Mammoth but controversial Indonesian copper/gold project said to be moving ahead - Lembata Project
One of Indonesia's richest mining entrepreneurs says that the Lembata copper/gold project, which has the potential to be one of the world's largest mines, is to move ahead.
By Fitri Wulandari, Mineweb from Reuters, Sunday , 28 Dec 2008
Yusuf Merukh, an Indonesian politician-turned-businessman, is nicknamed the king of mining after the 500 concessions in his portfolio, but his latest venture could dwarf the rest.
Despite the bursting of the commodity bubble, his unlisted Merukh Enterprises plans to push ahead with what has the potential to be one of the world's largest copper and gold mines, on Lembata, a dot of an island off Flores in eastern Indonesia.
But the project is controversial. Merukh says the site has preliminary reserves of 136.1 billion pounds of copper and 80.3 million ounces of gold but some media reports have questioned the actual size of the deposits.
At $17 billion, the cost of development is also being criticised, while environmental and community groups have raised concerns about the project's impact.
"I reject the project. Its mining potential is unclear," former Environment Minister and current member of the parliamentary mining committee Sonny Keraf said.
Reuters was unable to obtain records of the gold and copper resources in Lembata from the relevant departments in the Energy and Mines Ministry.
Merukh, 72, keeps a low profile and is rarely seen at the big mining industry gatherings, said one executive who didn't want to be identified by name.
He was born on the Indonesian island of Rote, in East Nusa Tenggara, and was a politician for many years during which he sat on a parliamentary mining committee and worked as a top government agrarian official.
In a rare interview with Reuters earlier this month, Merukh said that his group will start to invest in infrastructure for the Lembata project next year, but declined to say where he would get the funding.
Indonesia has some of the world's largest deposits of gold, tin, copper, and nickel, and leading global mining firms, such as Freeport-McMoran Copper & Gold (FCX.N) and Newmont Mining Corp. (NEM.N), operate in the country.
But its big mining projects don't always live up to the hype.
More than a decade ago, Merukh had an interest in the Bre-X gold mine project in Kalimantan. Bre-X was touted as one of the world's largest finds, but turned out to be a huge hoax.
Indonesia's mining projects have also often been the source of conflicts because of the impact on the environment and local populations, especially when it comes to the distribution of the proceeds.
"We are last to benefit from a project. Number one is the local people," said Merukh.
On the Lembata project, the predominantly Catholic population of roughly 100,000 will have to be relocated.
Many of the local people lack the skills to work on the mining project, so Merukh plans to bring in outside workers who will be housed on a nearby island in order to reduce the risk of conflict with the local population.
Merukh, who is worth $174 million according to the Indonesian business magazine Globe, initially studied agriculture and spent time in the United States at Texas A&M university.
He was a supporter of Megawati Sukarnoputri early on in her political career, according to Globe, long before she became Indonesia's president in 2001.
His early business ventures included chrome exploration, but he moved into gold concessions when the price was far below today's level of about $845 an ounce.
"He is the first Indonesian who has held so many mining concessions," Hartojo Wignjowijoto, an economist who has known Merukh for many years, told Reuters.
"At first, I thought he was just trading mining licences, but he proved to be a good mining partner (for foreign investors). He's shrewd. But he's shrewd for the national interest, and patriotic."
Merukh said he was optimistic demand for copper from the car and electronics industries would hold up despite the slump in commodities. Copper prices have tumbled almost 70 percent since hitting a record high of $8,940 a tonne in July.
"As long as the industry is still there and still alive, they still need copper," he said.
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