Measuring the health of the Indonesian Exploration Industry. Vol 119

Introduction.

This article is designed to provide some indication towards the overall health of the Indonesia mineral & coal exploration industry, as reflected by the public monthly exploration reports on the IDX.

The Indonesian stock exchange [IDX] requires mining companies to submit a monthly exploration report. These reports typically follow a standard format summarizing the unaudited funds spent, along with the briefest outline of exploration activity, plus a freer style attachment that sometimes gives more details. A review was undertaken of the January – July 2020 monthly reports posted on the IDX, that can be found at [https://www.idx.co.id/en-us/listed-companies/disclosure/]. This review excluded IDX mining board listed companies in the mining service business, and in the oil & gas business.

Readers of this article should not rely on the information herein for investment decisions, nor for a high degree of accuracy or reliability.

IDX Rules for Mining companies.

Rule no. 1-A.1 concerns the IDX rules for mineral and coal mining firms. This applies to companies with mining tenements, where most of their income is derived from mining and refining, but may exclude service companies handling transport and sales of commodities. There are a number of listing requirements, including having proven and probable reserves based on the report of a Competent Person, plus having a production history, or a Feasibility study that will support the starting of a mine within 3 years. These rules are strongly focussed towards the commercial business requirements, and tend to leave technical reporting to the discretion of the directors, as may be developed by the competent persons. Annual reports have many requirements, including; are not to be misleading, contain material information and business risks (including supply of raw materials). In practice, the concept of “material information & business risk” tends to be aligned towards accounting standards, with very few annual reports refereeing to resource or mining risks.

 It would appear that mining companies are to submit monthly exploration reports by the 12^th of the following month. The standard form requires basic information on the name of subsidiaries, exploration areas, total exploration expenses for the month, naming the party carrying out the exploration, method of exploration (drill, assay etc), the monthly exploration results (typically mapping or number of bore holes etc) and planed work that was not achieved.

Limitations to understanding the IDX monthly report data.

The record of expenditure can be in Rupiah or US Dollars. In this review the US dollar expenditure has been converted to Rupiah using an arbitrary conversion of Rp 14,000 to the USD. Some reports are not clear on nominating the reported currency. The contribution of head office overheads / project holding costs to the exploration budget is not specified. The portion of expenditure undertaken in the district, or in the head office district, is not defined, though the common use of exploration contractors (geological, drilling, assay etc) would suggest that in many cases, only a modest portion of the exploration expenditure is paid at the site. The definition of “exploration” for this reporting compliance is not clear, with no distinction between greenfields or brownfields for the determination of resources, or if this exploration includes mine development work such as geotechnical, dewatering drilling, drifting etc.

The exploration work often involves data studies, geophysical studies and reporting that is not well defined in these monthly reports, but can be a significant part of an exploration program. The drill program (and pitting / trenching) seems to be more regularly reported upon with number of sites and total meterage, and occasionally the number of samples is mentioned. Only very rarely do the attached reports provide maps, core log details, assay highlights or changes to resource estimates. A number of reports do not adequately identify the projects for which expenditure is undertaken. A number of IDX listed mining companies have reported undertaking zero exploration expenditure, and a few have not submitted any monthly reports.

Findings.

This January – June 2020 review of 16 IDX listed coal companies shows 61 coal concessions, of which only 18 have active exploration programs for a combined expenditure of Rp. 116,479,665,000 [USD 8.3 million]. There are about 1,000 drill holes for 106,000m drilled and 270 samples. The greatest exploration spending coal companies are PT. Bumi Resources Tbk (Rp 57 billion), PT. Indika Energy Tbk (Rp 29.6 billion), PT. Indo Tambangraya Megah Tbk (Rp 16.7 billion).

This January – July 2020 review of 11 IDX listed mineral companies shows 29 locations, of which 20 sites are being explored for a combined budget of Rp. 694,147,891,000 [USD 49,6 million]. There are about 200 drill sites for 64,300m drilled and 14,100 samples. The greatest exploration spending mineral companies are PT. Aneka Tambang Tbk (Rp 46 billion), PT. Bumi Resource Minerals (Rp 27.6 billion), PT. Vale Indonesia Ybk (Rp 87.3 billion), PT. Merdeka Copper Gold Tbk (376.3 billion), PT. JResources Tbk (57.1 billion), PT. Timah Tbk (Rp 80.4 billion), PT Kapus Prima Coal (19.2 billion). The range of minerals sought by these IDX listed companies includes Au, Ag, Cu, Fe, Pb, Zn, Ni, Al, Mn.

There is also one other IDX listed mining company that is mining stone (marble).

The use of such IDX exploration reports.

Foreign stock exchanges tend to require exploration & mining companies to promptly provide more technical detail, particularly if it may lead to speculation of a positive / negative change in the forward-looking prospects of the company. It would seem the technical detail provided in the IDX monthly exploration reports is inadequate for public shareholders, or prospective shareholders, to readily estimate the forward-looking prospects of the company. This review of the monthly exploration report does not indicate the outcomes of such exploration projects, but provides some guide as to which companies have active exploration projects.

Other public data on measuring exploration.

A number of international industry analysists look to compile data on the Purchasing Managers Index [PMI] as a reflection of the health of the mining industry, so several analysists look towards the statistics on drilling to reflect the health of the exploration industry. These drilling statistics have not traditionally been readily available in Indonesia. Should they become available, they may need to be broken down into industry sectors, with fewer and longer holes for gold and minerals [typically 150-250m depth], or modest depth for coal [typically 70-150m depth], or shallower for nickel laterite [typically 10-50m depth].

There are several other forms of data that have the potential to reflect upon the health of the Indonesian exploration industry.

Other Data – ESDM Digital Systems.

On the 2^nd December 2019 the Mines Department [ESDM] undertook the launching of three new computer systems to record the mineral and coal industries activities of commodity sales [Aplikasi Modul Mineral Verifikasi Penjulan – MVP], exploration reporting [Exploration Monitoring System – EMS] and submitting of exploration data [Exploration Data Warehouse – EDW] for minerals and coal. These digital data systems shall help the Mines Department coordinate and 1) manage the exploration and mining tenement areas, 2) direct efforts towards reserve replacement ratio, and 3) monitor greenfield and brownfield exploration budget activity. The three new systems rely on participation /compliance with other MOMS digital systems regarding company name, location, payment of certain fees etc. These new computer systems also rely upon the registered Surveyors, and upon Competent Persons to ensure reliable and correct data. Some parts of the system are open to the public, while other parts are restricted, based on the level of Government echelon, or for approved requests for information.

It is understood that by mid-2020 that more than 30 coal companies and 20 mineral companies regularly submitting monthly reports into the EMS & EDW systems. As with any new locally developed system, the varied nature of the data has prompted a review of the system’s format. The new Mining Law amendment 3/2020 now requires the monitoring of all 2,000+ mining IUP’s, wherein the manpower and budget requirements of the monitoring team may need to be revised.

This new computer system has the potential to inform the public, in some detail, on the health of the exploration industry.

Other Data – Mines Department Annual Reports.

The Mines Department [ESDM] have continued to improve their public Annual Reports, though the focus tends to be on the success of the mining industry, or the administrative performance of the department. For example, the 2019 Performance Report from the Ministry of Energy and Mineral Resources Directorate General of Minerals and Coal includes; –

• Table 74. Activities that support KPI Amount of Revenue from Mineral and Coal Business. The optimal realization of mineral and coal state revenues. Management of National Data on the Results of Mineral Exploration Activities. Planed Rp 1,337,300,000 with Actual Rp 1,244,803,252.
• Coordination of the completion of the litigation process, problems with coal mining business permits and problems in coal exploration activities in forest areas. Planned Rp 1,156,921,000 with Actual Rp 1,150,175,975
• Evaluation and Verification of Data on Exploration Activities in PKP2B and IUP. Planned Rp 1,563,381,000 with Actual Rp 1,560,269,203

The above extracts on Mines Department expenditure and operations indicate there could be suitable data to make a detailed analysis of the health of the exploration industry. In some public seminars / webinars, the Mines Department presentation of exploration tends to be lumped together in such a way that it is difficult for the public to analyse the performance of the various segments of the Indonesian exploration industry.

The Mines Department is presumed to have detailed data on every operating tenement in Indonesia through its approval process of annual work programs [RKAB]. By referring to the RKAB process, it may be possible to formulate detailed public reports on the planned verses actual performance of the exploration industry, without compromising the confidentiality of individual companies.

Other Data – Reserve resilience fund.

The amendments to the mining law 3/2020 continue much of the original obligations towards undertaking and reporting upon exploration. The new article 112A introduces the concept of a “mineral and coal reserve resilience fund” that is to be used for the discovery of new reserves. Implementing provisions are to be issued within a year, by March 2021.

There is considerable ongoing debate within industry, and between industry and the Mines Department about the distinction between Greenfields and Brownfields exploration activity. It will be interesting to see what nature the implementing regulations take, and if the “reserve resilience fund” or the “reserve replacement ratio” can be used by the public to measure the health of the exploration industry.

Table 1.

COMPILATION OF EXPLORATION REPORTS JANUARY – JULY 2020

IDX	Company	Subsidiaries	min	Expenditure RP	bore	meters	sample
ADRO	Adaro Energy	total	coal	6,977,933,900	84	14,836.00
		Tutupan, Wara, Paringin		4,957,960,000	71	14,620.00
		Semesta Centramas		261,677,900
		Paramitha Cipta Sarana		1,758,296,000	13	216.00
ANTM	Aneka Tambang	total		46,021,215,378
		Pegunungan Bintang, Pongkor	Au
		Pomalaa, Tapunopaka	Ni
		Tayan, BEI Mempawah.	Al
ARII	Atlas Resources	total	coal	0
		Kalbar Energi Pratama
		Citra Global Artha
		Ratna Utama Karya
		Diva Kencana Borneo
		Gorby Putra Utama
		Banyan Koalindo Lestari
		Gorby Global Energy
		Cipta Wanadana
		Hanson energy
		Anugerah Energy
		Papua Inti energy
		Karya Manunggal
BOSS	Borneo Olah Sarana Sukses	total	coal	821,449,625
		Bangun Olahsarana Sukses		821,449,625
		Pratama Buana Sentosa		0
		Pratama Bersama		0
BUMI	Bumi Resources			56,943,628,000
		Kaltim Prima Coal	coal	56,943,628,000
		Gailo Oil (Jersey)	oil	Large sum
BRMS	Bumi Resource Minerals	total		27,678,468,160
		Citra Palu Minerals block 1-5	Au	15,656,320,120
		Dairi Prima Mineral	Pb, Zn	8,588,669,600
		Gorontalo  Minerals	Cu	3,433,478,440
BSSR	Baramulti Suksessarana	total	coal	24,320,000
		Baramulti Suksessarana		0
		Antang Gunung Meratus		24,320,000
BYAN	Byan Resources	total	coal	3,189,153,520	111	7,906.38
		Perkasa Inakakerta		1,398,919,340	43	3,464.90
		Tiwa Abadi		76,852,440	4	125.00
		Tanur Jaya		1,713,381,740	64	4,316.48
		Gunungbayan Pratama Coal
		Orkida Makmur
		Silau Kencana
		Bara Sejati
		Apira Utama
		Cahaya Alam
		Mahakam Bara Energi
CTTH	Citatah	NO REPORTS	stone
		Pangkep marble – no report
DKFT	Central Omega Resources		Ni
		Mulia Pacific Resources		0
DSSA	Dian Swastatika Sentosa	total	coal	22,074,664
		Manggala Alam Lestari		19,780,664
		Surya Kalimantan Sejati		2,294,000
FIRE	Alfa Energi Investama	total	coal	113,200,000	7	224.00
		Alfara Delta Persada		113,200,000	7	224.00
		Berkat Bara Jaya		0
GEMS	Golden Energy Mines	total	coal	1,880,780,634	160	11,838.62
		Borneo Indobara		1,827,658,058	155	11,475.10
		Barasentosa Lestari		53,122,576	5	363.52
		Kuansing Int Makmur
		Berkat Satria Abadi
		Wahana Rimba Lestari
		Trisula Kencana Sakti
HRUM	Harum Energy, Perseroan	NO REPORTS	coal
		Mahakam Sumber Jaya
		Layar Lintas Jaya
		Santan Batubara
		Karya Usaha Pertiwi
		Bumi Karunia Pertiwi
		Tambang Batubara Harum
		Harum energy Australia Ltd
		Harum Energy capital Ltd
		Lotus Coalindo Marine
KKGI	Resource Alam Indonesia	total	coal	11,166,969
		Resource Alam Indonesia		11,166,969
INCO	Vale Indonesia	total	Ni	87,314,444,000
		Sorowako, Bahodopi, Pomalaa		87,314,444,000
IFSH	Isishdeco	NO REPORTS	Ni
INDY	Indika Energy	total	coal	29,653,759,854	146  ?	36,821.45	256
		Kideko Jaya Agung		25,927,821,455	146	36,149.65
		Multi Tambangjaya Utama		3,725,938,399		671.80	256
ITMG	Indo Tambangraya Megah	total	coal	16,705,586,626	488	34,953.00
		Indominco Mandiri		8,999,378,564	312	21,375.00
		Trubaindo Coal Mining		7,706,208,062	176	13,578.00
MDKA	Merdeka Copper Gold	total		376,297,111,651	87	18,917.55	599
		Bumi suksesindo-tuju bukit	Au	163,850,000,000	49	12,374.80
		Batutua Kharisma Permai -wetar	Au	5,730,000,000	19	2,783.30	599
		Puncak Emas Tani Sejahtera	Au	583,014,223,302	19	3,759.45
PSAB	JResources	total	Au	57,109,444,000	134	22,712.80	13,518
		Bolaang Mongondow		40,514,768,000	101	22,442.30	13229
		Sago Prima Pratama		3,615,430,000	33	270.50
		Gorontalo Sejahtera Mining		8,198,988,000			289
		Specific Resources Sdn Bhd		336,588,000
		Arafura Surya Alam		4,443,670,000
PTBA	Bukit Asam	total	coal	0
		Bukit Asam		0
SMMT	Golden Eagle Energy	total	coal	0
		Triaryani		0
		Internasional Prima coal		0
SMRU	SMR Utama	total		0
		SMR Utama	Mn	0
SQMI	Wilton Makmur Indonesia	total	Au	0
		Cikadu(CKD),
		Sekolah(SEK),
		Cibatu(CBT), .
		Pasir Mangga(PSM),
		Cibak(CBK),
		Cipancar(CPR)
TINS	Timah	total	Sn	80,468,430,393		22,697.90
		Offshore				15,752.00
		Onshore				6,945.90
TOBA	Toba Bara Sejahtra	total	coal	136,611,243			15
		Trisensa Mineral Utama		136,611,243			15
		Indomining		0
		Adimitra Baratama Nusantara		0
ZINC	Kapuas Prima Coal	total	Pb Zn	19,258,777,450
				19,258,777,450