The Positive Growth Prospects For Indonesia’s Mining Sector

Intelligent positioning should cement Indonesia’s role in global industry.

Indonesia contains an abundance of natural and human resources that have drawn traders to the archipelago for hundreds of years. Technological developments are creating new opportunities for the country allowing it to capitalise on its abundant mineral resources. Indonesia is gearing up to position itself not only as a supplier of raw materials but also as a key producer of smart technologies. The intention is to develop industries which will draw revenue into the country.

Parts of Indonesia used to be known as the Spice Islands and would attract traders from around the world to their supply of precious spices. Today Indonesia sits on mineral reserves that play a vital role in a number of developing global technologies. This is creating significant opportunities within the country that extend beyond the mining and distribution of mineral resources.

We have covered the vital role that nickel plays in the development of electric vehicle batteries in previous articles. To summarise the situation, Indonesia has significant supplies of nickel which is vital to producing the next generation of batteries. Nickel is necessary to produce energy-dense lithium-ion batteries which facilitate extended range and power for electric vehicles. Indonesia intends to leverage its nickel resources to develop further downstream industries beyond mining. A recent ban on ore exports was enacted to encourage the internal growth of these industries. Although COVID19 has put a dampener on nickel mining, Tesla’s recent announcement of a “giant contract” for responsible nickel miners is a clear indication of the direction Indonesia’s nickel mining could head.

Another significant opportunity for Indonesia is the development of its rare earth resources. Rare earth minerals play a vital role in important industries such as communications, aerospace and defence. Experts often joke that rare earth minerals are neither rare nor earth — but they are valuable. There are 17 rare earth minerals in the periodic table and Indonesia has at least 13 of these. To put things into perspective rare earth elements can be found in many of our smartphone components, ranging from the screen to the speakers.

Although proven quantities of rare earth minerals in Indonesia are currently only modest, the industry represents a significant opportunity for future growth. It is interesting that much of the currently identified resources are contained within the rock waste of existing mine sites known as tailings. Currently, many of these deposits are to be found on the islands of Bangka and Belitung near Singapore and some of the sites date back hundreds of years.

Rare earth minerals are becoming an increasingly contentious subject in geopolitics and have been identified as a “flashpoint” in global trade. China currently controls 80% the world’s trade in rare earth resources and this is adding to trade tensions with the US. Rare earth minerals are so valuable to technological development that some commentators have identified China’s control over the industry as being a point of geopolitical leverage. If commercially viable quantities of rare earth minerals can be extracted in Indonesia the country will be in a strong position to leverage this global market. Indonesia is currently the world’s second-largest producer of tin after China.

There is something appealing about retroactively utilising ancient tin mine tailings to extract rare earth minerals but it is not just tin mines which are associated with these commodities. Indonesia has identified rare earth deposits in Aceh, Jambi and West Kalimantan where they occur in conjunction with bauxite. If Indonesia can generate commercially viable quantities of rare earth minerals there exists significant export value as well as the opportunity to develop downstream industries such as those intended for nickel.

As Indonesia’s mining operations grow to meet global demands, logistics and finance are set to become increasingly valuable. The Enegra Group has core competencies in managing logistics and delivering financial instruments to organizations throughout the mineral supply chain. These skills are important for reducing friction and facilitating the liquidity of mine operators.

It is often underestimated by outside observers how important trade financing and logistical expertise are for operations in the mining industry. Although these processes take place in the background, without them industry costs would spiral. It is the Enegra Group’s intention to strategically position itself within Indonesia’s expanding mineral supply chains. There are significant advantages to be leveraged in the growth of both nickel and rare earth minerals. The next decade should see Indonesia cement itself as not only a global supplier of commodities but also as a growing centre for technology products and the Enegra Group will be there to assist that growth.

Enegra Group Ltd (LL15959) is a commodity trading company focused on resources in Southeast Asia. Equity in Enegra has been tokenised via the EGX security token. For enquires related to the purchase of EGX please contact support@enegragroup.com.