What can Indonesia do to grow the exploration industry?

October 3, 2016 Ian Wollff Coal Asia publications 0

Introduction.

Exploration plays a vital role in the ongoing development of Indonesia. While a single mine is a non-renewable resource, successful exploration can find more ore, such that the mining industry can continue to provide the Indonesian people with their needs and benefits from generation to generation. Tin has been mined in Indonesia for many centuries, while coal and gold have been mined for more than 100 years. Improvements towards exploration and mining are ongoing, and we may expect these industries to continue in Indonesia for centuries to come. The Indonesian coal and mineral industry has seen strong cyclic growth over the past 30 years. The industry is now in a significant down swing, wherein people have lost jobs and careers, business has lost momentum, and Indonesia is losing tax revenue. The Indonesian people are looking to its leaders in government and industry to grow the exploration industry.

Exploration is the scientific study that identifies valuable minerals and coal from seemingly ordinary rocks. This first step of finding the well hidden ore is followed by mining, processing and so on, until the rocks are finally turned into products on our shopping shelves, make up our homes, or turn on the lights etc. Exploration is a business, with budgets, work plans, efficiencies, organization structure, and output products of maps, resources and reserves that can become assets and wealth. The exploration industry is quite separate from the mining industry, though the mining industry is wholly reliant upon the exploration industry.

This article provides an overview of the many factors that may influence a recovery, or decline, in the Indonesian exploration industry.

Good Times.

The earlier gold and coal rushes of the 80’s & 90’s were a unique combination of several factors that created an immense influx of Foreign Direct Investment (FDI) that kick started the modern Indonesian exploration sector.

The administrative factors included the political will power (combined with some unique Indonesian administrative foresight) to develop the COW tenement system as a stable framework for foreign and domestic investment. The availability of the recently completed 1:250,000 Indonesian geological maps, along with an open library of a hundred years of geological reports enabled companies to focus on prospective ground.
The floating of the international gold price that saw a spectacular increase in the price of gold and silver. Established speculative stock markets (particularly in Australia and Canada) provided vehicles for raising exploration funds for juniors to compete with the major international gold miners for exploration targets.
The advances in technology, particularly 1) the change from the slow and expensive gold fire assay to a reliable, quick and cheap X-ray method, along with 2) advances in the geological understanding of gold emplacement systems [epithermal, porphyry etc] with the ability to use geology to vector into the target, 3) the timber industry opened up access roads to remote areas, and 4) the new satellite technology to enable the reinterpretation the geology in remote areas.
As the boom progressed, so the technology to support exploration grew in innovation and availability within Indonesia. Assay laboratories became established, airborne geophysical contractors evolved, shallow drilling innovated cheaper bits and man portable rigs, helicopter chartering became more available and even the slow river klotok was replaced with the speed boat. The huge numbers of slow ground surveys became streamlined with the introduction of unfiltered GPS system. Mining also saw great development, with the emergence of river barging to rival the Australian rail network. On the job training saw the replacement of expatriate skilled workers with Indonesians. Software evolved to make reserve estimation and mine planning faster and more reliable. Screen trading of Indonesian coal took off, while local banks began to support the industry players. The number and quality of Indonesian geology and mining graduates blossomed.
By far one of the most important factors in driving the exploration and mining boom was the story of success. Newmont’s Batu Hijau, KEM gold, plus the spectacular performance of the main coal mines of KPC, Arutmin and Adaro encouraged others to invest in exploration.

The momentum set up by this foreign led exploration and mining boom was soon transferred to the Indonesian domestic industry, first with professional geologists and miners, and later with investors and speculators.

Bad Times.

The recent flattening out of global growth left the coal and mineral industry with an oversupply of capacity and depressed commodity prices. Exploration was the first industry to be stopped, as exploration was seen as a cost centre rather than a wealth generator. Some players who had made a fortune in the mining industry sought to undertake some exploration in other commodities, particularly those that had initially retained a good price (manganese, iron ore etc) and other commodities that promised future high prices (graphite). The Indonesian investors were use to cheap entry and quick success (coal, nickel, bauxite), wherein most of these exploration programs into other commodities soon faded through lack of quick returns.

As the exploration and mining industry grew, so did the forces that restrict and oppose exploration. The development of forestry restricted areas, divestment regulations, limitations on FDI and eventual collapse of confidence in a stable mining investment regime are a few of the influences that impacted with negative growth on the exploration and mining industry. Decentralization has left a legacy of overlapping tenements to be sorted out, tedious procedures and excessive costs in the regions. The exploration and technological success of the boom years has seen a worldwide oversupply of minerals, along with a down turn in world growth, such that low profit margins are now a significant disincentive to invest in the exploration industry.

Critical components for a revived exploration industry.

1) The investment climate.

Exploration is a business that relies upon a positive legal and regulatory regime. We may monitor the media to see if the Ministry of Finance, with its economic rational can move the Ministry of Mines & Energy, with its emphases on nationalism, towards a win-win situation where private exploration can thrive. Exploration is typically undertaken in remote parts of Indonesia, wherein better coordination between the various ministries and various levels of government are necessary for the well being of the exploration industries.

Some people suspect there are further complications to developing mining policies, with private and powerful lobbies that are looking to develop their business interests into the exploration and mining sector. One test of this suspected business lobby is to look at the degree of transparency in the industry. EITI is evolving and broadening its scope, however implementation may subject to counter influences, for example by EITI not reporting production tonnage with taxes paid etc. The recently exposed clash over royalty and tax refunds indicated some companies received tax refunds, while others did not. The Mines Department is opening its files in response to the Asian Free Trade requirements; however the procedures to request such free information are still somewhat restrictive.

Another indicator of the business atmosphere is reflected in the Masela mega oil & gas project. There was a last minute interruption to normal regulatory process, with the project being referred to the President, where political aspirations overcame economic studies resulting in an onshore option to be evaluated. The Minister of Mines has certain discretionary powers; where in a change of politics or a change of Minister can have a big impact on perceived well being of the exploration investment climate.

2) A stable legal system.

In response to the poor management of the exploration & mining industry by the districts, and other factors, the 2009 mining law is to be revised. This revision was seen as urgent for the 2015 parliamentary year, but this did not happen, so it was rescheduled for the first half of 2016, however this also failed to materialize. A likely explanation for the slow development of a new mining law is that the administrative shake up of the Mines Department has slowed the process, and consensus with other departments is difficult. A more disturbing option is that Commission 7 is incompetent, or that the local business influences may be blocking progress, such that they can have more time to better position themselves into the future mining industry.

In the short term it may be easier to modify some of the implementing regulations and thereby improve the legal bases for encouraging exploration. However some investors look at the very long term stability, and fear such implementing regulations may later be changed back to a negative investment emphasis.

Other factors may include the government’s strategy to clean up the old tenement system before developing the new laws. The IUP tenement system has become mired in various legal disputes, and even disputes on the demarcation between district boundaries. The government is proposing to gradually implement the issuance of new tenements, and this may help the exploration industry, and reward the districts that cooperate with the Mines Department. The renegotiation of the COW system is required under the 2009 mining law, however the prolonged period of negotiation is a testament to a) the uncertainties related to the soon to be replaced 2009 mining law and B) the soundness of the original COW agreements. Clearly the exploration industry may have improved certainty if the new mining law is first promulgated with regulations that are more in line with the successful COW system.

3) Technical innovation.

We are seeing a continuation of technical innovations that may provide stimulus to the exploration industry. One example is the refinement of the sonic drill for alluvial and lateritic deposits. Computer applications in resource modeling are part of a worldwide trend. The drone industry is changing the nature of surveying and researching the inclusion of drone mounted geophysical applications. Universities around the world are researching and refining ore emplacement geology. Exploration may be stimulated with new mining technology, for example robotic underground mining, or extraction of resources through drill hole (CBM, shale gas) and related technology.

The Mines Department can further stimulate research and exploration by making its library of company and research geological reports and maps more readily and freely available to the public over the internet. The universities have a policy of publishing their student’s thesis (geology, mining etc) on the internet, but this is sometimes poorly maintained.

4) Success stories and more players.

There are essentially no new exploration success stories. All the advanced exploration projects and developing mines are the result of earlier discoveries. Some mines are continuing to expand through mine site exploration, such as the Freeport. Exploration success ratio is typically around 1-2% of projects are developed into viable mines. Thus the more exploration carried out the more chances of discovery and new mines. The ongoing decline of Indonesian exploration means there are significantly less chances of discovery and a downward spiral of disillusion is encountered. Clearly the government and industry need to work together to attract more and new players into exploration, rather than trying to carve up all the opportunities between the SOE’s and the present investors.

Drivers for a change in direction.

1) Impending failures.

The introduction of the raw ore export ban caused the abrupt closure of many nickel and bauxite exploration programs and mines. This bought a measured reaction from industry, and the politicians rationalized that greater benefits were to be had with the smelter industry. Later, the price collapse of coal and other commodities resulted in further abrupt ending of exploration programs and closure of many mines, increased unemployment and reduced districts income. The Mines Department reaction focused on the need for efficiency in the remaining mining industry. In both cases the public and government apparently overlooked the devastation to the exploration industry.

There are a number of further impending failures in the Indonesian mining sector that may lead to an ongoing shrinking of the exploration industry and thereby jeopardize Indonesia’s growth. Such an impending shrinking may trigger a wider industry and public reaction for a more supportive approach to the exploration and mining sector. The key will be when the government acknowledges the industries shortcomings, and acts before, or after the collapse of a number of mining sectors.

The decimated coal industry held out great hopes to supply coal for the planned growth of PLN coal fired power plants. Bid criteria was constantly changed by the government, the most recent being the change to the pricing formula, plus the cancellation of some power plant programs. There are many companies that spent millions of dollars over the years doing exploration and preparing bids, but some are now giving up and withdrawing out of frustration over the extended and unsure bid process.
Most of the mining SOE’s companies would seem to be faltering, with Timah stopping production to push up tin prices, Aneka Tambang struggling to make a profit from declining refined nickel prices and their gold mines reserves are severely depleted. Bukit Asam is expanding production to meet the decline in coal export prices and has formally stopped exploration. Each of these companies is looking at diversification into hospital, plantation, retailing and other businesses. What is alarming is that some of these SOE’s are also looking offshore for their next exploration targets, perhaps reflecting an outlook that Indonesia is no longer the most desirable destination for their exploration.
The Mines Department attempt to redirect the mining industry into downstream smelting would seem to be faltering. Lower world prices and competitive international trade seems to be making the smelter program less commercially viable. Apparently some of the new nickel smelters are not being maintained and allowed to shut down, while aluminum product from the new smelter is having difficulty in finding a buyer. Once smelters are established with reliable long term reserves, then there is little incentive to undertake further exploration. However raw ore exports would require exploration to supply a wider market.
Local banks are generally no longer interested to invest in exploration and mining ventures. Their bad debt profile in this sector is considered “acceptable” but clearly they do not want to expand their risk further. This means that some projects have few options for financial support for exploration or mining. Indeed we are seeing more companies delaying payment to staff and contractors. Such exploration and mining company’s failures are already having a multiplier effect on a number of exploration support industries (geophysical, drill, assay, geological modeling etc) and remote communities.

2) Return to fundamental values.

During the last national election the economy was still in good shape, with a target of 7 % growth, but today there is a growing acceptance of a much lower target (5%). Certainly there is a lot of political capital invested in demonstrating national aspirations in the mining sector that spills over into the exploration sector. We may hope to see the next election make a stronger emphasis on economic pragmatism. The political perception of the anti foreigner element in the exploration and mining sector may need to be toned down and replaced with a stronger emphases on working together.

Urbanization is continuing, whereupon daily economic hardships and opportunity will play a more significant role in political decisions. Thus income from a healthy exploration and mining sector may be portrayed as contributing to Indonesia’s overall growth, rather than the luxury of leaving the nations mineral and coal wealth undiscovered in the ground for sentimental reasons. Certainly the need for reliable electricity will undermine the governments concern to ensure the long term coal supply.

There is some misguided public outlook that the coal and other commodity industries should survive with only minimal profit margins, such that the final products are delivered to the Indonesian people at the cheapest possible price. This outlook reflects a misunderstanding of the high cost and risk nature to explore for and develop such resources, and to conduct further exploration to replace such resources.

The downturn in the exploration and mining industry has left many regions and provinces with significantly less income from royalties and taxes. We may hope sensibility prevails and the provinces become more conducive towards exploration as a means of future growth.

3) Aid Programs.

In the 80’s & 90’s several countries contributed aid to support the exploration industry. This included the various JIKA (Japanese) programs and the British stream sediment program over Sumatra. It is no longer suitable for the foreign countries to provide aid programs to support the Indonesian exploration and mining sector.

However there are more subtle approaches that seem to be in place now;

Some foreign aid is being directed towards assisting the central government put in systems for the districts to responsibly manage the distribution of village funds. This should spill over to better management of income derived from mining royalties etc.
Transparency and compliance with international finance criteria at provincial level will bring pressure on provinces to seek responsible growth in all sectors, including exploration and mining.
Professional standards, globalization of news, whistleblowers, public safety concerns and environmental compliance will all encourage more responsible governance and business activities. These are areas where responsible exploration and mining can counter traditional / illegal mining.

4) The rise of local power players.

The critical turning point from a FDI dominated exploration industry to an industry sought by domestic investors was the Brex gold project. The very public power fight by some of Suharto’s children, and other key political parties, elevated the exploration industry to one of national interest. Later some key, well managed, coal projects were sold to local players. The spike in coal and mineral prices rewarded these local companies, and stimulated a wider group of Indonesian entrepreneurs to enter the exploration business. Some of these local companies managed their portfolios better than others.

The beginning of the regional autonomy era saw the district chiefs issuing thousands of tenement (KP/ IUP) permits. Initially this was a way of stimulating local business, with some junior investors striking it rich and becoming big players in their local exploration and mining industry. However the KP/IUP industry also morphed into a fund raising enterprise for the district chiefs. This may be looked upon as an Indonesian version of playing the investors game rather than serious explorers, similar to some foreign junior stock market ramps. We also saw the divestiture of authority to the Provinces being taken advantage of by some big Indonesian power players. For example it appears that one private industry group supported the local NTT government to purchase their share holding of Newmont, only to see the dividends all go to repay the loan and interest. Fortunately that loophole has been closed to protect the Provinces. It is fortunate that some local big business have the funds and aptitude to take advantage of investment opportunities in the exploration and mining sector. Indonesia now has a reservoir of small and large business investors eager to invest in the exploration sector. Similar investors in Canada or Australia become a financial resource for the speculative stock market. The Indonesian stock market is developing its Junior Board to tap this source of public wealth, though the IDX could go further towards supporting the early exploration programs.

5) Counter cyclic investors.

On the international scene, there are a few companies with a long experience in the exploration and mining sector that have management support and financial resources to undertake counter cyclical investment in exploration. BHP is one such counter cyclic exploration company, though no longer exploring in Indonesia. BHP and others have issued public statements that it is more desirable to start a well managed exploration program rather than buy up overpriced brown-field assets. There are a few Indonesian companies that are quietly following this counter cyclic investment strategy. The success of this strategy typically requires the very best of the exploration geological teams, and this may include the need to reduce the restrictions on foreign expert geologist etc.

Which commodity.

The bulk commodities of iron, bauxite, coal etc. all appear to have huge well developed international mines with excess supply driving down prices and forcing closure of high cost mines. Should the price recover, then it may be relatively easy to restart or expand such mines without the further need for much exploration. The various common metals are also in general oversupply. New exploration targets may focus on lower cost / higher profit margin new mines, such as shallow open-cut high rank coal with long term cheap transport, or high quality mineral deposit.

There is some anticipation that new battery technology or solar cell technology will require massive amounts of some relatively rare element. This approach has seen a number of exploration programs towards graphite, lithium and rear earths. However the Indonesian private speculators in these new technology plays are often impatient and unwilling to support exploration in such untested areas. Certainly if one such element takes off, then the world wide rush is likely to see that commodity price soon collapse. One local example is the government’s consideration to extract thorium from Banka beach sands for possible future nuclear reactors.

For another boom in exploration, the commodity needs to have many targets and relative ease of sales potential. One likely commodity is gold. There are hundreds of partially explored and under explored targets that could provide the bases for a boom. Rather than the traditional market forces of supply and demand, instability in world markets for a variety of reasons may trigger a gold price increase. However, many Indonesian investors find hard rock gold exploration too slow, too expensive and high risk. Indeed there are many gold exploration targets that have been explored with one or two “passes” with no discovery. The geological professionals know it may take many tens of years and many expensive exploration programs to discover / or not discover a gold deposit. However new geological theories, new technology or simply smarter geological teams may trigger a gold discovery and subsequent rush.

Indonesian and other investors are attracted to low capital and operating cost mines that are relatively fast to put into production. However the nickel laterite and bauxite mines have mostly been closed due to the raw mineral export ban. Alluvial mining also meets this fast and cheap requirement, particularly off shore to minimize the tedious land acquisition / compensation phase. However the price of alluvial tin is so low that there is minimal or even negative profit margin. Illegal alluvial gold projects are booming in remote areas such as Papua and some parts of Sulawesi where land access issues can be overcome with the right approach. Formal mining can-not compete in these illegal mines without suitable law enforcement and resolve from the government authorities. There are reasonable alluvial gold targets in other parts of Indonesia where land access and formal permits are possible, but require tedious land compensation.

There are still some cement plants operating at under-capacity that would suggest the cement industry is not the target of a boom industry. The high cost of domestic shipping may avail exploration to develop new cement plants in some of the more remote parts of Indonesia.

Rock for road construction is typically sought from small quarries close to the construction, so that trucking is cheap. The demand for sand and gravel for general construction in the big cities often enables some distant mines to transport by barge to stockyards on the edge of the city. More interestingly, some of the ambitious regional highway projects in Sumatra and Kalimantan are in areas generally devoid of convenient suitable hard rock. There are some chemical solutions that can firm up clays, but ultimately some rock is required for public roads. Providing rock for a thousand kilometers of road may see an exploration boom in hard rock quarries along the route of such roads – provided the government builds such roads in a timely manner!

Some Scenarios.

1) Big business.

It is clear that local big business is well positioned to dominate the future Indonesian mining sector. In many cases they have funds, manpower along with political influence to take advantage of selected opportunities. Unlike FDI parties, the local business enterprises are resigned to work and thrive in the Indonesian political and business environment. Ironically, the urban property market as a main stay of many business investments is entering a downward trend, and banks are no longer freely issuing credit for apartments and office buildings. This may leave some local investors with fewer options for growth, wherein they may redirect some investment to the exploration and mining ventures. So the traditional exploration cycle may start again – particularly if some exploration success can act as a trigger to stimulate investors. The local big investors may;

Select existing projects from the large number of IUP’s and COW’s to invest in. Presently many inactive IUP holders are seeking unreasonable entry investment levels, to recover suck costs. The current Mines Department policy to insist upon annual fees is helping the exploration industry, by incentivizing the IUP holders to explore or relinquish.
Lifting the moratorium on new exploration tenements will more likely be speeded up when local companies with strong political influence are ready to make new investments in the exploration industry.

Not all local big business will enter the exploration and mining industry, as many got burnt in the previous boom, and others shall resist diversification away from their core business.

2) Government policy.

The national government can have a significant impact on the wider exploration and mining industry.

There are two directions the Indonesian government may consider. A) That all forms of growth, including mining, are necessary to support the well being of the nation, and thus prepare supportive regulations for exploration and mining. B) That the mining industry is no longer socially acceptable and not a significant factor for GDP, and thus allow the industry to shrink. The Indonesian constitution indicates God placed the minerals in the ground for the benefit of the Indonesian people, thus any trend to reduce the exploitation of such minerals could be viewed as non compliance with the constitution.
Commodity price intervention; – The stop – start nature of the Indonesian tin sales is an example of how much of the mining industry is reactionary to world-wide commodity prices. The domestic cement market is also severely restricted by SOE cement producers being instructed to reduce market prices to support political objectives of lower infrastructure construction. The price of energy (coal, steam, oil) delivered to PLN for generating electricity is an ongoing negotiation between the commodity producers and state consumer. The continued expansion of electricity and fuel subsidies for the consumers also promotes some wasteful practices in the public’s use of electricity and fuel. The government is now realizing that various forms of price support are also needed to ensure the long term supply of commodities. A clear example is the negotiations around the pricing of renewable energy and coal for mine mouth power stations. The government intervention in reducing commodity prices can have clear short term gains for Indonesian consumers. Without active support for the explorers and miners, the longer term impact of commodity price control is to shrink the Indonesian commodity producers, and ultimate reduce Indonesia’s capability to sustain growth.
Export controls;- We saw the Philippines lateritic nickel industry boom in response to Indonesia closing of their raw ore exports, however the Philippine government is now clamping down on nickel lateritic mining. There is some public pressure within Australia to slow down coal mining. Should these foreign suppliers reduce exports, and the Indonesian government relaxed some obstructive regulations, then we might expect to see a spectacular revival of opportunities for the coal and nickel industries in Indonesia.

The longer it takes the parliament to revise the mining law, the more likely that economic reality may play a bigger role in defining the nature of the new mining law. While a growth in the manufacturing and services sector is necessary, it does not need to be achieved by sacrificing the exploration and mining sectors. If we can see a new mining law reflecting a return to a private sector led pro-development, then we may see investors becoming more interested in the exploration sector.

3) Government led exploration.

At the beginning of decentralization, the districts applied for funds to conduct research and exploration. These budgets were refused by the central and district governments, as the very low success rating of discoveries were not considered in the best interests of the people. Instead we saw autonomy funds directed towards grand public buildings and fancy street lights. It is likely the new generation of politicians at the national and provincial level may continue this policy of investment in public infrastructure (roads, hospitals and sports stadiums), rather than investing in high risk exploration. Perhaps if the current court of appeal by the districts over their apparent loss of authority of the mining sector to the central government is successful, then we may hope this may stimulate the districts to justify their ongoing authority of the mining sector by committing to spend a proportion of their budget on exploration, or to attract private exploration.

A number of SOE’s have the potential to stimulate the exploration sector. In the light of the recent Indonesian Coal Mining Associations report on the apparent reduction in national coal reserves (related to coal price), then we might hope to see PT. Bukit Asam Tbk revise its policy and restart exploration to focus on low strip coal. The current program to increase the number of mining inspectors from 166 by an additional 1,050 may see renewed pressure on Aneka Tambang to resume exploration in its broad and diverse tenement portfolio.

We see PT. Timah Tbk and other SOE’s are now investing in exploration in foreign countries, wherein we may hope that a significant part of such investment is exporting Indonesian exploration experts and associated industries (drilling etc).

4) Export lead growth.

Indonesian coal exploration and coal mines grew upon exports to Asia and later boomed to support China’s spectacular growth. The expectation that India would replace China as the next major economy to grow seems to have peaked, and there are signs India may reduce future coal imports. Clearly if India were to return to a fast growth option, and stimulate coal prices, then there are many Indonesian coal exploration and mining projects ready to reopen.

Aneka Tambang’s nickel operations with Vale undertook a business strategy of exporting raw ore to supplement its smelting operations. The recent effective raw ore export ban has blocked this business option of combining raw ore export and refined product. Some years back PT. Bukit Asam started coal exports as a means to deliver profits to the State, along with bringing economies of scale to support production for domestic consumption. The coal Domestic Market Obligation (DMO) is a system of combining coal exports with domestic supply, and a shift in minerals policy to some similar form of combined raw ore and domestic product may reinvigorate exploration and mining.

Many countries are looking to stimulate growth, particularly through public funding of infrastructure. These projects may see an overall increase in cement and related items for Indonesia export. There are many other parts of the world that are in need of development, wherein foreign policy is a prelude to exporting Indonesian exploration capabilities (eg. Mongolia).

The minerals and coal of Indonesia are a resource to sustain the people of Indonesia that can be realized in a number of ways. The most obvious is to use the coal for local power, and minerals for local products. However exporting raw ore, smelted products and coal can also benefit the Indonesian people in a very direct manner. The income earned from such exports can drive stronger overall growth, with royalties and taxes leading to the building of schools, hospitals, and industries for today’s people, rather than waiting generations before a self sustained domestic growth can deliver such facilities and opportunities. The broader exploration and mining programs can particularly improve the well being of Indonesians in remote areas. Indonesia shall not readily run out of resources, as the schools built by these tax revenues will deliver better educated Indonesians to drive exploration to find more resources and deliver mine engineers to innovate future mines.

Conclusion.

When God placed the minerals and coal in the earth, he often made a great effort to hide such wealth as a means to encourage the geologist and investor towards ingenuity and perseverance. On behalf of the Indonesian people, the government has a constitutional obligation to support the exploration industry.

The government can demonstrate its obligation in support of the exploration and mining industries through public statements, regulations, a new mining law and lifting the moratorium on the issuance of new exploration tenements. The government can also fulfill its obligations through directing the SOE’s programs, through the governments influences on commodity prices, and ease the release of geological data. The government does not need to be, nor can afford to be, the sole implementer of exploration. The government should provide good regulations for which the people of Indonesia (and their foreign partners) can directly participate in the exploration sector. Non mining departments can actively encouraging local and FDI business in the exploration and mining sector, through managing taxation, manpower and better coordination with forestry etc.

Any new spectacular success story (particularly in gold) is likely to prompt strong interest in further exploration. Significant advances in exploration or mining technology and relaxing restrictions on foreign experts may bring a wider opportunity for growth. A recovery of commodity prices may bring some reopening or expansion of mines. The development of the Indonesian stock exchange and an improved investment climate may evolve to support early exploration ventures.