coal price mechanism (based on International coal indexes) to set the coal price for the purpose of determining royalty. There are ongoing discussions for Indonesia to develop its own independent price index system and so become a price setter of certain grades of coal. Indonesian nickel production may become a dominant international producer, wherein there is discussion for Indonesia to implement a similar price setting strategy for its smelted nickel. The road show was conducted in 12 Feb 2019 and it is planned to launch the new Ni index in September 2019.
7.3 Muhammad Hanafi, Ph.D. Candidate School of Business and management ITB Bandung. “Designing Smelter Industry Investment Competitiveness policy in Indonesia through System Dynamics Model”. The deadlock between industry and policies can cause significant losses to the Indonesian economy and jobs. A complex interaction of many variables of several commodities included their relative competitive position in the market, combined with interviews etc. This data was fed into a complex performance model. My interpretation and simplification of the complex answer is that ONE SIZE DOES NOT FIL ALL. Further research is required.
One of the last slides of the day carried the quote by Russell Ackoff – “We fail more often because we solve the wrong problem, than because we get the wrong solution to the right problem”. The conference did not address the numerous failed smelter enterprises in Indonesia. The smelter industry and the various ministries recognize a number of “problems” standing in the way of progress towards growing the smelter industry. Fortunately, those few surviving smelter businesses are finding ways to improve their business.
Many thanks to Erika Silva for opening the conference, and for Jimbarlow Gultom for closing the event. These two men, and their friends, did a great job in putting together this conference.