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TAMBANG, June 24, 2010 | 16.47
Bauxite: Propped Towards Downstream Industry

Reporting: Abraham Lagaligo
Indonesian bauxite has been targeted by industrialists from around the world. The commodity is declared to be among those that are value-protected. Indonesia shall play a strategic role as bauxite's biggest exporter in Asia.
The industrial area along the banks of Kapuas river in Kalimantan island is currently on the rise. A Tayan bridge project, estimated to involve a total investment of 500 billion rupiahs, would provide for two bridges of 240 and 1,140 metres, respectively, crossing the Tayan island which is located right in the middle of Kapuas river.
Once finished, the bridge will be the longest in the whole Kalimantan island. It will also be the one of the longest across Indonesia, second only to the Suramadu bridge which connects Java and Madura islands.
The state-owned mining giant PT. Aneka Tambang Tbk. (Antam) is currently preparing to initiate two mega-projects on bauxite in the area. The first of which is the development of a Chemical Grade Alumina (CGA) project of approximately US$ 240 million. The project would be operated under a cooperation with two Japanese corporations, namely Showa Denco KK and Marubeni Corporation. The project initial construction is scheduled to begin in 2011.
On another part of the area, Antam would initiate an even more ambitious Smelter Grade Alumina (SGA) project, located at Mempawah regency in West Kalimantan. It would involve an investment of 900 million dollars, according to Tato Miraza, Antam's Development Director in an interview with TAMBANG Magazine on 26 April 2010. “We are in a continuous discussion with our partners from China's Hangzhou Jinjiang Group (HJG),” he revealed to our reporters.
The gentleman also shared his optimism that once concluded, Antam's projects would benefit the social environment along the river Kapuas. He predicted that up to 5,000 new job opportunities would come into sight during construction phase of the projects. The Tayan projects would also sustain the economic growth, for it would facilitate an increasing trade activities across the region.
“Tayan can be a new Pomalaa which is always developing,” said Mr. Miraza, referring to Antam's Feni II factory in South East Sulawesi. He explained that the population in Pomalaa expands significantly, and that the region enjoys an ever-present electricity as well as other steady infrastructure. “It is located close to the bordering areas with Malaysia. The region would develop economically and (workforce) should not be in motion to Malaysia anymore,” he added.
Antam had previously mined bauxite at Kijang region, Bintan island. The company's operation there was concluded in 2009, and at present it fully concentrates its projects at Tayan region in West Kalimantan. The bauxite reserves there was estimated at 104.5 million wmt.
The development of the Kapuas river banks industrial region is sustained by the significant bauxite reserves in West Kalimantan province. Previously, the commodity was mined in the western part of the Indonesian archipelago, namely in Riau islands, Sumatera, etc.). It was only in early 1970s that studies were arranged to calculate the reserves in West Kalimantan.
According to a 2009 data from the Geology Training Center of the Ministry for Energy and Mineral Resources (ESDM in its Indonesian abreviation), bauxite was initially found at Bintan, among the Riau islands, in 1925 by the Dutch regional administration. Subsequently, low-grade bauxite was also found at nearby islands.
The American corporation ALCOA started to mine bauxite in 1969 when it obtained a working-contract based consession for mining areas of 500,000 km2 across the country, among other in Gunung Sewu (Central Java), Sumba and Muna, and in South Kalimantan. It then expanded its projects to West Kalimantan in 1971 and Riau.
The Pittsburgh-based ALCOA, however, decided to let go of its working contract in 1977, after a study showed that the projects were far from feasible, mainly due to a failure to attain considerable funding. Antam then tapped up the opportunity to carry on further with the explorative studies in the region, until it found bauxite reserves at Mempawah area.
Beside those of Antam, bauxite mining activities in the region are also conducted by PT. Harita Prima Mineral Abadi, a subsidiary company of PT. Cita Mineral Investindo (CITA). The company gets hold of a conscession at Kendawangan and Labai regencies in Ketapang, West Kalimantan. In 2007, the company exported 750,000 tons of bauxite to China. The figure was reduced to 250,000 tons in 2008 amid a global economy crisis.

Measuring Added Value
Bauxite is among the world's rare metal commodities. It is no wonder that its production and export volumes are not as significant as other metals, such as nickel or copper. Indonesia's bauxite is among the most sought-after. The country is blessed with a quite significant reserve of the commodity, and its geographic location has also been an advantage, as delivery cost from the country is quite cheap.
According to Norico Gaman, Head of Research of BNI Securities, when the commodity is not available in the East Asian market, buyers shall be forced to seek out as far as to South America or Africa. “Aside of Indonesia, there are not much producents (of bauxite) in Asia Pacific region,” stated Mr. Gaman. Even buyers from Asian countries such as China and Japan are looking to buy the commodity from Indonesia.
“We hope that in the future, we would not only export raw materials (of bauxite), but also its processed products, in order to maintain its international market price,” he added. His view was agreed upon by Mr. Tato Miraza, who pointed at Antam's endeavors to expedite development of smelters at facilities close the bauxite mining areas to ensure added value from the industry. “We strive to process the minerals domestically, to keep away other countries from exploiting our natural resources,” he said.
Since the conclusion of its previous operation at Kijang area, Antam had tried not to export unprocessed bauxite. Mr. Miraza explained that Antam's production of Chemical Grade Alumina (CGA) is not too significant, of only approximately 300,000 tons annually. Its market is also solely to Japan only, who requires up to 800,000 tons per year.
Meanwhile, the company's main target for its Smelter Grade Alumina (SGA) is the national aluminium producer, PT. Inalum. The latter's per year aluminium production is approximately 250,000 tons. Therefore it would require about 500,000 tons of SGA annually. PT. Inalum has so far relied on import of raw materials. “We hope that 50% of our SGA products could be consumed by Inalum. The rest would be dedicated for the domestic market,” stated Mr. Miraza.
At present, PT. Inalum could supply approximately 75,000 tons of aluminium to the domestic market, who actually possesses an actual requirement of up to 300,000 tons annually. This clearly shows that there is still a big opportunity in the national aluminium market. “We predict that we will also be involved in the downstream aluminium industry in the future. However, we hope that the Government be consistent here. According to the Minerba Law, export of ores shall be prohibited by 2014,” explained Mr. Miraza further.