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G-Resources gold mine suspension starts to hurt Indonesian businesses

Publication Date : 08-10-2012


Indonesian local businesses have begun to feel the pinch from the recent suspension of activities at the Martabe gold mine in South Tapanuli regency, North Sumatra, have as they have come to rely on the mine as a source of income over the years.

Hindun Gultom, owner of an automobile repair shop and a travel agency, faces the risk of bankruptcy following gold producer G-Resources Group Ltd.'s decision to stop operations at the gold mine.

Prior to the suspension, Gultom's shop received many orders to service the vehicles owned by PT Agincourt Resources, a subsidiary of Hong Kong-listed G-Resources, which operated the mine.

"Business has been very slow and I have lost a significant amount of revenue since mining operations stopped. I spent 2 billion rupiah [US$208,550] to build this repair shop and now I am worried I will not be able to break-even," he said in Medan on Friday.

His travel agency has also started to feel effects of the stoppage. According to Gultom, he used to dispatch up to five cars a day from Medan to Batangtoru, where the mine is located. Now, he only dispatches two cars per day.

Meanwhile, Parningotan Nasution, leader of the Aek Pahu farmers group in Batangtoru, said members of the group had been out of work ever since the mine was shut. The group provided manpower on a daily basis for Agincourt's construction activities.

"We are just waiting for work orders now," Nasution said.

In September, G-Resources called a stop to its gold mining activities as a result of growing protests from Batangtoru residents against Agincourt's plan to install a 2.7-kilometre pipeline to carry waste to Batangtoru River.

Residents demanded that Agincourt dispose wastewater straight into the sea instead of into the river, out of fear of its presumed toxicity.

As of September, Agincourt employed about 1,500 people, most of whom are natives of the surrounding villages. However, last Thursday, G-Resources said it had begun to lay off as many as 300 of Agincourt's workers after the latter ceased operations.

Bloomberg reported that G-Resources expected local opposition to be resolved within days as the company was currently holding talks with the local community.

"It is really only a question of time, we are talking days. We are fully permitted. It is not as if we are waiting for a piece of paper from anybody," G-Resources vice chairman Owen Hegarty said, as quoted by Bloomberg.

"People came to the front gate and were sort of querulous about what is going on. What we could not do was to keep going against that. That is not a good start to things at the early stages of operation. Our focus is on getting Martabe right," he added.

The residents' protest came a month following G-Resources's announcement in July that it had finally struck gold after 15 years of exploration in the area.

It expected the 162,900-hectare mine to produce 250,000 ounces — equivalent to around 7 tonnes — of gold and 2-3 million ounces of silver per year.

The company reportedly has spent almost $900 million building the Martabe mine, which is estimated to have proven reserves of 7.86 million ounces of gold and 73.48 ounces of silver.

G-Resources acquired a 30-year contract of work for the site in 1997. The contract can be extended for a maximum of another 20 years.


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