Koba Tin denies illegal mining, but may delay shipments

Koba Tin denies illegal mining, but may delay shipments

25th January 2008

by Reuters

SINGAPORE, Jan 24 - Indonesia's PT Koba Tin, majority owned by Malaysia Smelting Corp Bhd , said on Thursday production was running as normal, after police said they had closed warehouses belonging to the company.

Senior company executives denied police accusations it was sourcing tin ore from illegal mines on the main producing islands of Bangka and Belitung and said a storage site, which was shut on Wednesday, was owned by one of the company's sub contractors.

But in the latest twist, police said on Thursday they also closed the company's warehouse holding about 2,000 tin ingots for export, which may delay Koba Tin shipments to Singapore.

"The ingots were only moulded yesterday. We don't know yet when we are going to ship them because we have yet to check on the quality," said Bangka-based company spokesman Patrianusa.

Ikhwansah, the Jakarta-based company's corporate secretary, said Koba Tin's sole warehouse remained opened but police were protecting the ingots, which totalled 50 tonnes. "Our mining, smelting and warehousing and shipping operations continue as normal."

Concerns over supply from Indonesia, the world's second-largest producer after China, helped ignite a rally in tin prices last year after a crackdown on illegal mining and smelting in October 2006 led to the closure of dozens of small smelters.

Tin is used in electrical solders and as a corrosion-resistant coating for other metals.

Police in Bangka-Belitung said on Wednesday they had shut down a warehouse owned by Koba Tin and arrested two miners working as the company's partners over alleged illegal mining.

But Ikhwansah said police sealed a storage site owned by one of the sub-contractors, who mined ore on behalf of the company, and not the company's own warehouse.

"We always closely monitor the activity of our sub-contractors. It's well-documented in which they have made a statement they will not mine from outside Koba Tin's concession areas. They should not get ores from forest areas."

Police alleged the company's partners mined ore in a forest area where mining activity was prohibited and the suspects had planned to send the ore to Koba Tin's warehouse. They accused the company of fencing -- a crime which carries a maximum penalty of four years in jail.

"It's obvious Koba Tin is receiving goods which are obtained through criminal activity," said Djuhandani Raharjopuro, the head of Central Bangka police, after securing the tin ingots at Koba Tin's warehouse on Thursday.

Koba Tin officials denied any wrongdoing.

"All production from the company's sub-contractors are from mining activities carried out within the company's Contract of Work and outside forest areas," he said.

It is the second case of alleged illegal mining involving the company, after an Indonesian court cleared three executives of PT Koba Tin in August 2007 of illegal mining on Bangka-Belitung islands, Indonesia's main source of tin. Police arrested three directors of Koba Tin, including President Director Anuar Sidek, in February last year on suspicion of illegally obtaining tin ore and operating outside approved mining areas.

Koba Tin is 75-percent owned by Malaysia Smelting. State-run PT Timah Tbk owns the remaining 25 percent of Koba Tin, whose sales of refined tin dropped more than 60 percent to around 8,000 tonnes in 2007 as exports stopped during an investigation of the alleged illegal mining. Koba Tin aims to produce around 15,000 tonnes in 2008.

Indonesia banned exports of tin ore in 2002 to stop illegal mining that had caused environmental damage on Bangka island, after which a number of small-scale smelters emerged there.

A rebound in the tin price from $3,620 a tonne in February 2002 -- the lowest since the LME reintroduced its tin contract in mid-1989 -- also stimulated activity.

Tin traded on the London Metal Exchange around $16,500 a tonne on Thursday -- below a contract high of above $17,000 in mid-November last year. (Additional reporting by Dwi Sadmoko in Bangka and Fitri Wulandari in Jakarta, Editing by David Cowell)