it is in the interest of the Sultan to develop the project:
Indo Mines owns through its Joint Venture Company PT Jogja Magasa Iron a 70% interest in the Jogjakarta Iron Project. The joint venture partner, PT Jogja Magasa Mining, is a consortium of Indonesian business people including members of the Sultan of Jogjakartas family, the family of the Kingdom on which the Project is sited, and several other influential local businessmen. In November 2008, Indo Mines signed a Contract of Work with the Indonesian Government to develop the Iron Project.
Sultan sees writing in the sand PUBLISHED: 02 Feb 2011 12:49:30 PRINT EDITION: 2 Feb 2011 by Dan Hall
For most, a trip to the southern beaches of Indonesia?s Java island sounds like a tropical retreat. But for a handful of high-profile mining executives, including former Fortescue Metals Group chief financial officer Chris Catlow and the executive chairman of Murchison Metals, Paul Kopejtka, a visit to the 120-kilometre stretch of black sand is an opportunity for prospecting.
With the personal backing of the Sultan of Yogyakarta, the executives behind the Australian-listed and Indonesia-focused iron sands explorer Indo Mines are hoping to develop the supplier of choice to the growing Indonesian steel industry.
Indo Mines hopes to produce low-cost steel-making products from iron-laden sands for an industry that is almost entirely reliant on imports of coking coal and iron ore. The iron sands products can be produced for about $19 a tonne, well below typical iron ore products produced in Western Australias Pilbara region, because they are lifted almost straight out of the sand using simple gravity and magnetic processing techniques.
However, the product is sold at a discount because it contains undesirable titania material.
It is not a direct substitute for iron ore, but operators in New Zealand such as BlueScope Steel have been using the product for the past 30 years to make steel products and provided the inspiration for the Sultan of Yogyakarta, Sultan Hamengkubuwono, to press for the industry?s development.
With new iron-making technologies, steel makers can consume significantly larger volumes more of the iron sands, Indo Mines chief executive Martin Hacon tells The Australian Financial Review .
Iron sands are only an emerging source of iron ore supply in Indonesia, but very high profile Indonesian investors are keen to see the industry flourish. He has personally paved the way for Indo Mines entry into the market after taking inspiration from established iron sands producers in New Zealand.
Hacon says the Sultan has been at the fore of negotiations to secure operating and environmental approval on Javas south coast.
The assistance from the royal family comes after years of industry criticism over the Indonesian government?s handling of foreign investment in the mining sector. The royal family has taken an indirect 5 per cent holding in the company, according to Hacon, and helped the company secure the last contract of works, a type of mining licence, issued in Indonesia.
That provides us with the opportunity to mine all iron sands in Indonesia, subject to an agreement with the landowners, Hacon says. We estimate there is over 10 billion tonnes of resource in Java alone.
Other investors include London-listed Anglo Pacific Group, which owns a 15 per cent stake in the company as well as royalty rights to Queensland coalmines owned by Rio Tinto and BM Alliance Coal Operations and South Australias Beverley Four Mile Uranium project.
The companys board members, including the managing director of Moly Mines, Derek Fisher, and the managing director of gold explorer Beacon Minerals, Darryl Harris, also hold an 18.6 per cent stake in the company. Indo Mines is targeting international and domestic steel producers in negotiations over supply agreements. We?re in discussion with people who are interested in iron concentrate and pig iron products, Hacon says.
The company expects to supply iron concentrate products from about 2012 to the Indonesian domestic market, supplemented by offtake into China.
The companys strategic partner, Chinese steel maker Rockcheck Steel Beijing, recently took a 10 per cent stake in the company and is interested in iron concentrate supply, Hacon says.
South Koreas Pohang Iron and Steel Company (POSCO) could also be interested in supply after it announced a joint venture with Krakatau Steel to build a 6 million tonne steelworks in Indonesia in August last year.
Both Indo Mines and POSCO are bullish on the prospects for Indonesias growing steel market.
Not only ourselves, but some of the leading companies like POSCO, who have announced a big development over in Indonesia, expect at least a five to 10-fold increase in Indonesias steel capacity, Hacon says.
Indo Mines is initially assessing the potential to produce 2 million tonnes of iron concentrate a year from a 22-kilometre stretch of land on the south coast of Java, mainly owned by the Sultan of Yogyakarta.
The concession boasts a 605 million tonne Joint Ore Reserve Committee compliant resource, but the entire mineral province is some 120 km long and could contain about 2 billion tonnes of that material, according to Indo Mines. Production of commercial trial volumes of iron concentrate will begin this year before the targeted start of fullscale operations in June 2012.
The company is also discussing supply agreements for pig iron products that could be produced about two years after iron concentrate production begins.
Last Thursday the company appointed minerals and metals technology company Outotec to undertake the process evaluation and design of the companys Yogyakarta pig iron feasibility study.
Over six months, Outotec will complete a series of smelting trials and evaluate the potential of producing 1 million tonnes of pig iron a year.
