"In total there are 3,504 mining licenses in Indonesia. The country has gold, silver, nickel, copper, bauxite, and some alluvial gold as well in small amounts. We are in a Ring of Fire area, so magmatic activity is very strong, and mineralization of primary ores is very scattered."

Djoko Widajatno


June 16, 2020

What is the scope and mandate of the Indonesian Mining Association?

The Indonesian Mining Association was founded in 1975. We have 31 mining company members, on top of which we also have 78 associate members, such as providers and consultants. The association serves as a link between government and the mining sector, addressing the problems of the industry, promoting the country to attract mining investment, improving ethics in mining, and publishing studies and information about the industry in Indonesia.

What is the size of the industry in Indonesia, and which are the main commodities?

The mining industry in Indonesia consists mainly of coal and metals mining. The coal mining activity is handled by the central government, while there are 31 companies dedicated to metal mining, and many small companies dedicated to artisanal mining. There are 86 processing facilities in the country, including smelters. In total there are 3,504 mining licenses in Indonesia. The country has gold, silver, nickel, copper, bauxite, and some alluvial gold as well in small amounts. We are in a Ring of Fire area, so magmatic activity is very strong, and mineralization of primary ores is very scattered.

What levels of investment is the industry seeing at the moment?

Investment in mining decreased slightly in 2019 (US$6.2 billion versus US$7.3 billion in 2018), but it is expected to increase in 2020 and reach US$7.8 billion [pre-COVID estimates from the Energy and Resources Ministry]. Most of the investment is in processing and in the smelting industry. In Indonesia you have two types of licenses: one from the energy and resources department, and another one from the industrial department if you want to have a processing facility without a mine. The goal of the government is to prevent the export of primary ores, with a vision to have all mineral processing on Indonesian soil.

How do you think coronavirus will affect total production in 2020?

The pandemic heavily affects the mining industry and a 30% decline in mineral and coal production is estimated. This is due to the slowdown of fuel, spare parts, and logistics supply. The large scale social restrictions (‘PSBB’) make it difficult for workers to attend their roster and, as each area has different approaches towards pandemic-related regulations, the scattered operation sites might face inconsistencies in time management. Investments have also declined amidst the pandemic.

After long negotiations, Freeport finally reached an agreement with the Indonesian government to continue operating the Grasberg mine. How has this impacted investor perception?

Investors have received very well the agreement between Freeport and the Indonesian government. With this new framework Freeport can now extend operations until 2041 and, in exchange, the Indonesian government now owns 51% in the joint venture. So, both parties have benefited from this and it has created new interest from investors to enter the industry.

What are the main challenges for mining investment in Indonesia?

The main issue we have in Indonesia is the inconsistency of regulations. Progress is being made to improve the legislation but, in studies on Indonesia by organizations such as PwC, the country appears to be lagging behind in terms of bureaucracy and licensing processes, in spite of our high geological potential.

What is the state of the exploration segment in the country?

Most of the mining investment is currently going into processing, but at IMA we are trying to promote the exploration segment as well, as it is essential. So far, most of the exploration has been done for surface mining, but in the future we will have to increasingly focus on potential underground mines. Many open pit deposits, such as the ones in tin and bauxite, have been mined out.

What is the capability and expertise of Indonesian-based service providers?

The service sector offers a number of big players, with both local and international contractors present in the country. We already have very good experience developing mining infrastructure, and these companies are now working on public infrastructure projects as well. Companies like Komatsu and Caterpillar also have small assembly shops in the country, although not for the very large equipment.


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