VZCZCXRO6310
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #1855/01 1900746
ZNR UUUUU ZZH
P 090746Z JUL 07
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 5344
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHKO/AMEMBASSY TOKYO 0576
RUEHBY/AMEMBASSY CANBERRA 0878
RUEHBJ/AMEMBASSY BEIJING 4146

UNCLAS SECTION 01 OF 02 JAKARTA 001855 
 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/ESC/IEC 
DEPT PASS OPIC, EXIM, TDA 
DOE FOR CUTLER/PI-32 AND GILLESPIE/PI-32 
COMMERCE FOR 4430/BERLINGUETTE 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EMIN CASC EINV PREL ID
SUBJECT: Sumbawa Mine Showcases World Best Practices 
 
¶1. Summary:  (SBU) The PT Newmont Nusa Tenggara (PTNNT) copper and 
gold open pit mine at Batu Hijau on the island of Sumbawa is a 
showcase for state of the art mining technology, environmental best 
practices, and responsible community development policies.  During a 
June 22 to 24 site visit, the Charge d'Affaires (CDA) had the 
opportunity to see a successful business venture that supports local 
community employment and provides enormous wealth to the Government 
of Indonesia.  The mine receives much less attention than Newmont's 
other venture in North Sulawesi, but both underscore the firm's 
commitment to technological and environmental global best practices. 
 End summary. 
 
Mine Operations 
--------------- 
 
¶2. (SBU) Located on the island of Sumbawa in the south central 
portion of the Indonesian archipelago, Batu Hijau is 950 miles east 
of Jakarta.  PTNNT is a joint venture with Sumitomo Corporation and 
local firm PT Pukuafu Indah.  Denver-based Newmont is the operator 
with an ownership interest of 45%.  Construction cost $1.8 billion. 
Newmont signed its initial fourth-generation Contract of Work in 
1986 and commenced exploration activities that same year.  They 
discovered the Batu Hijau copper-gold deposit in 1990.  The GOI 
approved the required environmental impact study in 1996 and the 
firm began commercial production in 2000. Under current scenarios, 
Director of Operations Leigh Taylor said they will be processing ore 
until 2034, though mining will cease many years before that date. 
 
¶3. (SBU) The project covers an area of 87,540 hectares, according 
business planning superintendent Dave Sellers, but only 2,000 to 
3,000 hectares of forest will be disturbed for mining.  The mine 
site itself is 1,476 feet above sea level and nine miles in-land 
from the company's purpose built port in Benete Bay.  The pit 
plunges 3,445 feet into the ground and measures 1.6 miles in 
diameter.  Electric shovels work 24 hours per day, seven days per 
week putting the ore into 240-ton haul trucks, which convey the ore 
to be crushed and then onward four miles to the concentrator which 
makes use of two grinding mills and five flotation lines.  The 
flotation lines use physical processes only, not chemicals, to 
separate the copper and gold from the rock slurry.  The end product 
concentrate is then pumped through pipelines to the port at Benete, 
where it is filtered and then shipped to smelters in Asia and 
Europe. On average they mine 784,000 tons of rock per day.  With a 
strip ratio of 2 to 1, each day the mine yields 392,000 tons of 
commercial-grade ore.  Since the mine opened PTNNT has mined a total 
of 3.8 billion tons of rock.  In 2006 they mined 294 million tons of 
rock at a cost of $319 million.  In 2006, PTNNT milled 46 million 
tons of concentrate at a cost of $144 million.  On typical day, they 
mill 156,200 tons of ore to obtain 2,300 tons of concentrate, 
according to operations superintendent Rachmat Makkasau. 
 
 
Economic and Community Development 
---------------------------------- 
 
¶4. (SBU) PTNNT has approximately 4,320 employees and 2200 
contractors, almost 98% of whom are Indonesian and more than 60% of 
whom are from West Nusa Tenggara province and local communities. 
Batu Hijau's performance in environmental management, safety 
management and community development is among the best in Indonesia, 
according to external relations manager Kasan Mulyono.  He said the 
company has injected $324 million into the Indonesian economy over 
the life of the mine as follows: $84 million in salaries for 
national employees, $135 million in the purchase of domestically 
sourced goods and services, $101 million in government taxes and 
royalties, and $4 million on community development projects. 
Mulyono added that the company has tried particularly hard to steer 
goods and services contracts to local communities, generating $5.8 
million for them.  Finally, Mulyono showed the CDA several of the 14 
schools and health clinics PTNNT has built in Sumbawa since 
commencing operations.  He said the company has also built two large 
dams for irrigation and several smaller ones that have revitalized 
local agriculture.  In addition, Newmont funds an agriculture 
extension service that helps local villagers take advantage of best 
practices and reap increased crop yields. 
 
Environment 
----------- 
 
¶5. (SBU) One of PTNNT's biggest challenges is the public relations 
involved with its management of tailings from the mine. The Newmont 
 
JAKARTA 00001855  002 OF 002 
 
 
Minahasa pollution trial in North Sulawesi centered on false 
accusations of pollution from tailings disposal process.  Tailings 
are the finely crushed rocks that remain after copper or gold has 
been extracted from the ore.  They look similar to very fine black 
sand. Tests show that the tailings are completely inert.  In Batu 
Hijau, PTNNT decided that it was not possible to store the tailings 
on land due to the island's heavy rainfall, fear of earthquakes, 
proximity to populated areas, and a scarcity of land.  Due to these 
factors and the mine's proximity to an offshore submarine canyon, 
the GOI decided that submarine tailings placement offshore was the 
preferred disposal method. 
 
¶6. (SBU) PTNNT disposes daily of hundreds of thousands of tons of 
tailings in a system known as submarine tailings placement . The 
process involves transporting the tailings through a pipeline 
extending 2 miles offshore at a depth of more than 300 feet below 
the ocean surface to the edge of the continental shelf.  The inert 
tailings are deposited into an underwater canyon, where they settle 
at depths of 9,840 to 13,100 feet below the ocean surface.  PTNNT 
also chose the canyon because there no coral reefs there.  With its 
tailings permit up for renewal in 2005 and in the face of the bad 
publicity from the Minahasa case, PTNNT's staff held seminars on its 
tailings disposal for news media, NGOs, local, provincial, and 
national government officials and neighboring villages and coastal 
communities. PTNNT also signed an agreement with the Indonesian 
Fishermen Association on coastal community development programs. 
Based on their vigorous outreach and education, PTNNT has 
encountered virtually no public resistance to their operations. 
 
¶7. (SBU) PTNNT's Environmental Manager Grant Batterham told us that 
their community outreach on the tailings issue focused intensively 
on the key differences between PTNNT's copper mining and Minahasa's 
gold mining operations.  Unlike in gold mining, copper mines like 
Batu Hija do not use cyanide.  Batterham said that mercury and 
arsenic levels offshore in the tailings disposal site are lower than 
background levels elsewhere in Indonesia.  Since 2004, PTNNT has 
also engaged Australian and Indonesian scientists to conduct water 
and sediment monitoring studies on its tailings disposal system.  He 
said the company continues regular testing for trace metal and 
cyanide concentrations in the water and sediment at locations in the 
vicinity of the mine site.  He added that even though mercury and 
cyanide are not part of the Batu Hijau metallurgical processes, the 
firm continues to test those levels as well. He said PTNNT also does 
extensive sampling of fish from the offshore canyon and other local 
waters to assure they are healthy. 
 
¶8. Batterham said that their monitoring study results have 
consistently showed that the effects of tailings were confined to 
bottom waters and sediments within the offshore canyon as predicted 
in the site's environmental management plan. He said also that the 
study verified that the tailings have no impact on surface waters, 
the coastal environment, coral reefs or inter-tidal areas. 
Hume