Miners finding Indonesia a tougher ask

A STRING of mid-tier Australian mining companies have run into serious problems with local protests in Indonesia recently, prompting some executives to say the resource-rich nation is losing its lustre.

As the Australian government’s Asian century white paper urges business to get familiar with Asia, companies are confronting sometimes wild protests and heavy-handed police action, with little hope of relief through the courts.

”The risk profile for Indonesia is starting to look very challenging [compared with other parts of Asia],” according to Jim Kerr, the general manager of goldminer Hillgrove Resources. ”If it was a Melbourne Cup, you’d say Indonesia has drifted to the back of the pack. The odds are looking a little longer.”

In the past 12 months, Arc Exploration, Hillgrove Resources, Sihayo Gold, G-Resources and gas company Triangle Pase have run into serious difficulties with local protests.

Last week, protests erupted against Hong Kong-listed and Australian-run G-Resources, which is attempting to build a ”clean-water pipeline” at its Martabe mine in northern Sumatra. Protests that began over fears of discharging water into the local river turned angry at police action during the protest, and two district offices and a police station were damaged, three government cars burned and a number of people injured.

Local spokesman Adi Sumurung told BusinessDay the company’s chief executive, Peter Albert, was ”good” and had been willing to negotiate, but that they were angry at police, who had forced two youngsters to eat gravel and a young woman to drink water laced with mercury. ”I think this is ridiculous,” Mr Sumurung said.

Arc Exploration also faced trouble last year over the actions of local police, who shot dead two environmental protesters at its Bima project on the island of Sumbawa. The government cancelled the company’s licence as a result.

Sihayo Gold has twice suspended work at its North Sumatra exploration site after attacks by protesters, who set the camp on fire last year. The company blamed illegal ”artisan” miners who face being locked out of goldfields.

Gold explorer Hillgrove Resources likewise suspended drilling for much of 2011 at its Sumba prospect because of environmental protests and what it claims was ”political misinformation” from people outside the community.

And Triangle Pase, a gas producer run by long-time industry figure John Towner, has been the subject of a protest about ownership, alleged problems with waste, and claims that it had not fulfilled its corporate social responsibility obligations.

Both Mr Towner and Mr Kerr suggested the protests were more about money than environmental issues.

”In reality, these people are paid by someone to cause a disturbance,” Mr Towner said. ”I’ve been there longer than most, I’ve seen it all … someone thinks we’re making an absolute fortune and they think they can come in and take it over until it runs out.”

Mr Kerr said some NGOs were legitimate, but others were little more than organisations designed to ”shake down” his operation.

”They’ll put 20 people outside your gate and then someone comes up and says, for a bit of money, these people can go away,” Mr Kerr said.

Indonesia’s post-democracy decentralisation of power has left local administrations with enormous power over mining investment, but ill-equipped to administer complex environmental and mining legislation, he said.

Companies also do not expect the courts, which in Indonesia are often corrupt, to enforce their rights.

But G-Resources chairman Owen Hegarty said despite the trouble his company faced he had significant faith in the government and people of Indonesia. ”These issues are not fatal, they are not deal-breakers. They are issues we need to work with,” he said.

Australian National University economist Hal Hill said mining was a vexed political and legal issue in Indonesia with ”more than a hint of corruption”. But he also sensed mining companies might be in a rush to catch the once-in-a-generation profits on offer. ”I get a sense of nervousness, that they are getting pushy and aggressive. Maybe both sides are going harder,” he said.

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