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JBURHALO[ GEOCHtICAL ELSEVIER Journal of Geochemical Exploration 50 (1994) 13-90 EXPLORATION 25 Years of mineral exploration and discovery in Indonesia Theo M. van Leeuwen P.T. Rio Tinto Indonesia, Cilandak Commercial Estate, Kotak Pos 7564/CCE. Jakarta 12075, Indonesia ( Received 4 September 1992; ...

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25 years on mineral exploration and discovery in Indonesia Theo M van Leeuwen

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Journal of Geochemical Exploration 50 (1994) 13-90

JBURHALO[ GEOCHtICAL EXPLORATION

25 Years of mineral exploration and discovery in Indonesia Theo M. van Leeuwen P.T. Rio Tinto Indonesia, Cilandak Commercial Estate, Kotak Pos 7564/CCE. Jakarta 12075, Indonesia

( Received 4 September 1992; accepted after revision 26 October 1993)

Abstract This paper traces the history of mineral exploration in Indonesia between 1967 and 1992, and discusses various technical aspects, such as area selection, exploration and discovery methods, and significant geologic features of the more important new discoveries. Exploration activity over the past 25 years can be divided into four main phases. Phase I ( 19671976) mostly involved investigations of mineral prospects and districts previously identified by the Dutch. These investigations resulted in many discoveries, including: a major copper-gold district (skarn-porphyry copper) in Irian Jaya, where exploration is still in progress (resources identified to date: 28 Mt Cu and 2,700 t Au); large nickel resources in Eastern Indonesia ( 13 Mt Ni); significant onshore and offshore tin resources in the Sumateran tin belt (0.13 Mt Sn); and large but low grade bauxite deposits in West Kalimantan ( 300 Mt A1203). Of the eight Contracts of Work signed between 1967 and 1972, six reached the mining stage. Phase 2 ( 1970-1975) consisted of an extensive porphyry copper search in the Sunda arc, the western arc of Sulawesi and the central belt of Irian Jaya. Best results were obtained from northern Sulawesi, where follow-up between 1976 and 1982 identified three potentially economic copper-gold deposits ( 1.7 Mt Cu and 140 t Au) and one subeconomic molybdenum porphyry system ( 0.8 Mt Mo). During Phase 3 ( 1981-1988 ) extensive coal exploration in South and East Kalimantan delineated over 5,000 Mt of coal of varying rank and quality, including 1,500 Mt as measured reserves in 17 deposits, eight of which have been developed to date. Phase 4 (1984-1990) involved a major gold rush, focused primarily on the Cenozoic magmatic belts of Kalimantan, Sulawesi, Moluccas and the Sunda arc. Over 80 primary and alluvial gold prospects were drill tested. Five of these were brought into production (two alluvial deposits, two new hard rock discoveries and one Dutch mine), containing approximately 135 tonnes of mineable gold, and several other projects are under development or undergoing feasibility studies. Total geological resources identified to date are estimated to contain about 700 tonnes of gold. Exploration during phase 4 also resulted in several gold-rich porphyry copper discoveries, including a major deposit in Sumbawa ( 2.7 Mt Cu and 250 t Au). Intermittent exploration for uranium, diamonds and lead/zinc since 1969 has been largely unsuccessful. Exploration is now passing to the next phase, which is likely to be multi-commodity in nature with 0375-6742/94/$07.00 SSDI0375-6742(93)

© 1994 Elsevier Science B.V. All rights reserved E0050-7

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T.M. van Leeuwen / Journal of Geochemical Exploration 50 (1994) 13-90

a strong focus on gold, copper and coal. A number of deposits outlined during earlier phases will be developed. The unprecedented high level of mineral exploration activity over the past 25 years can be attributed to Indonesia's mineral prospectivity and favourable investment climate. Given a continued competitive commercial environment and sustained commodity prices, the next 25 years should see further strong development of the country's mineral resources.

1. Introduction

The minerals industry in Indonesia has had a long and checkered history. Gold and silver have been worked for over 1,000 years, and records of tin and diamond production date back to the 18th century. The foundations of the present-day industry were laid by the Dutch, who undertook exploration and development between the 1840s and 1930s. During this period, Indonesia became the world's second largest producer of tin, as well as an exporter of small amounts of gold, silver, nickel, bauxite, and coal (Fig. ! ). However, the ravages of World War II and the post-war independence fighting left the mining sector in bad disrepair. The situation was further aggravated by the nationalization of all foreign enterprises between 1957 and 1960. By 1966, production of most minerals had fallen to below pre-war levels. In 1967, the New Order Government under President Suharto carried out sweeping changes, which included the introduction of a Foreign Capital Investment Law and a revision of the Mining Law. Under these new laws foreign investment was permitted in the mining sector under a Contract of Work (COW) system, a "from the cradle to the grave" type arrangement, which had earlier been used in the oil industry. In order to speed up mineral exploration, the Government invited international tenders for the development of certain areas with tin and nickel potential, and shortly thereafter 53 blocks were opened for large scale "general mineral exploration" ( Sigit, 1972). This heraldeda period of unprecedented mineral exploration activity during the ensuing 25 years. The industry has developed in four major, partly overlapping phases. The first involved exploration of mineral occurrences and regions previously identified by the Dutch, which commenced in 1967 and was largely completed by 1976. During phase 2, between 1969 and 1975, large scale reconnaissance surveys for porphyry copper deposits were undertaken. Detailed investigations of several prospects were carried out in the late 1970s and early 1980s. The porphyry copper search was followed by an intensive coal exploration campaign (phase 3) that began in 198 t and peaked around 1988. Phase 4 was part of the worldwide gold exploration boom of the 1980s, beginning in 1984 and continuing until 1989/90, when the stock market crash of 1987 and lower gold prices began to take their effect on the exploration industry. The present paper is a revised and updated (September 1993) version of a paper presented at the 1991 Indonesian Mining Conference (Van Leeuwen, 1993). It traces the four main phases of exploration and also describes some less intense exploration activity (i.e., for diamonds, uranium, and lead/zinc). Area selection, exploration and discovery methods are discussed together with significant geologic features of the more important new discoveries.

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T.M. van Leeu wen / Journal o f Geochemical Exploration 50 ( 1994 ) 13-90

17

The evolution of the COW system is also briefly discussed. Geographic localities mentioned in the text are shown in Fig. 2. In order to put these activities in historic context, a brief outline of the relevant Dutch work is given for each. Comprehensive summaries of Dutch exploration and mining have been presented by Van Bemmelen (1949), Ter Braake ( ! 944) and Van der Ploeg ( 1945 ). Detailed information can be found in the "Jaarboek van het Mijnwezen" (Mining Year Books), published between 1872 and 1939. For the post-Dutch period of mineral industry development the reader is referred to a collection of papers by Sigit (1989), which includes a comprehensive review of policies and legislation, the Indonesian Mineral Development Digest published by the Indonesian Mining Association in ! 988, and papers by McDivitt (1989) and Makarim ( 1989 ). Detailed analyses of the early COWs have been presented by Beals and Gillis (1980) and Mikesell (1983). Information presented in this paper has been drawn from a number of sources, including published papers, mining year books (1970-1992) published by the Department of Mines and Energy, company relinquishment and termination reports on open file, unpublished reports and other information kept in the files of P.T. Rio Tinto Indonesia, stock market reports, mining magazines, and personal communications with many colleagues in the industry. With the exception of published papers, these sources are in most cases not quoted. The paper is largely restricted to the exploration activities by foreign companies, which have dominated the industry, and, with a few exceptions, does not discuss the work done by Indonesian companies and institutions, foreign agencies, etc. Neither does it deal with exploration for mineral sands, chromite, manganese, and industrial minerals.

2. Phase 1: following in the footsteps of the Dutch In 1967, when Indonesia was opened to foreign investment in mining, the first companies that came to the country were primarily interested in prospects and mineral districts identified by the Dutch, including the Ertsberg copper prospect in Irian Jaya, nickel laterite and ultramafic occurrences in eastern Indonesia, the Sumatera tin belt, and bauxite occurrences in western Indonesia. Between 1967 and 1971, one First Generation COW for copper (Ertsberg area) and seven Second Generation COWs for nickel (3), tin (3) and bauxite ( I ) were signed (Fig. 3). The only First Generation COW was signed by Freeport Sulphur in 1967 and contained the following major provisions: ( 1) the term of the agreement was for 30 years ( "the operating period") following the initiation of commercial production, which was preceded by an "exploration period" of two years, a "feasibility study period" of six months, and a ' 'construction period" of three years; (2) the company received a tax holiday for the first three years after the beginning of production and a reduced corporate income tax rate of 35 %; (3) it was exempted from royalties on copper and gold; and (4) it was given full control and management of all matters related to the exploration and mining operations. The contract was renegotiated between 1974 and 1984. Changes included a reduction of the tax holiday from three years to one year, the sale to the government of 8.5% of the total equity shares in Freeport Indonesia at book value, and payment of land rent and royalties.

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T.M. van Leeuwen / Journal of Geochemical Exploration 50 (1994) 13-90

19

The Freeport agreement attracted other mining companies to Indonesia, even though the terms of the Second Generation COWs were somewhat more onerous. Major differences included: (1) abolishment of the tax holiday; (2) increase in corporate tax rates; (3) payment of royalties, land rent and some other taxes; (4) addition of a two year "general survey period" and extension of the exploration and feasibility study periods by one year and six months respectively; (5) specification of the percentage of Indonesians to be employed; and (6) obligation to offer up to 20% of the equity shares to Indonesian nationals over a ten year period. 2.1. Copper (Ertsberg District)

The Dutch found copper in Sumatera, Java, Sulawesi and Timor, but none of these occurrences were of economic significance. Far more important was the discovery of Ertsberg ( " o r e mountain") (Fig. 3) by Jean Jacques Dozy, a young petroleum geologist, while climbing the highest, snow covered mountains in Irian Jaya in 1936. The orebody formed a spectacular outcrop, standing about 140 m above ground level in glaciated terrain at an altitude of 3,600 m. Dozy (1939) reported on his trip and included a brief reference to Ertsberg, noting its high copper content and traces of gold. Because of World War II and its aftermath, the report went unnoticed until 1959, when Forbes Wilson, manager of mineral exploration for Freeport Sulphur, saw it during a visit to Holland. Immediately recognizing the potential of Ertsberg, he mounted an expedition within a year to sample the deposit. A fascinating account of this expedition, which took place under extremely difficult conditions, is given by Wilson ( 1981 ) in his book "The Conquest of Copper Mountain". Results of the investigations surpassed all expectations, showing Ertsberg to be the world's largest copper orebody exposed at the surface. Wilson recommended immediate further studies of the deposit, but technical and political problems delayed a detailed evaluation of the deposit for seven years. By 1969, a helicopter supported drilling program had outlined 33 Mt at 2.5% Cu and 0.75 g/t Au and a preliminary feasibility study had been completed. Construction of an open pit mine (named "Gunung Biji", the Indonesian term for Ertsberg) began in 1970 and production started in late 1972. Exploration drilling during 1975-1976 encountered a second orebody, named Gunung Biji Timur (Ertsberg East), located 1.3 km to the east of the original discovery. The area had already been noticed during the 1960 expedition as a heavily malachite-stained limestone cliff (Wilson, 1981 ). Subsequently, two ore zones were discovered below this deposit, viz the "intermediate ore zone" (IOZ) and the "deep ore zone" (DOZ), and a third deposit called Dom (meaning "cathedral" in Dutch) was found 1 km to the south. Drill testing of the Big Gossan deposit, which was initially investigated in 1974, began in 1991. Reserves outlined to date and development status for each of these deposits are given in Table 1. The four deposits (Katchan, 1982; Soebagio and Budijono, 1989; Mertig et al., 1994) are all hosted in skarned sediments of Mesozoic to Tertiary age near a Pliocene intrusion containing weak porphYrY copper-style mineralization. They are unusual among major copper-gold skarn deposits in being associated with magnesian rather than predominantly calcic silicates (Sillitoe, 1994). Ertsberg occurs as a nearly-engulfed block of skarn suspended in the intrusion, and Ertsberg East/ IOZ/DOZ and Dora are located along the

20

T.M. van Leeuwen / Journal of Geochemical Exploration 50 (1994) 13-90

Table I Copper and gold reserves of the Ertsberg district Deposit

Reserves Mt

Comments Cu (%)

Au (g/t)

Gunung Bijih (Ertsberg)

33

2.27

0.47

Mined by open pit methods from 1972 to 1989; 3 Mt left.

Gunung Bijih Timur IGBT)

54

2.03

0.66

Block cave operations commenced in 1980; 2 Mt left.

1OZ

27

1.68

0.56

Production will start in 1994 by induced and sub-level caving. Reserves open to east, west and down dip.

DOZ

25

2.30

0.99

Open stope production started in 1988.

Dora

31

1.47

0.42

Has not preceeded beyond the early development stages; will be mined by block caving methods.

675

1.45

1.87

Open pit mining began in December 1989; about 30 Mt mined to date.

Grasberg

Big Gossan

In exploration stage (drilling and underground). Outlined resource: 12 Mt @ 4% Cu, 1.9 g/t Au.

Data source: P.T. Freeport Indonesia. Reserves as of January, 1993 (including historical production).

intrusive contact, whereas Big Gossan is a distal skarn controlle d by a steeply-dipping fault zone. The Ertsberg East/IOZ/DOZ deposit has a vertical extent of 1,500 m, making it one of world's largest copper-gold skarn ore bodies. The original composition of the sediments (predominantly dolomitic limestones and sandstones) and their depth of burial at the time of skarn formation influenced the type of skarns developed. This in turn largely determined types of ore formed and the distribution of ore sulphides, which consist predominantly of bornite and chalcopyrite, and largely postdate the skarn formation. One of the most recent discoveries, and arguably the most exiting one, is Grasberg, located 2.2 km northwest of Ertsberg, which differs from the other deposits in being a porphyry-type copper-gold deposit. The name Grasberg ("Grass Mountain") was given by Dozy (1939) to a "rather smooth grass-covered mountain, which forms a striking morphological element amidst the limestone mountains". Interestingly, Dozy's report contains several clues as to the presence of porphyry-style mineralization: (1) disseminated sulphides including chalcopyrite are described from a diorite sample; (2) several other samples are reported to contain abundant secondary biotite; and (3) Dozy noticed that the water of a creek draining Grasberg had a very pronounced iron taste.

T.M. van Leeuwen /Journal of Geochemical Exploration 50 (1994) 13-90

21

Freeport geologists investigated the occurrence in the mid-1970s. Outcrop samples yielded significant gold results, but copper values were very low. The possibility of porphyry copper-style mineralization occurring at depth was recognized, but no further work was undertaken at the time, as there appeared to be little chance of an enriched chalcocite blanket being present because of recent glaciation. A primary deposit was of little interest, because copper grades were expected to be less than 0.8% (as was the case for other known porphyry deposits in the region), and gold would not be a significant cred...