Manganese – a need for improvement.

Introduction.

At the recent Regional Technical Conference (RTC) – Mineral Processing 2016, the presentation by the Ministry of Industry Dir Jen Gusti Putu Suryawirawan (Putu) indicated the Geological Agencies data on manganese ores was not as reliable as other commodities. Indeed all those in the audience with experience in the manganese industry know that to be true.

This article takes a brief look at the current manganese exploration and processing industry in Indonesia.

Ore Types and Exploration.

The principal minerals of manganese are pirolusite and psilomelan. The manganese (Mn) ores are typically found in the following Indonesian geological settings;

1) Sedimentary related to shallow marine, or as deep basins where chemical controls in the local ocean environment precipitate out thin beds of high purity manganese. These thin beds of manganese ores are typically hard and weather out from the host claystone rock, allowing the ore to be picked up on the top of the ground. Exploration in Indonesia has generally found sedimentary manganese in formations that have been structurally disturbed, wherein a typical ore pod may be 100m long, a few tens of meters wide, and deep. Within this ore pod the distribution of manganese ore can be highly erratic. Mining with an excavator has been undertaken at a number of sites, where it is usual practice for the ore to be spread on the ground for hand picking. Some companies are looking at mechanical processing (wash plants).

2) Hydrothermal / Epithermal as veins and irregular structures often where the volcanogenic fluids can chemically react with the host rocks. Typically these form small medium grade deposits, but often such ore is bound tightly with chert and other rock types. The ore is very hard and often forms boulders. This type of ore is not readily sought after by local miners or collectors.

3) Hydrothermal replacement of limestone’s in volcanic massive sulphides (VMS) systems. One case is found in Romang Island where the ore is found in large enough sites to warrant mechanical mining and processing.

4) Residual as weathered surface oxides, typically small and variable. Very small amounts are often found in river beds, or coating other rocks. Typically such ore is of variable quality, and having iron impurities.

Geophysical exploration techniques have been tried over many years, without clear success. There seems to be no quick way to explore for manganese, or to discover manganese from a desk looking at remote imaging. The traditional geological way of following up from local reports of manganese outcrops, and close spaced geological mapping is the starting point. Trenching or drilling may follow, but the typically small uneven nature of many of the  deposits makes it less attractive to apply JORC / KCMI standards for determining the resource potential.

How much Mn is there in Indonesia.

Since Van Blemmens 1940’s publication of Indonesia’s mineral resources, exploration has been doing its job to find more manganese ore. The ESDM 2008 report on minerals, coal and geothermal lists 11 provinces containing manganese resources. The Geological Agency 2012 estimates of national manganese Resources as 13,450,262 tons with a metal content of 5,584,457 ton of which 4,078,029 ton of ore is classified as reserves with a corresponding 2,834,916 tons of contained metal. Ore grades typically vary form 20 – 60% manganese. The largest resources are found in Central Java (3,725,250 ton), Riau (2,254,922 ton) Nusa Tenggara Timor (1,990,777 ton), Nusa Tenggara Barat (1,488,537 ton) N.Maluku (1,153981 ton) and lesser amounts in Lampung, Benkulu, East Java, Kalimantan, Sulawesi and Maluku. A presentation at the Indonesian Mining Conference (Sep 2015) quotes a ESDM 2013 source for manganese resources as 15 million ton (6.5 mill ton metal) and reserves as 4 million ton (3 mill ton metal). The derivation and reliability of such resources are not detailed, though we may assume these estimates are based on questionable IUP reports to the Provincial and other government agencies.

Geological Agency.

In September 2016, the Geological Agency (ESDM) presented a paper to the RTC-Mineral Processing 2016 smelter seminar titled, “Availability of mineral reserves related to smelters in Indonesia”. Discussion indicated that the Geological Agency responsibilities for collecting data on Indonesia mineral resources is made difficult through poor inter agency communication, and that the agency has no authority to contact the IUP / COW companies directly to seek or clarify such reports. The agency is required to apply UN or SNI reporting standards, but often the reports it receives on resources and reserves have little supporting data. Indeed it is suspected some reports are well outside the required reporting reliability standards. This September presentation provided data on the 2015 status of Indonesian mineral resources. It lists manganese as having 60,839,820 ton of ore resources (27,977,709 ton metal) and 87,236,536 ton of ore reserves (43,134,791 ton metal). The 2016 manganese smelter program table shows one existing manganese smelter (West Java) with a capacity of 54  t/y, and 2 further planned smelters (West Nusa Tenggara) with a capacity of 108,000 t/y, wherein Indonesian reserves should last for 808 years. Based on these studies, the agency is considering recommending one area for further manganese exploration in East Nusa Tenggara, with exploration to be undertaken from 2016 to 2019.

The agency is required to provide input on the smelter program, in particular to recommend smelter sites and priorities. The lack of reliable data and limitations on follow up is of great concern for the agency.

Resources of some mining companies.

In 2011 PT. SMR Utama Tbk (SMR) floated (Rp 300 billion) on the Indonesian stock exchange with its principal asset of PT. Soe Makmur Resources, This IUP of 4,550 Ha is located in West Timor. The prospectus included a non JORC / KCMI report claiming 3.78 mill ton of ore. The ensuing production of around 90,000 ton of ore over 3 years was far less than targeted. SMR Tbk made a significant loss and later sold its tenement. SRM Tbk was deemed by one reporter to be the worst performing company on the IDX mining board. Ongoing exploration at the SMR site was experiencing difficulty to confirm the original reserves, though there are plans to improve mechanized production for significant throughput.

Gulf Manganese Corp. made an ASX announcement relating to a desktop study conducted by SRK on manganese prospects in West Timor. SRK concluded there were 182 IUP tenements for 1.5 million Ha containing prospective formations with potential extractable mineralization of 29 Mt (million ton) for production IUP’s and 114 Mt for exploration & production IUP’s. This study made a number of arbitrary assumptions and does not follow JORC or KCMI professional reporting codes.

In a further report of August 2015, SRK reported a JORC compliant report (Mining Associates of Brisbane) from the Robust Resources manganese project on Romang Island, with an estimated indicated resource of 413,000 ton at 41.6% Mn and 325,000 inferred resource at 40.5% Mn ton, from the Lakuwahi project with about 304,000 ton metal. Many manganese geologists would consider the Romang JORC resources as the only reliably defined manganese resource in Indonesia. This deposit is different to most manganese deposits in Indonesia in that it is a hydrothermal replacement of limestone in a volcanic massive sulphide (VMS) system. This geology setting is accompanied with an unusual set of associated and trace elements wherein special considerations are required for smelting.

There are a number of smaller companies undertaking exploration and small scale production, however most of these companies do not wish to be named due to the often sensitive nature of community relations. In Timor there are family feuds and village politics that can be particularly sever in some small villages, while local traditions or religious issues can lead to further difficulties. Crop rotation and complex systems of land leasing between village people can add complexities, even simply to cross some land. Some NGO’s are active with a mix in the quality of their reports and manner of news releases. There are also very friendly villages wherein the tradition of manually collected manganese ore is happily sold as a bonus opportunity to get much needed cash. The police are very strict about the road transport of equipment and ore, in their effort to restrict illegal activities, but this adds a further layer of permitting for operating companies. The regional mines department and local politicians typically support the formal manganese companies, with frequent site inspections.

Ore Production costs.

In Timor the local farmers and ore diggers presently receive about Rp 400/kg (US $30/ton) for good quality ores. These are sold to collectors and stockpiled until there are several container loads. Unfortunately the high cost of shipping containers to the Java smelters is a prohibitive financial barrier. Typical container shipping cost from Timor to Java is about Rp 15 mill per 20 ton container (about US $ 58/ton). The miners/ collectors would prefer the much cheaper bulk (30,000 ton) shipping options, however the nature of the small scale production cannot support the operating costs over lengthy periods to build up such a stockpile. Historically, one of the largest formal miners (SMR Tbk) produced a maximum of around 3,000t/month. A number of local mines have sold their ore to the smelters in Java in 10 – 20 container lots. The present international price of manganese is about $3.70 /metric ton unit, so $3.70 X 50% Manganese yields a selling price of $ 185/ton metal. In 2016 the price has varied from $148 – $205/ton metal. However production and transport costs in 2016 require a price of around $4.50/metric ton unit ($225/ton metal) to support a reasonable operating cost, margin and risks.

Manganese trade.

The Indonesian Bureau of Statistics shows that from 2006 to 2010 Indonesia exported about 300,000 tons per year with an average value of $325/ton for around $100 mill/year. This production was largely derived from small mines and manual collectors with traders building stockpiles and exporting in containers. The more recent Bureau’s data for “Manganese Ores & concentrates including ferro-maganese with Mn content <20% “.

is shown on table 1;

Table 1- Bureau of Statistics – Manganese ore imports & exports.

Year	Import Ore	Import Ore	Export Ore	Export Ore	Export ferro-silico Manganese	Export ferro-silico Manganese
	Kg	US $	Kg	US $	Kg	US $
2011	228,325	291,104			9,299,381	12,091,877
2012	8,768,399	1,139,206	19,081,118	3,054,255	21,936,689	25,021,794
2013	22,331,056	2,083,745	3,945,221	1,006,245	16,189,395	17,486,213
2014	59,171,574	9,077,069	0	0	37,072,250	38,490,663
2015	45,697,660	5,559,378	0	0	20,727,371	18,434,947

 

We can see clearly the impact of the raw ore export ban, with manganese ore exports at zero from 2014 onwards, and imports dramatically climbing. Note that the royalty for Manganese ore is 3.25% of selling price (GR9/2012).

The Bureau also records various manganese products, such as ferro-silico- manganese wherein the 2014 & 5 statistics suggest a fourfold value adding, with half the imported tonnage remaining in Indonesia as waste.

Smelters.

2011. Indotama Ferro Alloys was established in 2007, with production starting around 2011. The smelter is located in Purwakarta, West Java and uses its 2 X 12500KVA submerged arc furnaces to consume up to 140,000 t/y of manganese ore with 35,000 t/y of coke to produce up to 60,000 ton of silicon manganese per year. However ore supplies became more difficult to acquire with the decline in the international price in 2013 and implementation of the raw ore export ban at the start of 2014. Many of the IUP companies and artisanal miners (IPR license) found the overall $70/ton cost to transport of ore to Java more than twice the transport cost to China. Thus Indotama imported ore from Malaysia and other sources, and sought Indonesian ores at competitive prices. We can see from the Bureau of Statics table that output is well below maximum design capacity.

 

1. Century Metalindo began production in 2009, is located near Jakarta and required 3,000 ton of manganese ore per month with 2 X 6,300KWV furnaces to produce silicon manganese alloy. However freight costs to supply manganese ore from Timor and other sources were too expensive, so ore was imported from Malaysia and other sources. In 2015 Century stopped manganese smelting and converted their furnaces from manganese production to nickel pig iron.

There are other parties planning to build smelters including PT. Gulf Mangan Grup (ASX listed Gulf Manganese Corporation Ltd).  Their February 2016 plans are to build a ferromanganese smelting hub in Kupang, Timor with a smelting plant brought in from South Africa. The envisaged smelter requires manganese ore feed, plus metallurgical coal and limestone. The hub is planned for 8 modules constructed over 5 years as the manganese industry recovers. Each module will consist of one 7MVA furnace capable of producing about 1,130 tonnes per month of alloy, or 13,500 tonnes per year. Gulf Manganese identifies one of the major business risks is the limited proven mineral resources of Indonesia, and the project is sensitive to power costs. A significant opportunity is that the manganese ore that was “stranded” due to high transport cost to Java may be more readily available and at competitive prices in Kupang. The project requires some $13 million to construct. Permits and red tape are a significant factor in the slow implementation of this project.

It is understood Robust Resources has had a number of meetings with the ESDM to adjust the generalized implementation of the national smelter program to allow for a specialized smelting to provide the Indonesian battery manufacturing industry with its manganese needs (currently imported), and for exports.

Asia Mangan Grup announced in 2014 that it is looking to build a manganese smelter in Timor with a production capacity of 128,000 tons of ferro-manganese alloy per year. However there has been no further substantial public update on such plans. This is typical of the broader 2014 “rush” to plan smelters in many commodities, which faded when reality set in.

Winners and losers.

In 2009 I visited some manganese sites in Timor where it seemed most mining was undertaken by local miners. Old village women, families or children scavenging after school seemed to be the main local miners, but often richer patches would be worked by a group of village men. In each district hundreds of such miners were able to collect sedimentary ores lying at or near the surface and sell to collectors who would transport the sacks of ore to the main towns, where buyers could combine the small lots into shipments. There are few studies of this mining enterprise, but we may assume one miner may on average find, collect and transport to his home / road site some 20kg per day at Rp, 1,000/kg. More people were engaged to collect and truck such small parcels of ore to centralized shipping points. More people were engaged in monitoring, security, manual loading and unloading trucks, loading containers and such. There are further reports of fees paid to police and local government. The village people, and traders were short term cash winners. From 2006 to the introduction of the ore export ban at the start of 2014 it is likely that this informal manganese mining industry provided a reasonable income for up to one million rural people per year through much of Indonesia.

However there were losers, with a number of deaths from poor mining practices, and some short term environmental destruction. The transition from local mining to formal mechanized mining was only undertaken at very few sites, and even these were often short lived. Some government officers and academics consider that Indonesia did not benefit from such local mining, implying that taxes were not optimized. The scattered geological nature of the manganese ore meant that much of this first phase of exploitation has mostly passed, and there is much less opportunities for local or mechanized miners.

The Indonesian smelters started out as winners, with access to local high quality manganese. However as international prices dropped, and the relative high cost of shipping continued, then the smelters sought imports of manganese, and one smelter closed. The remaining smelter appears to add significant value to the manganese ore, however the business profit margin may be far less than originally planned. The governments benefit through VAT, is not known, though may not be so much, as most of its costs are in purchasing manganese, associated minerals for the smelting blend, plus electricity, and employs relatively few workers at one town site in Java.

 

Conclusion.

The lack of coordination between the various government agencies regarding the reliable data on Indonesian metallic ores is of great concern, and undermines any strategic national planning regarding the development of the mineral industry. The present structure of the exploration and mining industry is based on a district by district model. However this system has failed to provide a coordinated national direction on minerals. Clearly the centralized ESDM / Geological Agency needs to establish an industry by industry model, based on each commodity. Each “desk” should contain a few specialists to coordinate and compile all national data on each commodity (manganese), the IUP and their owners, geology, progress reports, resources reports, along with mining and transport issues, and follow through to smelting, exports & imports, costs, royalty, taxes, spatial planning, waste disposal, manpower, social setting and environment etc. Such desks could then provide meaningful information to Ministers, Commission 7 and industry on the wellbeing and improvements of each mineral industry.

At present there is only one manganese smelter in Java. The scattered nature of the small deposits and their expensive freight component means that this smelter relies heavily upon imported manganese. The smelter may fulfill the governments Value Added objectives, but its influence on domestic ore prices is a disincentive to develop Indonesian manganese mines. World prices are an important factor, as the smelter needs to sell its product into the international price structure. Gulf Manganese’s plan to build a smelter in Kupang may be one answer to reduce the cost of ore to smelters, and if this is commercially successful, then the government may look at encouraging similar smelters in other parts of Indonesia if they can be confirmed to contain reliable resources of manganese. Another approach may be the successful implementation of the Presidents electoral promise to build cheaper and reliable internal sea freight systems, to transport containers of ores from producers to smelters at competitive costs.

Uncertainty is introduced to the manganese industry with “Governmental Regulation Number 1 Year 2014 and the Minister of EMR’s Regulation Number 1 Year 2014, by January 12^th, 2017 any products as the processing result of six metallic minerals such as copper, manganese, zinc, lead, tin, and iron may not be sold abroad”. The Geological Agencies estimate that manganese resources are sufficient for 808 years of smelting. Such resources (if real) is supportive of combined smelting and ongoing ore exports, as Indonesia’s small international ore exports are not likely to weaken international prices. Manganese ores are recorded throughout Indonesia, and the people in these provinces should be able to continue to benefit from the resources within their areas, and not have to wait hundreds of years for their turn at mining and development.

The government may consider deviating from the “one policy fits all” approach (eg Robust) to allow variety in the smelter programs. Also the government may improve transparency through including all smelting operations in the annual EITI reports.

The ESDM held a workshop in Solo (March 2016) on mining without permission. The Director General of Minerals emphasized its main focus is management of mining business, and recognizes that some minerals are easy to mine but understanding the regulations is poor. The approach to curbing illegal mining is to formalize a form of technical assistance.

Clearly the new Provincial management system shall need significant budgets and trained manpower to undertake the task of formalizing the manganese mining industry.

Finally, the Siti Rochani article [M&E Vol13, No.3 Sep 2015] on the “Potential development of processing and refining ores of manganese in Indonesia” presents a good overview of the manganese industry for further reading.