The Indonesian Miner magazine held the “Gold and Copper Summit” in Jakarta from the 8th to 9th June 2022. The presentations were held in English, with 100 people registered to attend and another 200 virtual attending.
Overall, the summit was a showcase for emerging Indonesian gold and copper exploration projects and expanding mines, with support from a variety of leading service companies, and windows into the marketing of gold and copper. It appeared that this summit was a great to incentivises further capital and manpower to be directed into the mineral industry.
This article is based upon personal notes and should not be relied upon for commercial decisions. I apologize for any errors or omissions.
Ben Lawson, vice chairman of the Djakarta Mining Club; undertook the moderator’s role for the 2-day event. His opening comments set the scene for the industry, with strong commodity prices as part of the present global trend, along with specific copper and gold supply concerns related to the Ukraine war, new tax schemes for some South American countries, along with the anticipation of new growth in copper consumption for the renewable industries. The mining industry takes seriously the growing emphases on Environment, Social Governance [ESG] issues, though is concerned these do not get out of hand to become “Extra Spending Guaranteed” issues.
Prof. Ir. Irwandy Arif, special advisor to the minister, ESDM; delivered the keynote speech “Indonesian Gold and Copper Mining Blueprint – Where the Industry is Heading?”. Indonesia is the worlds 7th largest holder of gold (Au) reserves at 2,600-ton Au, and the world’s 12th largest producer of gold at 90-ton au/year. Indonesian holds the world’s 9th largest copper (Cu) reserves of at 24 million ton Cu and is the world’s 8th largest copper producer at 810 ton / year. Global gold consumption is dominated by the jewellery market (India & China), along with support for the financial institutions. Copper is a key product for industry, particularly in heat exchange items (air conditioners etc), cables and future EV motors etc. The increase in commodity prices has seen significant increases in tax contributions from these commodities. Much of Indonesia’s gold and copper is exported, wherein the Government is keen to support the development of domestic industries downstream use of these metals.
Tony Wenas, President Director, PT. Freeport Indonesia (PTFI); spoke on “Electrifying the Future”. The nature of the Freeport mine was very briefly introduced, along with the global trend for copper to support the growing renewable industry. PTFI is building the largest single line copper smelter in the world at Gresik, East Java. The facility will consume 1.7 million ton of Cu concentrate per year, starting in 2024 with an output of 500 – 600, 000 ton of Cu cathode per year. This will be complimented with a 6,000-ton anode slime Precious Metal Refinery. Freeports refinery partner, PT. Smelting is also expanding capacity from 1 to 1.3 million ton / year for Cu concentrate. Side products will include sulphuric acid, slag, gypsum and lead. The output of Cu cathode varies according to the grade of Cu in the concentrate, that in turn, reflects on the variable grade of mined ore.
Discussion indicated that despite the global increase in commodity prices, the US$ 3 billion smelter is so heavily capitalized, that it may not return any profit for much of the smelter’s life. Freeport as a mining company, has reluctantly entered the smelting industry, but is not interested in entering the industry of manufacturing of final copper products. PTFI’s smelter capacity is dedicated to Freeports copper concentrate, Similarly, PT. Amman Minerals Nusa Tenggara (AMNT) is developing Indonesia’s third copper smelter, as dedicated to processing its copper concentrate. Indonesian possibly has space for a fourth smelter to take other mines potential copper concentrates. The advanced automation and remote-control systems installed to improve safety and efficiency in the Freeport mine will lead the approach to similar advanced technology to be installed at the smelter.
Patrick Lam, Senior commodity specialist at S&P Global Market Intelligence; spoke on “Overview of Global Gold Markets in 2022 and Beyond”. Geopolitical tensions and inflation remain key outlook factors for the gold market. The principal gold jewellery buyers of India and China (48% market) along with central bank reserves are monitored and compared with inflation, USD strength, yields on bonds etc. Global exploration budgets and drilling activity rebounded strongly in 2021 to some $6,000 million, with big increases in Canada (>$1,400 mill), Australia (>$ 1,200 mill), with the Pacific / SE Asia region expenditure at about $ 200 mill. Gold mining companies market capitalization remain positive, as gold output looks to grow. The gold price outlook remains strong in the short to medium term as inflation persists.
Discussion indicated gold production is typically efficient, where cash cost of production has increased only by about $10/oz over recent time, with further increase linked to fuel prices, though there are some offsets from local currency exchange rates. Global production rates are expected to platform soon. It is though the average gold price for 2022 may be $1,838/oz.
Lukman Leong, Chief analyst at DCFK, spoke on “The current gold price and assumptions in the post-pandemic demand and the Russian – Ukraine conflict”: Lukman’s presentation went into some detail on the nature of gold as an investment instrument, rather than a commodity. “Gold has been traditionally used by investors as a hedge in portfolio diversification and a safe haven in times of extreme economic and political turbulence and severe market turmoil. Gold is also a special commodity that has financial and monetary functions.” The Russian – Ukrainian conflict saw the USA freeze some US$ 300 billion of Russian Banks. This has had an unsettling move for China’s concerns, particularly for its overseas foreign exchange reserves.
Discussion indicated many gold investors are waiting for the price to drop, though some estimates for the 2023 price is for >$2,000 / oz. China is though to be not selling its gold reserves, but seems to be buying less. The US dollar makes up 60% of global trade currency, reflecting the interest in comparing the gold price to the US financial health. Indonesian has some US$ 135 bill in foreign trade reserves, though its gold reserves are not known.
Dendi Ramdani, VP Industry & Regional Research, Bank Mandiri, spoke on “Mitigating Risk of Mining Investment of investing in Indonesian mining amid changing regulatory environment”: Dendi outlined the story of the development of Indonesia’s nickel industry as a measuring stick for future downstream development in tin, gold, bauxite and copper. Dendi’s key conclusions were that; 1) The small global size of reserves in the copper, gold and tin commodities are less likely to replicate the success of the nickel industry. 2) Most downstream projects are unattractive to local or foreign investors, wherein SOE may be called upon to develop such smelters. 3) Policy affecting regulatory & sovereign risk needs to be done carefully.
Discussion indicated that there is some speculation that the 2023 ore export ban may be brought forward to encourage the redirection of profits into downstream investment. Most mines have a significant component of Indonesian ownership / investment whom do not want to participate in the high-risk area of greenfield exploration, but prefer lower risk brownfield operations. There are a very limited number of “players” in the Indonesian mining industry. Vale’s out-performance of Aneka Tambang suggests private investment is lower risk than SOE’s for the mining and smelting industry.
Scott Ferguson, Global application specialist with Thermos Fisher Scientific, spoke on “Changing technologies in Mining & Mineral processing- how are they affecting the Requirements for on-line measurements?”: Their instruments are designed to help optimize performance and improve throughput & recovery while driving sustainability and safety in the areas of exploration, mineral processing and laboratories. This can include multiple pre ore sorting points before final beneficiation, coarse particle flotation, the Jameson concentrator and dry stacked tailings. Conclusions include that sensor need to evolve to meet changing processes, plus concern for data quality and reliability.
Paul Walker, Chairman Far East Gold, spoke on “The Woyla copper Gold Project – One of the most prospective undrilled gold projects in Indonesia”: The Australian based company has 3 projects in Indonesia [Woyla Cu/Au, Trenggalek Cu, Wongiri Cu/Au] , and 3 projects in Australia. Woyla was previously explored by Newcrest and others, with 4 strong mineralized outcropping targets identified. A maiden drill program of 38 holes for 5,750 m is to be undertaken in 2022. Far East Gold has been admitted as the first junior exploration company to join the UN Global Compact as a demonstration of its intent to undertake responsible exploration and mining.
Discussion included the consideration that previous tenement owners could not drill due to forestry restrictions, and security concerns over the native militants. It has taken up to 2 years to get forestry permits and a local social license to operate.
John Battista, Mining consultant with Whittle consulting spoke on; “Implications of ESG on Mine Planning and Equipment Selection”: The traditional objective of mining is to make a profit, though more contemporary objectives now include advancing humanity through jobs, environment, lifestyles along with contributing to government taxes etc. Whittle modelling cover the traditional steps from resource definition through to product, logistics and marketing. Traditional NPV assessment now includes aspects related to Carbon, water, tailings employment etc. Carbon emissions include Scope 1= on site emissions, Scope 2= off site support (electricity etc), Scope 3= Upstream supply chain emissions, Scope 4 = Downstream transport to customer. These carbon emissions are modelled for optimization in the overall project Feasibility.
Lim Khoon, GM Project Development PT. Agincourt Resources, spoke on “Addressing Martabe’s future Challenges”: The mine is located in North Sumatra with reserves of 4.3 mill oz of gold and 33 mill oz silver, plus 7.5 mill oz gold and 72 mill oz silver. Key challenges include decline gold grades, changing from oxidized to sulphide ores with depth, limited tailings options and increasing compliance requirements. Some of these challenges have been addressed successfully (such as installed filtering units for dry stack tailings, underground mining options, proposed sulphide flow sheet etc), while studying various options is ongoing for outstanding challenges.
Discussion included comments that production cost was in the order of $623/oz in relation to the initial low strip ratio with grades around 1.3 g/t. Cut off grade is 065g/t, with lower grades down to 0.5g/t being stockpiled for later processing. Cyanide is reprocessed on site. The lower sulphide ores have complex gange minerals that complicate recovery, and may require a new process facility. Filter tailings plant can only operate 70% of the time, reflecting the heavy rainfall nature of the area, wherein the size of the filter plant needs to be larger in order to fulfill longer term throughput. It may take 5 years to move from the present open pit oxide operations to an underground sulphide mine.
Patrick Creenaune, Chief consulting geologist for Asiamet Resource Ltd, spoke on the “New gold-silver discovery at Beraung Kanan (BKZ) project”. Asiamet’s key projects are Beutong Au, Cu, Ag project in Ache, and Kalimantan Surya Kencana (KSK) Cu/ Au/ Ag project in Central Kalimantan. BKM – BKZ Resource expansion drilling of 8 months has recently been completed, with the next drilling program planned for 8,300m to extend resources along strike. There are distinct exploration targets of Cu, Zn & Pb, and separate gold targets. The resources model is that of a Volcanic Massive Sulphide (VMS), where exploration targets of Pb – Zn occur above Cu – Au deposits. Multi element soil geochemistry for Cu, Au, Zn, Pb, Mo along with some IP geophysics are strong exploration tools. Numerous drill assays and soil geochemistry maps were shown. The project is yet to consider process and smelting options, though the copper seems suitable for simpler electrowinning processing. Exploration is ongoing.
Marius Toime, partner K&L Gates, spoke on “Strong ESG as Indonesia’s top mining priority”: E = environment, S = social, G = governance is an investment philosophy to appease the financial community, competitors, employees along with community, government and customers. It is impossible to satisfy the never-ending broadening scope of ESG factors, wherein a company should focus on what selective factors are important to them. If a company does not meet their ESG factor targets, then simply try better next time.
Craig Lang, Principal analysist, CRU Group, spoke on “Copper Market Outlook; Meeting future needs”: Copper prices remain strong at around $6,000- 10,000/ton with strong demand and limited supply making for small inventories that are a principal factor in the volatile copper price market. Global copper consumption is growing at about 2% per year, with speculation that the EV market will drive copper consumption up further. The longer term decline in present mine production, and committed new projects, projects a growing supply shortfall of 5 mill ton in 2030, and more further in the future. The excellent presentation looks at tier 1 Cu projects ( Cu concentrates of >100,000 t/y and tier 2 projects with 50- 99,000 t/y are to slow in coming on line, and inadequate to meet projected Cu demand. Key challenges for copper miners is slow permitting, huge capex, project complexity, decline in ore grades (seems 0.5% Cu in feed is lower limit), The industry is becoming increasingly dependent on greenfield deposits coming to fruition, and the trend towards small projects. Many of the identified large projects are stalled, and those progressing suffer from delays and over budget issues. Underground projects may take 10 years, while open pit projects may take 12 years to develop. Indonesian may require a 4th smelter to develop the countries full copper potential. Some global mines may extend operations, and the consumption of copper scrap may increase as many recently industrialization countries (China) replace items (such as air conditioners etc). The present London Metal Exchange (LME) cu prices is around $9,000/ton and may increase going forward. Price volatility remains a strong feature of the market.
Discussion indicated that globally, smelters need to work very hard at optimizing their contracts to make any profit. Scrap makes up about 3-4 million ton of the 25-million-ton global copper supply, and most scrap tonnage growth will be within China. This scrap typically enters the production stream after smelting as input to the remelting to produce copper pipes etc. Ongoing talk about carbon tax etc may impose extra Capex & Opex costs. This drives the trend towards underground mines and use of hydropower for electric vehicles, processing etc. A new large copper project may have Opex of $6-7 bill, of which $ 3 bill is for a hydropower plant.
Gabor Csicsovyszki, Principal metallurgist, Glencore Technology (GT), spoke on “How to reduce concentrator energy, CAPEX, OPEX, ESG and overall footprint”. This presentation focussed on the nature of the IsaMill and Jasmesin Concentrator. Traditional copper floatation circuit design based on residence time, and is now considered to have relatively high capex an opex associated with the mechanical and operational design. The Jameson Concentrator has a smaller footprint with savings in capex and opex, with a high flotation rate, higher recovery of fines, and ease in maintenance. Some 430 Jameson Cells are installed in 32 countries, including for many copper, gold & copper projects. GT have a number of laboratory test units to support individual project design, and have contract teams to undertake concept, feasibility, engineering design studies, and installation.
Bede Evans, President Director, PT. Sumbawa Timur Mining spoke on “the Hu’u Project. Onto deposit resource estimate update”. The project is located on the eastern end of Sumbawa island, some 170km east of Batu Hijau. After about 10 years of exploration, a maiden Onto resource was released in February 2020, of 2.1 billion ton at 0.86% cu and 0.48 g/t Au. The identified deposit is between 500 to 800m below a barren surface, and open at depth. Drilling and studies are ongoing, with a target production around mid 2030’s.
Discussion indicated the hot rock of this very young gold deposit are being investigated for their geothermal energy potential, as well as how to manage associated hot underground mining systems. A new road is being built to facilitate ease of deeper drill rigs, and the geothermal program. Smelting options will be part of ongoing studies. Future mine development costs shall be expensive, and shall influence corporate decisions on project funding.
Ralph Smith, Services Director – GEOVIA, Dassault Systemes, spoke on “Executive overview of strategic mine planning”. Recent discussions with some miners indicate industry concerns surrounding the low success rate (49%) of Pre-Feasibility Studies, restarting feasibility studies, slow pace to run multiple mining models, plus loss of knowledge & skill to industry. The GEOVIA modelling software can handle many varied data inputs, including geotechnical, ESG factors, Carbon Tax etc, to quickly generate thousands of models, and automation the optimization process. Often the preferred model is not the one that maximizes IRR, but one that allows for good IRR with flexibility for latter unforeseen circumstances.
Simon Milroy, CEO PT. Merdeka Copper Gold Tbk, spoke on “Tujuh Bukit Gold Project”. Merdeka mines have 6 varied mineral projects in Indonesia. The Tuju Bukit project is located in Eastern Java. The surface gold oxide ore is being mined, with simultaneous exploration of the underground sulphide copper-gold porphyry system. A 4 km decline provides for long term exploration drill platforms, supported by a world class core shed to handle the 66,000m of core per year. The underground mine plan is in development, with considerations for an initial high level sublevel cave system of top-down extraction at a rate of 16-24 mill ton of ore per year, followed later by a more conventional block cave system. Smelting is considering an Albion Cyanidation copper concentrate, followed by pyrite roasting and sulphuric acid to proceed to chloritizing roasting and metal recovery.
Discussion included that Merdeka presently hedge some of their gold output, as required by some of their financial instruments. Overall they have relative low production costs with a high profit margin, that allows them to self-fund the ongoing massive exploration / feasibility study programs. Merdeka has successfully raised Rupia bonds, and exercised swaps to US currency. Merdeka have good relations with local banks. Merdeka confirm studies of processing the copper into metal do not bring value to the project, and may even reduce overall project profit.