A look at Small Scale Mining

A look at Small Scale Mining. (Vol 83)

Introduction.

Jakarta drivers will notice with great displeasure that some of the motorbikes will cruise through red lights, drive on the wrong side of the road, and even drive against one-way traffic. When challenged, some drivers know it is wrong, but emphasize convenience, while others believe it is their right to drive anyway they please. This seems to be a reflection of the authorities’ tolerance of misbehaviour. In a Papuan city, I noticed many of the car number plates were blacked out, or simply missing altogether. Perhaps another example of the authorities’ broad tolerance, or I wonder if it is easier to come to some agreement with the authorities rather than go through the formal license system. Over thirty years of exploration in many of Indonesia’s islands I have seen first-hand informal small-scale mining and wondered how much of this is properly registered? how much is operated through unofficial channels? or how much is simply illegal?

This article takes a brief look at some aspects of the small-scale mining industry in Indonesia.

The Scale of Small Miners.

The issue of small scale mining appears in the news when WALHI, or another environmental groups, issues a report that typically focusses on local worker deaths & injuries (of up to hundreds in a year), or environment damage. The recent report by BaliFokus estimates that perhaps more than 50% of Indonesia’s actual gold production is being undertaken by small scale miners that goes unreported (of perhaps 50 to 130 ton /year). BaliFokus reported on some 830 gold sites in 13 Provinces. The Indonesian Association of Small Miners (Asosiasi Penambang Rakyat Indonesia = APRI) 2016 conference concluded that some 1,000 small miner work sites throughout Indonesia engaged around 3 million people with a multiplier effect to some 32 million people. APRI estimate small scale mining annual turnover of more than Rp. 100 trillion, with potential lost government revenues of more than Rp. 10 trillion each year. Small scale mining is being undertaken in many commodities, including gold, manganese, zircon, mercury, coal, industrial sand & gravel and even oil.

The collapse of the IUP licensing system under the Regents provided an opportunity for some small-scale miners to operate more freely, and in some cases, operate within other people’s formally issued IUP’s of COW’s, or in restricted forest areas.

ESDM Authority.

The new mining Law 4 of 2009 is based upon the Constitution’s Article 33-3 that clearly states that all natural riches shall be controlled by the State and exploited for the greatest prosperity of the people. To this end the Energy Sumber Daya Minerals (ESDM) or Mines Department, is to manage minerals and coal. The law recognizes and stipulates many articles on “small scale mining”. Essentially, small scale mining permits can be issued by the Province (was also regents) and reported to the Minister. Small scale mining areas are limited to less than 25 Ha, limited to a depth of 25m and may be undertaken by individuals, community groups (5 ha) or cooperatives (10Ha). Such permits are valid for up to 5 years and extendable. The local governments are responsible for safety, management of environment and post mining (Article 73-2). Progress reports are to be sent to the Minister and local governments (Article 73-4). Such small scale mining shall be subject to mine inspectors, assigned by the local government or the Minister, with 6monthy reports to the Minister. Such small-scale mining is subject to many of the general mining regulations, including sanctions.

Preliminary enquiries indicate the ESDM does not assign a specific officer in each division (coal, minerals, industrial rocks) to monitor or compile the reports of small miners sent to the Minister.

Artisan miners become Small Miners.

International agencies often focus on Artisan miners who are sometimes portrayed as local village people conducting traditional mining as a valid and much needed source of revenue. The ESDM and others often apply the informal term PETI (PenambangTanpa Ijin) for miners without a license. Under the earlier 1967 mining law there was a willingness for the authorities to recognize such miners as those who did not use any machines.  Such manual miners do continue today, but the bulk of the Small Mining carried out today is with machines, where pumps are used for river and soil gold. Such small miners tend to grow rapidly where there are good profits, and today some small miners are using excavators, heap leach with cyanide, or mercury in small local rock crushes, with a corresponding devastation on the environment, community health and lack of formal reporting.

There are several cases where an initial discovery of gold (or gems) by local villages becomes a “rush”, and within a few weeks perhaps 10,000 people from distant islands have arrived to dig for gold. These ‘rushes” can cause local environmental damage, develop into improper communities, stir up social conflicts, and virtually none of the riches are properly recorded, or finds its way into the formal economy. It is clearly a difficult situation for the Government to manage, and the longer it is allowed to operate, the more entrenched local “systems” become. Like the Jakarta motorbikes, the small and illegal miners begin to feel it is their right to operate in the informal sector.

Small Miners and Social Conflict.

The first “Dayak War” in West Kalimantan (1996-7) was started in urban areas, but quickly spread into outlying villages across the Province through the resentment of the traditional Dayaks over the largely Madurese immigrants conducting small scale/ illegal gold mining that muddied the river waters. There was already a combined police and military action to break up such illegal mining, but this was not so effective. Today, small scale mining continues to create communal conflicts, between miners and local people, between small miners and other miners etc. Occasionally such conflicts result in arson and deaths.  Note that the Law 4/2009 Article 8 specifically mentions that government’s management of small scale mining permits shall include the settlement of communal conflicts. Such government action is often initiated with force (police / army) to isolate the ring leaders, and then followed up with communal talks.

Some communal conflicts can become overtaken by stronger political forces, wherein the powerful business interests aligned with the Regent, police or army that may then informally control the mining (and associated logistics), and extract a commission for maintaining such “order”. For example, this may have happened in the early days of Manganese mining in Timor, also the BaliFokus report makes some reference to informal control by powerful parties in the Cinnabar (mercury) mining industry. It would seem there may be similar local power groups operating or “protecting” small scale hard rock and alluvial gold operations in Sumatra, Sulawesi and Papua.

It would seem the small miners are willing to pay someone to maintain a sense of stability for their working environment. The challenge for the ESDM is to morph the informal / illegal miners into the legal system, whereby the cash fees paid to the local “controlling” authorities are replaced with recognized royalty and taxes under the Mining Law, with supervision by an active Provincial mines department. The Mining Law is a ‘frontier law” that brings the sense of Indonesian national unity and order to outlying areas, where such remote areas rarely see the operation of other branches of the government.

International Programs.

Global Affairs Canada (GAC) is concerned about Artisan Small Gold Miners (ASGM) using mercury and so harming themselves and the environment. This organization indicates there may be some 300,000 ASGM working in some 1,000 sites across Indonesia. GAC is working with a local partner in four provinces to provide technical training, policy support and market development for sustainability. GAC is promoting an alternative mercury free technology.

In November, 2016, the Australian Government (DFAT) supported a conference on small scale mining. This conference was held between some Australian universities (including Charles Darwin University) plus a number of Indonesian universities from Sulawesi, NTT and the Association of Community Miners Indonesia. This conference was based upon research on a number of gold mining sites in Sulawesi and manganese sites in Timor. Mr Gatot Sugiharto of the Indonesian Small Miners Association (APRI) played a significant role in the success of this conference [ www.tambangrakyat.org ].

In 2001 C. Aspianll issued a report on small scale mining in Indonesia, and in 2002 T. Hentschel & others issued a global report on artisanal and small-scale miners. More recently BaliFokus issued a 2015 & 6 report on small scale mining. The Indonesian Association of Small Miners (APRI) 2016 conference presented about 30 papers on Indonesian and Asian small-scale mining. It is understood the Indonesian ESDM has recently asked a number of responsible large miners to conduct a survey of small scale mining in their regions. The numbers and scope of the small-scale mining industry is highly flexible, depending on commodity prices, availability of minerals sought, buyers, seasonal agriculture works, seasonal rains, plus effectiveness of the police and the authorities.

How to move forward.

In the past, some attitudes in the ESDM have been – that the ESDM is there to manage the registered miners, and if they are not registered, then such miners are not the responsibility of the ESDM.  However, the interpretation of the Constitution would suggest that all minerals and coal is to be managed by the ESDM. Such unregistered small mining should become registered mining and so abide by the Mining Law.

In discussion with a number of parties interested in the well-being of the small mining industry, there are two principal events needed to move forward; –

1. To appoint a senior officer within each commodity division (coal, minerals, industrial rocks) of the ESDM, with a principal task of reporting on compliance of the small-scale mining industry. [Mining Law 4/2009, Article 73 (4) “The districts / city governments shall record proceeds of production of all small-scale mining business activities within their regions and so report periodically to the Minister and the local Governors”].
2. That Provincial governments pass implementing regulations (Peraturan Daerah) in support of the Law 4/2009 on small mining.

It is clear that there needs to be good cooperation and synchronization between the ESDM and the Provincial Government to ensure a certain amount of consistency and reliability with the implementation of small scale mining. This may include the ESDM issuing an implementing regulation (PP – Peraturan Pemerintah) on guidelines to assist the Provinces & Districts in their issuance of supporting regulations on; –

• Setting up standard format cooperatives to facilitated a local entity to register production quantity & quality for royalty and tax calculation and payment.
• Where to pay royalty & taxes (some small miners want to pay different forms of fees to the Province and not regular royalty and taxes to the Central government).
• Mines Inspectors roll in monitoring and training to improve safety, environmental compliance, geological and mining reporting for small miners.
• The nature of the environmental compliance (AMDAL) prepared by the Province for which the small miners must follow.
• Procedures for community dispute reconciliation.
• Training and safety programs to be developed for internet access.
• The nature of warnings and discipline action for poor compliance.
• The administrative path should a small miner wish to, or be required to, develop into a IUP (big) miner, or a IUP miner wish to scale down to a small miner.
• Set guidelines on the relationship of local verses outsider small miners.
• Establish guidelines for commodity trading companies to purchase minerals from small miners [ For example; – Antam wishes to purchase gold form “authorized” small miners throughout Indonesia, but such authorization relies upon the small miners being formally registered, and typically such registration is stalled until the Government issues Mining Districts (Wilayah Pertambang Rakyat = WPR)].
• Establishing the relationship for overlaps between IUP and small-scale miners tenements (a very tricky situation). The nature of exclusivity of mineral rights
• Setting some technical criteria for the different mining situations, such as alluvial in active rivers or terraces, underground mining, mechanical mining, slope stability and such.
• The responsibility of small miners to undertake smelting, or direct exports etc.

Each of the above points are quite complex. For example; – if some local miners are active but without registering their Small Mining, and then a registered IUP is placed over their area? Conversely, what happens if a registered IUP is later encroached upon by small scale miners? If the small scale miners have rights only to 25m depth, then how does an overlapping IUP access the ore below this small scale mining area? If the new IUP is to go through a lengthy and public bidding system, then can small scale miners “jump in” first into parts of the area?

Conclusion.

Like the Jakarta motorbikes, if small scale mining continues without the authorities promptly taking firm formal control, then such miners may consider it their “right” to operate without the appropriate government control, thereby undermining the moral outlook of good law-abiding miners.

Small miners can play a significant role in helping large miners detect areas of mineralization, whereupon more sophisticated and expensive exploration may find deeper and larger deposits. The roll of the small miner should not be eliminated or overlooked in the Indonesian mining industry.

The large mining industry (COW, PKP2B & IUP) adsorbs a significant portion of the ESDM’s human and fiscal resources. However, the small mining industry comprises a larger component of public human capital, is in greater need to improve its safety and environmental record, and has an overall significant production capacity. Despite the intrinsic difficulties associated with small mining, the imbalance of the ESDM resources between big and small mining needs to be reviewed and redefined. Perhaps the Ministers KPI (work performance indicators) could have a 30% weighting to implement the small scale mining regulations?