EMDI seminar on “Incentives & disincentives to exploration in Indonesia”



EMDI seminar on “Incentives & disincentives to exploration in Indonesia” Jakarta 1 December 2015. The seminar was attended by about 50 people, many of whom are long term industry players, plus a welcome few new people interests to learn about the Indonesian exploration industry.

The following are personal notes taken without recorder, wherein I apologize for any mistakes or omissions. Photographs of most of the presented slides were taken.

  1. Introduction by EMDI Chairman Myke Jones;
  • Everybody present recognizes the year 2015 was very difficult, with little to no significant progress in the overall exploration industry. There were some aberrations to the downward trend with a few companies managing a respectable year of doing business. A year with “moments of encouragement”. The ESDM’s willingness to discuss issues with stakeholders is one particularly bright point.
  • Noted that Hanief Setianto from ESDM may not attend as he had been summoned to the DPR.
  • Thanks to various parties, particularly Malcolm Baillie & Dr Lobo.

2, Dr Lobo Balia – Update on White Paper Submission (no slides)

  • Have distributed the EMDI submission to a number of key officials (Pak Haneif,Pak Sri Rahadjo and Dr Adhi Wibowo in the ESDM, whereupon they will undertake an internal review and provide feedback to EMDI.

Lobo Introduced guest Dr Andang Bactiar – head National Energy Council (NEC), which is a group of about 46 professionals representing stakeholdersfrom the government, industry and academia that provides advice to the Minister. He was chairman of Indonesian Association of Geologists (IAG) from 2000 – 2005. This NEC is traditionally only for the oil & gas / energy industry, but will be expanded to include geothermal & minerals next year. Andang has no experience or significant contacts in the mineral exploration sector, and thus he will be looking for input from EMDI.

  • Lobo proposed Andang to become a guest member of EMDI. Lobo nicknamed his friend Andang as “chief of exploration in Indonesia”.
  • The oil & gas industry recently held a seminar wherein one of the 16 recommendations was that the national oil reserve of about 3.7bb (class 1) plus 3.9 bb (class 2&3) for total 7.6bb could be increased by a further 5.2 bb if the government made some adjustments to its criteria for national reserves. Such 5.2bb has been drilled & tested, but the firms have not proceeded to a feasibility phase as they anticipate under the present economic climate such resources are not adequately profitable. If the government were to change the production share ratio from 80 (Gov.) : 20 (private) to 70:30, then much of the oil resource could become feasible and enter the state reserve. Andang notes that SKKMigas does not understand the concept of “time value of reserves”. Note that Saudi Arabia has more than 200bb.
  • Another significant issue for the oil & gas issue is the government regulation 79, the requirement to pay land & building tax on their exploration areas – this is a significant disincentive for explorers.
  • The final recommendations (including proposed exploration road map) regarding the revision to the mining law, as derived from the joint IAG, MEGI & PERHAPI Balikpapan conference will be considered before the end of the year (2015), but it is entirely up to the Minister to apply or not such recommendations.

4. Ir TinoArdhyanto (new chairman of PERHAPI). He is a miner & geologist with past experience in Freeport, BP (oil & gas), Pinang Coal and then to Indika Energy and now running the coal transportation sector.

  • Recognizes Junior exploration companies play a significant role in exploration in Indonesia, and the issue is how can PERHAP give support. PERHAPI does not understand the tools to help junior exploration companies and wants more discussion on this matter.
  • A PERHAPI issue is that the ownership of minerals in Indonesia does not follow “common law”.
  • Wants to work with EMD to bring the plight of exploration to governments attention

5. Peter Fanning[peter.fanning@hhrlawyers.com +6281 186 2094] – “The Challenge to Investors, A perspective on Indonesia’s Investment Climate”. Presentation with slides. This presentation is a list of legal aspects related to the Indonesian mining sector.

  • There are many positives for investors in Indonesia – Freedom of contract, business law, banking law etc to provide good foundation for mining business – with improvements ongoing.
  • Issues faced by investors – poor law enforcement, corruption & government regulations across many sectors that are difficult for doing business.
  • Legal reform – some positive developments over the long period wherein there are more specific courts etc.
  • Challenges faced by investors – Poor levels of education emphasizes the need for on the job training, ownership restrictions, including divestment for foreign ownership of mines, restrictions to only one activity, BKPM approvals still troublesome, confused in various legal instruments (central, regional) & in court process etc,
  • More consultation between ESDM & industry is encouraging, and changes to manpower to eliminate recent restrictive regulations welcomed.
  • Enforcement of rights is difficult.
  • Mixed messages in regulations to welcome Foreign Investment.


  1. John Levings – “Progress on Romang Island, mineral development”. Presentation with slides.
  • Robust Resources Ltd – PT. Gemala Borneo Utama (GBU) mineral project is located on Romang Island (South Maluku province), a very remote area with limited public access or public facilities.
  • Area initially explored in 1988 by Ashton for gold, later in 1999 by Billiton PLC that drilled some holes in the current area and discovered significant intercepts of base metals, but inadequate gold potential for Billiton. Robust Resources acquired a new tenement in 2008 and has continued exploration to present.
  • Resources include JORC resources of 738,000 ton Mn average 41.1%Mn (cut off 30%Mn), Polymetallic Sulphides (80 million ton of ore containing 1M oz Au, 68M oz Ag, 1040 million pounds of Pb, 1,086 million pounds of Zn, 68 million pounds of Cu). Some of the shallow Au is oxidized and amenable to mining & processing.
  • There are significant challenges to smelt the base metals, and sharing a smelter with the only other Indonesian deposit of significance (Diari – North Sumatra) is not feasible due to differences in smelting process.
  • Value adding for the Manganese to produce a manganese product for battery manufacturing (replace current imports) has some issues. The Indonesian battery manufacturers will not buy all Robusts production (until price, quality & delivery can be demonstrated over some years), thus Robust needs to export initial excess – but the government is placing obstacles on such exports – as the current regulations require a much higher Mn content (98% Mno2 – needing different technology smelting) than is used for batteries (90-92% MnO2).
  • The oxidized gold ore will support a 500,000 ton of ore per year for 10 years using standard CIP technology.


The seminar concluded at 4 pm and adjourned to the lounge area for networking drinks

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