Mineral Testing is testing our patience.
By Ian Wollff
The author is an expatriate principal geologist of about 30 years’ experience in the Indonesian exploration and mining industry. The authors’ web site is www.ianwollff.com
The raw ore export ban/ tax needs revision to ease the progress for testing of coal and minerals abroad. The coal and mineral exploration & production industries typically focus on a suite of basic assays, such as CV and Ash for coal or Au (gold) and Ag (silver) for minerals, for which there are adequate qualified registered laboratories in Indonesia. However some parts of the exploration phase, and particularly the Pre-Feasibility and Feasibility stages, require a wider range of coal and mineral testing often not readily available in Indonesia.
Most of the Indonesian coal laboratories are well set up and have good quality controls for a wide range of standard thermal coal properties. However Feasibility studies and production marketing studies are often subject to end users demands to test such coal in their own off-shore facilities. In some cases it is a matter of testing the coal for its optimal blending properties. A typical coking coal may be part of a blend to be fed into a coke oven, wherein such tests will be conducted in conjunction with other coals from around the world, or a thermal coal may be blended with a high ash Indian coal for an existing power plant. In other cases the off shore laboratory may have facilities and skills in interpretation for specialty concerns, such as the pilot plant coking facilities in Australia, or a laboratory in China or India wherein the off taker has the need for a report developed under local laboratory regulations and language. The regulations relating to the coal industry recognize the need for such bulk testing abroad, though the facility for “trial shipments”. Trial shipments can be from a few hundred kilograms (drum samples) to 2,000 ton shipments. Unfortunately some tenement holders sought to exploit the Governments poor implementation of inspections, and endeavored to export many more tons under the guise of trial shipments.
There are a few desk top and trial coal plants designed for testing for coal upgrading in Indonesia, wherein bulk samples can be tested. However not all alternative coal upgrading process methods have small scale plants or scale up plants in Indonesia. Often more advanced testing is to send trial shipments to one-off overseas process plants. It is simply not feasible for some test plants to be built in Indonesia. Throughout the world there are a few coal fired power plants using less than 4,000 Kcal/kg coal, and these often have various new technology boiler systems that are being considered to efficiently use such coals. The testing facilities to determine how specific Indonesian coal will perform in such boilers may need various bulk samples sent overseas.
The Indonesian mineral testing laboratories are well set up to undertake regular assays, and some limited other studies. However mineral testing involves an extremely wide range of ore types often requiring diverse testing equipment and expertise, and always requiring specialty interpretation that may not be readily found in Indonesia.
Mineral processing typically comprises two main areas, one related to crushing and ore beneficiation of the rocks and minerals (crushing, grinding, screening, gravity separation etc), and the other for chemical process (leaching, flotation etc) to extract the selected element. Auxiliary studies often review the waste disposal and environmental considerations associated with the planed process plant. This laboratory testing typically requires a few hundred kilograms for the initial bench top studies, and later a few hundred tons (or more) for more detailed studies aimed at process plant design. These studies need to be carried out with calibrated equipment and properly trained technicians, with ISO (or other suitable) certification to provide assurances the Feasibility Study is bankable. For some big budget process plants, the financiers may have an input in nominating which laboratories and experts are acceptable for bankable studies.
Exploration companies are typically very happy if they can source such testing laboratories in Indonesia, for faster turn-around and competitive price. However the Indonesian laboratories are often not complete. It is not within the scope of an exploration company to invest in developing in-house, or expanding local mineral processing laboratories, as such development may take significant budget and time (perhaps 1 year) for a limited one time use. Each mineral resource may have some common and some unique mineralogical settings that require a tailored mineralogy process flow chart. Commercial or State mineral testing laboratories also find it non-viable to acquire and maintain every form of testing apparatus & certified technicians. Some well established international mineral testing laboratories have a rich history of testing ores from around the globe, or of testing specific genesis of ores, and may be more experienced/ suitable for testing a new raw ore from Indonesia.
Some testing may only need much less than one kilogram of rock, particularly for petrology of minerals or macerals. During the earlier gold boom, it was standard good practice to send abroad rocks for petrology testing, (including electron microscopes), particularly as some such laboratories had world leaders in recognizing alteration assemblages and interpreting ore petrology as a guide for ongoing exploration. Obtaining an export permit for such tiny rocks is testing the patience of the explorer.
Each deposit tends to have a unique mineralogy mix of both ore and associated non ore minerals. A simple example may be ilmonite inclusions within the magnetite of iron ore beach sands in south Java, or higher uranium trace elements in zircon from SW Kalimantan. Sulphides can be more complex, and often it is gangue minerals associated with the ore that interfere with the envisaged mineral processing, refining process. In many cases a standard process technology needs to be modified to achieve an optimum process of element extraction. Note that Weda Bay has spent tens of millions of dollars on several feasibility studies looking how their ore will perform under the various processes to extract the nickel, and thus which billion dollar refinery process they should engage. Often several bulk samples are required to reflect the variable run of mine ore, and are essential to the feasibility process.
Project sensitivity can be significantly impacted through properly understanding bulk samples under mineral processing testing. Even a seemingly simple heap leach may see recoveries dramatically drop through slightly incorrect digesting fluid temperature or Ph. The earliest commercial lateritic nickel process plants that cost hundreds of million of dollars were a dismal failure. Indonesia is following a legal case wherein a commercial scale coal upgrading plant did not perform during its extended commissioning phase. The Natuna gas is filled with CO2 that creates immense processing issues.
There are a number of mineral petrologists and mineral process engineers in Indonesia. It is the experience of understanding the minerals in relation to mineral processing that is vital. Often such experience comes from working on many projects from around the world that can be critical for a projects success. Certainly most foreign financed projects will insist on nominating certain international mineral process engineers to reduce the technical risk of a project.
Indonesian experts are developing, and certainly the new emphases on mineral processing and refinery in Indonesia shall help. It is essential the Manpower department works with the ESDM to ensure a technology transfer in operating the new generation of smelters. However the ongoing moratorium for new exploration areas will see a generation gap of opportunities in these fields of petrology and mineral processing, placing an even greater reliance on foreign experts.
It is understood that the raw ore export ban has been interpreted by the ESDM to apply to all raw ore, including small amounts for mineral testing abroad. This interpretation is largely due to the limited nature of the regulation effectively banning all raw ore exports. Consequently a permit for raw ore export of a few hundred kilograms for testing presents a significant obstacle towards the development of the Indonesia’s exploration and mining sector.
Regulation of the Minister of Trade (MoT) No. 29/M-DAG/PER/5/2012 concerning provisions on export of mining products defines “Export as the activity of removing goods from the customs area”, and “Mining Products as non-renewable natural resources dug from the inner of the earth that have not been processed and/or purified (raw materials or ore) can be either metallic minerals, non metallic minerals and stones”. At present a mining company needs to obtain recognition as a registered exported of mining products which includes the requirement to be in the production operation phase of tenement. This is a “Catch 22” situation, wherein export of samples for advanced laboratory testing may be required to complete the Feasibility Study as a pre-requirement for obtaining a production operation permit! Another complication is that the mining products must be subject to verification by a surveyor appointed by the Minister, including the requirement to “have at least 3 laboratories with complete equipment in accordance with the scope of mining products”, wherein some samples are being exported because of the lack of suitable laboratories! We see that the geothermal industry got around the difficult forestry issue through having the geothermal industry declassified as a mining industry, so perhaps a similar approach may be sought here. Perhaps there could be a distinction between “commercial goods” and “non commercial goods”, with samples allocated to the latter, and thereby excluded from this ministerial regulation.
A similar logic may be applied to MoT regulation No. 33/M-DAG/PER/8/2010 concerning certificates of origin for Indonesian export commodities, and to MoT regulation No.59/M-DAG/PER/12/2010 concerning provision of issuing certificate of origin for Indonesian exporting goods, along with MoT regulation No.05/M-DAG/PER/1/2013 concerning determination of bench mark price for dutiable mining products. If we define samples as not being a “commercial commodity” or “commercial goods” then we may not need a Certificate of origin (SKA) and not need to determine the export bench mark price (HPE).
The exploration company is typically undertaking research tests at its expense, and there is no income derived from such ore, thus a 20% export tax makes no sense, and such tiny export tonnage has no significant contribution/loss to the government’s income. The administrative delays and overheads to obtain such export permits are delays for development and completely out of proportion to the immediate interests of Indonesia to promote growth.
Internal restrictions & training.
Shortly after the introduction of regional autonomy, many districts took the initiative to create fees on goods being transported through their district. This meant that inland district, such as Muara Teweh in Central Kalimantan was being held to ransom by numerous districts in South Kalimantan. Similarly trucks were exploited using the Trans Sumatra highway. Fortunately the Central Government banned such restrictive internal trade barriers. However I have seen some similar internal free trade barriers been recently imposed using the excuse of the raw ore export ban. Some Districts / Provinces require special permits, proof of payment of export fees etc to take a few kilograms of samples of coal or minerals out of their airports on domestic flights destined for Jakarta.
The ESDM has recently undergone a significant change of personnel, and a number of training programs. We may expect industry to work with the ESDM in the understanding of some aspects of testing for the smelting / refining industry, however a small exploration company may find such meetings or training sessions a heavy burden on its budget and schedule. The oil and gas industry is similarly going through this learning phase, where the new coordinating minister has requested an independent study comparing a floating process plant as compared to a long pipe and onshore oil & process plant. The oil company has requested the Ministry pay for its own study, and study time limits have been set.
Industry and government recognize there are very limited laboratory and suitably trained experts in the District or Provincial centers. In a number of cases samples are sent to Jakarta or Surabaya for government testing. Some coals may need to be sent to Balikpapan, wherein cargo flight safety requirements treat all coals the same, reflecting an airline industry lack of knowledge about spontaneous combustion.
Gaps for finished products.
Provisions for the export of mining products (No.29/M-DAG/PER/5/2012) requires verification of the goods to be undertaken by a recognized surveyor company (Article 7 &8). There are many surveyor companies that meet the defined requirements, however the government appointed surveyor is typically a SOE (Survey Indonesia / Sucofindo). It is understood that their fees for performing such mandatory state testing can be relatively high in some instances, and are typically to be borne by the private exporting party. In the case of gold exports, the small differences in assay or measurement can have a significant impact, wherein some gold producers have engaged their own surveyor to simultaneously cross check.
The present regulations on appointing surveyors was developed in response to the Coal, and raw ore export industries where it was suspected some laboratories were not always reporting the correct export commodity quality or quantity and thereby under reporting / paying export levies. The present MoT regulation is a good step towards greater transparency and control in the export industry, but does not rely address the core issue of monitoring the credibility of the surveyor personnel and company.
It is difficult to understand how the MoT will manage the small scale community mining market for selected rocks, mineral specimens, gems and fossils, with international trading via the internet and courier package services.
There has been a recent trend for Indonesian men to wear lumpy polished stone rings made from local colorful rocks. I wonder if these rings will need to have an SKA, have an independent valuation and taxed upon boarding a flight to Singapore! We will need to be even more patient when traveling!