20,000 Indonesian farmers take on Australian mining company

By Sam King in Yogyakarta

An estimated 20,000 Indonesian farmers from 10 villages will be displaced if an Australian company proceeds with a proposed iron sand mine. The venture would span some 22km of coastline of the Kulon Progo regency in the Yogyakarta Special Region, on the south coast of Java. Perth-based PT Indomine, which is listed on the Australian Stock Exchange (ASX) as Indo Mines Limited, plans to invest US$600 million in mining the sands and constructing a pig iron plant, the November 16 US BusinessWeek magazine reported.

The company wants to drill to a depth of up to 14.5 metres to extract iron sand, in partnership with Jogja Magasa Mining, which is controlled by the family of Hamengku Buwono X, the sultan of Yogyakarta. The proposed site consists of sand dunes and productive watermelon and chilli farms. Indomine’s 2007 annual report stated that the deposit “has enough contained iron for production of 1,000,000 tonnes of pig iron annually for a minimum of 30 years”. It estimates the project will yield a 21.7% annual profit (compounded). Commercial-scale production is scheduled to begin in 2008 but has not yet started.

Community opposition

Kulon Progo anti-mine campaign organiser Ulinuha told Direct Action that mining has been delayed by well-organised community opposition. Farmers and other residents have mobilised in a series of mass demonstrations at the Yogyakarta parliament, the national parliament, against the local mayor and provincial governor as well as at the Australian embassy in Jakarta. Ulinuha said that Australian embassy staff denied that the proposed mine had any links to Australia. The embassy reportedly told a delegation from Kulon Progo that Australian companies in Indonesia need to gain approval from the embassy before investing and that Indo Mines was “unknown” to the embassy.

Speaking by telephone with Direct Action, embassy spokesperson Bernard Lynch, who met with the delegation, said it was “a complete fabrication” that the embassy denied knowledge of the company. He added: “Technically speaking, it is not an Australian company” because Indo Mines, while registered on the ASX, is also “registered in Indonesia as an Indonesian company” i.e., as PT Indomine.

The “Preliminary Environmental and Social Scoping Study” printed in Indo Mines’ 2007 annual report “identified no unmanageable community or environmental issues with the development of the project at this stage”. However, a table published in the same report estimated a “medium” social and environmental impact on “local communities, ... public health and safety, ... surface water quantity ... [and] groundwater quantity”. A major Indonesian website, Tempointeraktif, reported on December 10, 2007: “If the sand is removed it will make the ground water salty, ruin crops and pollute wells with sea water”.

The Kulon Progo community and its supporters are angry not just about the threat to the livelihoods of farmers but also about the mine’s impact on the price and availability of food. The farmers began to receive higher prices for their produce over the last six months due to the impact of the world food crisis. “What right do foreign investors have to come here and smash up productive farms?”, asked Yogyakarta-based activist Isti Komah from the Political Committee of the Poor - People’s Democratic Party (KPRM-PRD).

Situated within the “ring of fire”, an arc of volcanoes and fault lines encircling the Pacific Ocean basin, the whole south coast of Java is vulnerable to tsunamis. The last major tsunami, on July 17, 2006, left more than 600 people dead. Dr Djafar Shiddieq from the agriculture department at the University of Gadjah Mada (UGM) told the leading Indonesian daily Kompas on April 11 that the combination of farming, casuarina trees and sand dunes forms the most effective natural defence against tsunamis. He said that even the Dutch colonial government had decided, for environmental reasons, not to mine the iron sands in Kulon Progo . “There are only three areas of moving sand dunes in the world. One of them spans the beach in southern Yogyakarta”, he told Kompas. Dr Sudaryatno, from the geography faculty at UGM, told the March 23 edition of Jurnal Affinitas that removing large volumes of sand from the coast will destroy the natural defence against tsunamis. Sudaryatno said that the iron in the subsoil acts to muffle earthquakes. He also warned of the possibility that the company could mine deeper than its current plan.

Increased risk from tsunamis does not get a mention in Indo Mines’ 2007 annual report. However, the company is taking precautions against tidal waves washing away its profits. According to the July 4, 2007 Investor Daily, Indomine also plans to build a 100 megawatt coal-fired electricity plant in Kulon Progo, with the coal being transported by train from the harbour Kendal, on the north side of Java, to Kulon Progo. The article added: “The location of Kulon Progo is in the middle of south Java coast line region which is prone to big tidal waves, so the shipment through sea will not be effective.”

“When Indo Mines says it can see no ‘unmanageable’ community or environmental issues”, Komah said, “what it is saying is that it thinks it can get away with stealing the small farmers’ land. In our view, the community is very strong and can win this battle, but there must be solidarity, including international solidarity.”

Profits versus people

Indo Mines’ directors — having already signed off on its mining project with the sultan of Yogyakarta, PT Krakatau Steel (Indonesia’s largest state-owned steel maker) and the Indonesian government — may find it difficult to imagine having their plans and profits stopped by small farmers. Indo Mines is concentrating almost all of its $9 million company equity in this “flagship” project. The company has been divesting its stakes in mines in South Australia, the Northern Territory and Peru with the aim of “maximising the value” of the Yogyakarta project, according to its website, www.indomines.com.au.

However, the authors of the company’s 2007 annual report were not fully confident everything will go their way. They state: “In the opinion of the Directors, any further disclosure of information regarding likely developments in the operations of the Consolidated Entity [in Yogyakarta] and the expected results of these operations in subsequent financial years may prejudice the interests of the Company.” James Balowski, who manages the Jakarta-based Asia Pacific Solidarity Network (APSN) news website told Direct Action what this means: “The spectre of a fight with the peasant farmers could rattle investor confidence in the project. A well-organised mass movement can stop the mine from going ahead.”

The Australian ambassador in Jakarta, Bill Farmer, is active in promoting the interests of Australian mining companies in Indonesia. The embassy website quotes him as saying: “Australian companies have delivered real benefits for the development of the mining sector in Indonesia, and have the potential to do much more, including in areas such as environmental sustainability.” Australian investment in Indonesia reached $3.1 billion in 2006. An estimated 400 Australian companies operate in Indonesia in mining, construction, finance, food and transport.

To support the campaign against Indo Mines’ Yogyakarta iron sand mine, please send messages of solidarity to APSN via James Balowski at jamesbalowski@yahoo.com.