From: Reuters
Published October 21, 2008 09:51 AM

Indonesia's tin islands: blessed or cursed?

PANGKALPINANG, Indonesia (Reuters) - Tin mining on these sleepy islands off Sumatra has brought wealth, but at a price; it is literally eating away at the land.

The scale of the environmental damage on the Bangka-Belitung islands can be most clearly seen from the air, revealing a lunar landscape of craters and hundreds of highly acidic, turquoise lakes created by centuries of largely unregulated tin mining.

Efforts in recent years to control illegal mining on the islands have reverberated thousands of miles away by spooking world markets for tin in global financial centers such as London.

"We will continue to clamp down as long as there are violations," said Iskandar Hasan, Bangka-Belitung's police chief, adding that mining was still going on in prohibited areas such as protected forests in the province of about 1 million people.

Tin exports from Indonesia, the world's second-biggest producer after China, have slowed after a government clampdown on illegal mining in Bangka-Belitung, helping make tin one of the best performers on the London Metal Exchange in recent years.

The white metal, widely used in food packaging and to solder electronic products, hit an all-time high of $25,500 a tonne in May. It has halved along with falls in most other metals due to concerns over a global recession.

Indonesia's government has said it will set an annual tin production quota of 100,000 tonnes from next year in a bid to reduce environmental degradation in the main tin-mining areas.

But the situation on the ground is often murky.

Thousands of small-scale traditional and often illegal mining operations sprung up in the late 1990s when the Asian financial crisis wiped out jobs in other sectors of the economy.

FINDING TIN

It takes only a short drive from the provincial capital Pangkalpinang, which boasts its own tin museum complete with display cabinets with gleaming bars of tin, to come across signs of mining right near the road.

One miner, Aji, who had come to Bangka three years ago from Lampung in southern Sumatra, said he was more worried about dwindling tin supplies than a police crackdown.

"In the past, it was very easy to find tin. Now it's very difficult," added the 32-year-old, who earns about 100,000 rupiah ($10) a day, which he shares with two other miners in his team.

Sitting next to a large crater filled with murky looking water, Aji explained how the miners' search for tin with a high-pressure water jet to hose away the crumbling sand soil and then separate out the seams of darker ore.

Even this small-scale mining has left the area completely bare of the thick tropical vegetation that once existed.

From Papua to Kalimantan, there are many examples of mining damaging Indonesia's rich natural environment, with the situation often exacerbated by lax policing, poverty and corruption. The explosion in unregulated mining in Bangka helped tin exports soar and prices plummet in 2002 before a crackdown on illegal tin mining and smelting in 2006 spurred a recovery.

David Bishop, managing director of UK-based tin consultancy ITRI, said mining on Bangka appeared to be on a more sustainable footing after the clampdown over the past few years.

ITRI, which is backed by the tin industry, also said in a recent report that small-scale or illegal mining in Indonesia was also being curbed as shallow higher grade alluvial reserves had been rapidly depleted, while production costs had risen.

Several of Indonesia's small tin smelters stopped production at the end of September and will likely stay shut for the rest of this year because of the drop in tin prices.

"Our miners that supply tin ore have been idle because they can't cover production costs due to falling tin prices," said Patris Lumumba, director of Bangka-Belitung Timah Sejahtera, a consortium of seven smelters.

RESTORING DAMAGED LAND

Eko Maulana Ali, governor of Bangka-Belitung, said that 40 percent of the islands' workforce was currently involved in tin mining and dependence had to be cut, but at a manageable pace.

"Gradually, we try to stop them," he told Reuters, referring to small-scale traditional and often illegal mining operations.

Authorities were try to encourage people to work instead in industries such as tourism, maritime and agriculture.

Bangka is ringed by beautiful beaches but gets few visitors due to limited transport links and tourism infrastructure.

A new terminal is being built at Bangka's tiny airport and the runway would be extended to 2,500 meters from 2,000 by the end of 2009 to allow in more planes, the governor said.

But there are few hotels catering to international visitors and little service culture. During a recent stay at a resort near Pangkalpinang to attend a mining conference, the tap water was erratic and the chef failed to show in time for breakfast.

Even with a slowdown in small-scale mining, efforts to restore damaged land, such as by replanting trees, were proceeding very slowly. A local official estimated that 619,000 hectares (1.5 million acres) had been damaged by tin mining.

Ali, the governor, said it costs 5-10 million rupiah per hectare to rehabilitate these areas.

Some Indonesian tin mining companies are looking to exploit tin deposits in the surrounding sea using dredges.

PT Timah, the world's biggest integrated tin miner and headquartered in Pangkalpinang, plans to spend a total of 350 billion rupiah on seven new small dredges and one big dredge this year to increase off-shore mining activity.

With the new dredges, the firm expects to source half its tin ore from off-shore mining by 2009, compared to a fifth at present.

(Additional reporting by Dwi Sadmoko; Editing by Megan Goldin)

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