MINING IN SULAWESI

AUSTRALIA AND INDONESIA This will not only provide new export opportunities for
Australia – it will also support economic growth and
The most recent expression of the strong relationship
development in one of Australia’s nearest and most
between Australia and Indonesia is the signing by both
important neighbours.”1
federal Governments of Australia and Indonesia of a free
trade agreement between the two countries. Indonesia is predicted to be one of the top five largest
economies in the world by 20302. The trade agreement
Indonesia is a growing market for Australian goods and
strengthens the economic and strategic ties between
services exporters. In 2017, total two-way trade in goods
the two countries and will be an important and mutually
and services with Indonesia was worth $16.4 billion,
beneficial relationship for the future.
making Indonesia our 13th largest trading partner. IA-
CEPA will provide Australian and Indonesian businesses LOCATION AND DEMOGRAPHICS
an opportunity to expand and diversify this economic
Sulawesi (previously known as Celebes) is one of the biggest
partnership.1
islands in the Indonesian archipelago3 and the eleventh
Industry commentary on the agreement within the largest in the world4, covering an area of roughly 175,000
resources sector has been positive including Tania km2. Located east of Borneo, the island is bordered by the
Constable, CEO Minerals Council of Australia: Flores Sea, Banda Sea, Molucca Sea, Celebes Sea and
“This is a good outcome for the Australian and Indonesian Makassar Strait.
resources sectors. The island hosts a total population of approximately 17
The agreement’s provisions will create more scope for million people; of which, almost 9 million reside in South
Australia’s world-leading mining services firms to partner Sulawesi province. This is significant when you consider its
with Indonesian businesses in developing that country’s relative size to Australia, which currently has an approximate
extensive minerals and energy resources. population of 25 million.

1 DFAT, 2019
2 PwC, 2017
3 Embassy of the Republic of Indonesia, 2019
4 Nugraha & Hall, 2018
 MINING IN SULAWESI

BUSINESS AND REGULATORY environmental impact analysis report (AMDAL). This is

ENVIRONMENT comprised of an Environmental Impact Statement (ANDAL)
The mining sector in Indonesia is regulated by national, and the specified reporting obligations associated with
provincial and regency (or municipal) government. an Environmental Management Plan and Monitoring
Plan (RKL-RPL). Companies are required to complete
Indonesia as a whole has drastically improved their ease the AMDAL in order to progress into the operational and
of doing business, jumping 47 positions over the last four production phase. Once this requirement is fulfilled, this
years. Their current world ranking is 73, which places them then triggers the commencement of their monitoring and
ahead of the regional and world averages; and countries reporting obligations as detailed in the RKL-RPL.
such as South Africa, Papua New Guinea and Ghana5. This
is largely due to an increased focus on the implementation CURRENT AND FUTURE ACTIVITY
of key reforms by the Government of Indonesia (GoI). According to historical records, Sulawesi has been a
Sulawesi is no exception, with South Sulawesi rated as one source of exploration and mining for more than 150 years,
of the best performing provinces in Indonesia for overall however, findings now suggest this could actually date back
competitiveness by the Asia Competitiveness Institute in to over 1000 years ago7. Despite this rich history of mining,
20176. This index refers to their macroeconomic stability; the island is still considered to be vastly under-explored in
financial, businesses, and manpower conditions; quality comparison to activities in other regions7.
of life and infrastructure development; and their highest There are a range of mineral deposits which have been
scoring indicator, the government and institutional setting6. discovered and successfully mined in Sulawesi, including
This, coupled with excellent infrastructure, makes South gold, iron, nickel, cobalt, coal and copper. It is not
Sulawesi the ideal location to conduct business. surprising that this diversity in available mineral resources
Contract of Work Agreement has attracted a number of multi-national corporations to the
region, providing them with long-term mining opportunities.
The Contract of Work (CoW) system was introduced under
the 1967 Mining Law of Indonesia and was an agreement
between the GoI and a foreign (PMA) company, as contractor,
to carry out mining activities within the CoW area. The 1967
Mining Law was replaced by Law 4 of 2009 on Minerals and
Coal (2009 Mining Law). The 2009 Mining Law recognises
existing CoW’s such that they will continue to be honoured by
the GoI until their expiry, however, they were required to be
adjusted to more closely align to prevailing regulations. This
legal contract is in essence the equivalent of an Australian
State Agreement and carries the same rigorous standards
and shared commitment arrangements that companies are
familiar with in the Australian resources sector.
Indonesian companies, and more modern agreements with
foreign companies, now operate under a special mining
operation and production business license (IUPK-OP).
Given the extensive history of mining in Sulawesi, both the
CoW and IUPK-OP systems are in operation.
The CoW renegotiation process was completed in 2018
and provided CoW companies with security of tenure and
confirmation of their legal entitlement to explore and exploit
mineral deposits within the CoW area. Once the renegotiated
CoW agreements expire, each company will migrate to the
IUPK-OP system, in accordance with the prevailing laws
and regulations.
Environmental Approvals
The environmental approval process in Indonesia is
comparable to the environmental protection approvals
process that applies in Australia.
During the exploration and feasibility study phases,
all mining companies are required to complete an
5 The World Bank, 2019
6 Competitiveness, Trade, Liveability & Productivity in ASEAN Economies, 2017
7 van Leeuwin & Pieters, 2011
 MINING IN SULAWESI

The US Geological Survey reflects Indonesia’s mineral SUPPORTING INFRASTRUCTURE

production for 2017 as follows: Makassar, the capital of South Sulawesi, is home of a newly
Commodity Tonnage (‘000) constructed state-owned container port11, offering excellent
facilitation of trade. The port connects with the Trans-Sulawesi
Bauxite 3,600
rail network, which is operated and maintained under a
Alumina 1,500 public-private partnership arrangement, spanning almost
Cement 66,000 140 kilometres12. Makassar port is the largest in Sulawesi,
with an additional 13 smaller ports situated on the island.
Copper 650
South Sulawesi is well connected, with Makassar International
Gold 80
Airport offering both a domestic and international flight
Iodine 15 service, with access to major airlines on a daily basis. The
Nickel 400,000 region is only a short distance by air (approximately 1.5 hours)
from Denpasar airport, making the island highly accessible
Ammonia 5,000
for business travellers.
Tin 50,000
Zirconium 120
The Indonesian government announced in early 2019 that
they would be utilising the abundant reserves of nickel and
cobalt in Sulawesi to produce lithium-ion batteries to support
the manufacturing of electric vehicles8. This initiative will
further boost their economy as they target becoming the
largest lithium battery producer in the world8.
According to the GFMS Gold Survey 2018, Indonesia ranks
seventh in the world for gold production, with an annual
tonnage of 154.39.
Top 10 Gold Mining Countries
Rank Country Production (t) Electricity provisions in Sulawesi are provided by the state-
1 China* 426.1 run company PLN. All villages on the island have access
2 Australia 295.0 to a power network and the company actively engages with
industry to ensure services are made available according to
3 Russia 270.7 individual requirements13. Additionally, Sulawesi has been
4 United States* 230.0 identified as having the potential for future hydropower sites
which would generate a collective increase in capacity of
5 Canada* 175.8
10,307 MW for the island14. In Australia, this would power
6 Peru* 162.3 almost 2,000 homes for an entire year and is therefore a
7 Indonesia* 154.3 valuable opportunity for the region.
8 South Africa 139.9
9 Mexico* 130.5
10 Ghana 101.7
Rest of world 1,160.3
World Total 3,246.6
*Free trade agreement with Australia in place
With a current spot gold price of AU$1,849 /oz10, Indonesia
is well placed to create future wealth through undiscovered
gold deposits and is likely to be a very lucrative opportunity
for new and existing mining companies operating in the area.

8 ASEAN Today, 2019

9 GFMS, 2018
10 Kitco, 2019
11 Hamid, 2018
12 PwC, 2019
13 PLN, 2018
14 PwC, 2017
 MINING IN SULAWESI

The quality infrastructure and services available in Sulawesi ABOUT NUSANTARA RESOURCES
enable companies to conduct large-scale operations by Nusantara is an ASX-listed gold development company with
connecting them to facilities and resources capable of its flagship project comprising the 1.1 million-ounce Ore
supporting sizeable projects. Reserve and 2.0 million-ounce Mineral Resource Awak Mas
COMMUNITY ENGAGEMENT Gold Project located in South Sulawesi, Indonesia. Discovered
in 1988, the Project has over 135 km of drilling completed in
The community members and residents of Sulawesi are often
over 1,100 holes.
strong supporters of companies operating in the area due to
the employment opportunities and social benefits that are The Project is 100% owned through a 7th Generation CoW
generated from the projects. with the GoI. The CoW was secured prior to the current Mining
Law and has recently been amended by mutual agreement to
align with the current law.
PT Masmindo Dwi Area (Masmindo), a wholly owned
subsidiary of Nusantara, has sole rights to explore and exploit
any mineral deposits within the project area until 2050. After
this period, the operations under the CoW may be extended
by the IUPK-OP in accordance with prevailing laws and
regulations, which currently allows for an extension of 10
years and a further extension of 10 years.
In the 10th year after commercial production, Masmindo is
required to offer at least 51% of its share capital to willing
Indonesian participants at fair market value according to
international practice.
Companies that act with integrity, are committed to honouring
Nusantara’s development strategy is for construction of a
their corporate social responsibilities (CSR) and are willing
modern, low strip ratio open pit operation with ore processed
to engage with their key stakeholders, are more likely to be
by standard carbon-in-leach processing delivering high
embraced and supported by the local community.
gold recoveries. Environmental approval has already been
There are many mutual benefits to be gained by seeking the received for the Project, which is favourably located in non-
best outcomes and ensuring a long-term sustainable future forestry land close to established roads, ports, airports, and
for all involved. grid power.
Nusantara’s second strategy is to grow the resource base and
support a mining operation beyond the initial project life of 11
years. Multiple drill-ready targets have already been outlined
extending from the three main deposits and in other areas of
the 140km2 CoW.

DISCLAIMER
Nature of Document: This document has been prepared and issued by Nusantara Resources Limited (Company) to provide general
information about the Company and its environment. The information in this document is in summary form and should not be relied upon
as a complete and accurate representation of any matters that a reader should consider in evaluating the Company. While management
has taken every effort to ensure the accuracy of the material in the document, neither the Company nor its advisers has verified the
accuracy or completeness of the information, or any statements and opinions contained in this document.

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