By Michael Taylor
JAKARTA | Tue Jun 7, 2011 4:18pm IST
(Reuters) – Australia’s Sihayo Gold will restart operations by Monday at an Indonesian gold mining project and still expects to start production in two years, after protesters set fire to its camp late last month, its chief executive said on Tuesday.
The incident highlights the risks facing foreign miners with investments in Indonesia, the world’s largest tin and thermal coal exporter and with large reserves of copper, nickel and gold.
Sihayo Gold’s 75 percent-owned subsidiary, Sorikmas Mining, closed its operations at the exploration site in the north of Sumatra island in late May after a demonstration of about 300 people turned ugly, Paul Willis told Reuters.
“We’ve ceased operations on that site. They (demonstrators) basically tipped petrol on the camp and set it on fire,” Willis told Reuters.
It plans to resume operations by Monday and start gold production of 70,000 ounces in 2013 once exploration work is complete and government permits obtained, he said.
High commodity prices and increased stability in Indonesia are attracting increasing investment interest in Indonesian resources, particularly in coal. But miners still face political uncertainty over contracts, corruption and local interests
pushing for greater ownership or revenues from resource assets.
Willis said that illegal local miners were partly to blame for the demonstration and attack, in which one female demonstrator was injured when a rubber bullet fired by police ricocheted off a tree and hit her in the arm.
“We don’t see it as a true reflection of the broader community — we do see it as a reflection of a minority number of people conducting and profiting from illegal activities,” he said.
The firm began working at the gold mine in 1998 and has invested about $20 million to date, Willis added.
“You always have on-going minor issues with communities… but this is the first ever instance of physical destruction,” he said.
“Despite constantly telling the locals that we’re not doing any mining, we’ve never mined any gold, sold any gold or made a profit since we started — they find it a bit hard to believe.”
Sihayo’s shares slid 3.5 percent on Tuesday, as mining firms came under pressure, while the benchmark index was largely flat.
In April, two workers at Freeport-McMoran Copper & Gold Inc’s giant gold mine in Indonesia’s easternmost Papua province died in a blazing car after it was shot at by gunmen.
The Freeport mine has been a frequent source of friction in a province with a simmering separatist movement because of the share of revenue going to local Papuans and the legality of payments to Indonesian security forces who help guard the site.
Freeport forecasts its global sales of gold at 1.6 million ounces this year. Gold prices hit a record high last month and were trading at around $1,549.60 an ounce on Tuesday.
Indonesia, Southeast Asia’s largest economy, struggled to lure foreign investments into mining in recent years, with some politicans taking a nationalist line on resources. It is now trying to boost investments in added-value metals processing.
(Editing by Neil Chatterjee)