From: Reuters
Published February 29, 2008 06:07 AM

Indonesia's Koba Tin faces 2nd illegal mining probe

By Fitri Wulandari

JAKARTA (Reuters) - Indonesia's second-largest tin producer, PT Koba Tin, should stop using sub-contractors to mine tin as the company faces its second investigation into alleged illegal mining, a senior government official said on Friday.

Indonesia is the world's No. 2 tin producer after China. A government crackdown on illegal tin mining in the Bangka-Belitung islands since late 2006 has led to the closure of several small smelters.

Police in January closed down the company's warehouse and smelting operation over allegations it had been supplied tin mined in protected forests, triggering fears of tight supply that helped pushed tin prices to record levels this month.

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"Koba Tin should not employ sub-contractors anymore," said Simon Sembiring, director general of mineral and geothermal at the Energy and Mines Ministry.

"This is their second case. So, they'd better stop using sub-contractors. They should do it themselves," he told reporters on the sidelines of an industry gathering.

Koba Tin is 75-percent owned by Malaysia Smelting Corp. Bhd while Indonesia's state-owned PT Timah, the world's largest integrated tin miner, owns the rest.

The two companies and 33 other smaller smelters operate on the islands of Bangka and Belitung off Sumatra.

This is the second case of alleged illegal mining involving Koba Tin after three directors, including president director Anuar Sidek, were cleared in August 2007 of charges of illegal mining on Bangka-Belitung.

In the latest case, police arrested 12 people, including five Koba Tin officials and a local politician. Last week, they also sealed off a barge which was about to unload 1,400 tons of tin ore to Timah warehouses for a lack of proper documents.

Malaysian Smelting has said Koba Tin's internal control measures and an investigation confirmed that all production from its appointed sub-contractors had been derived from mining within its contract of work and outside of the forest areas.

Despite the crackdown, tin shipments from Bangka remained high, suggesting that smelters still carried plenty of stocks, industry sources said.

Tin exports from Bangka and Belitung islands jumped 73 percent in January from a year ago, according to the trade ministry. January tin exports were 9,914 metric tons, up from 5,716 metric tons in the same month of 2007 and 3,330 metric tons in December.

"About 36 containers left Bangka yesterday, and on March 5, around 100 containers will go. I don't think there's a drop in exports," said a source at Bangka's main port.

"Logically, exports should drop," said the source, who declined to give the tonnage of the cargoes.

The trade ministry is expected to release tin export figures for February next week.

Tin trading on the London Metal Exchange tin was quoted $250 lower at $18,600 a metric ton on Friday, but not far from Thursday's record of $18,900.

Illegal mining pushed up supplies and led to a sharp drop in the tin price in 2002.

(Additional reporting by Lewa Pardomuan in Singapore)

(Reporting by Fitri Wulandari, editing by Ed Davies and Peter Blackburn)

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