German Bank Pulls Out of Controversial Indonesian Gold Mine Scheme 0

The Indonesian province of North Sulawesi is a biodiversity hotspot and
harbors some of the world's most spectacular nature areas. Northern
Sulawesi is also home to a series of gold deposits, the largest of which
is known by the name of Toka Tindung. Plans to establish gold mining
operations here have met with widespread resistance both from local
inhabitants and the Provincial government, who fear that the mines would
disrupt the ecology and the economy of the region, which is based on
fishing, agriculture and tourism.

The British-based mining company Archipelago Resources, which is
attempting to force the development of the Toka Tindung mine, recently
received a serious blow, when the German bank WestLB did not renew its
credit arrangements with the company. WestLB is one of four banks, which
had originally agreed to provide project financing for Toka Tindung. The
other banks involved are Australia's ANZ and Investec and the French
bank Société Générale. NGOs are now calling upon these banks to follow
suit and to pull out of the controversial project.

„We are amazed that WestLB held on to this project as long as they did,“
says Heffa Schücking from the German NGO Urgewald. „Since 2005 the
people of Northern Sulawesi Province have consistently demonstrated and
spoken out against the project and both the provincial parliament and
the Governor have given a clear „No“ to Toka Tindung. This and the fact,
that the company pushed forward construction without obtaining valid
permits is a clear indication, that Archipelago Resources is not a
company that banks should invest in,“ says Schücking.

Activists believe that their threat to launch a public campaign against
WestLB in Germany played a role in the bank's decision to finally
withdraw from the project. „Supporting a project, which local people
don't want and which will harm unique ecosystems, would have created a
lot of damage to WestLB's reputation,“ says Marianne Klute from Watch
Indonesia.

From the start, the gold mining project has been contentious. In July
2006, the Indonesian Federal Environment Ministry forbid Archipelago
Resources' plan to dump tailings from the mine in the ocean and the
company thus put forward a plan to store tailings on land. However, this
solution is far from safe as the area is prone to earthquakes and
floods. The Governor of the Province, S.H. Sarundajang, thus refused to
grant a permit for the mine, which is located near the Lembeh Strait,
the Bunaken National Park and the the Tangkoko Conservation Area. At a
press conference in February 2007, Sarundajung said that short-term
extractive industries like gold mining don't fit into the long-term
sustainable development plans of this province and stated, „I prefer to
be a green governor rather than allowing the destruction of our
environment.“

Archipelago Resources and its Indonesian subsidiary have nonetheless
moved forward with construction, thereby enraging the local population
and showing utter disregard for the law. The company's security forces
have time and again attacked peaceful demonstrations by locals and there
are many accusations of corruption and unlawful intimidation against the
firm.

Villagers claim that Archipelago Resources' illegal construction
activities have already resulted in unprecedented damage to the
environment. On March 11th 2007, 400 villagers of Rinondoran and
vicinity had to flee as their houses were buried under a 1.5 Meter thick
layer of mud. The avalanche turned the crystal clear water of Rinondoran
Bay into a stinky mud pool with hundreds of dead fish. The villagers
suspect that this was a man made environmental catastrophe, caused by
the construction activities of Archipelago Resources in the hills above
Rinondoran. The contract to construct the dumping ponds and dams for the
mine was granted to Bakrie constructions, which belongs to the
Indonesian minister Aburizal Bakrie. This is the same company that is
responsible for the mud volcano that has been flooding the region
Sidoarjo in East Java over the past months. Archipelago Resources,
however, denies any responsibility and speaks of a natural catastrophe.

„Archipelago Resources does not care about the law nor about the people
in our region,“ says Revoldi Koleangan of AMMALTA, the local alliance of
farming and fishing communities opposed to the project. „We are
therefore glad to see that the company is losing support from its
financial backers and hope that it will soon be forced to leave the
province entirely,“ he adds.

Background:

In March 2006, the small British-Australian mining company Archipelago
Resources secured a US$ 38.5 million syndicated loan together with a US$
4 million cost overrun facility, from a syndicate of four banks to
develop the Toka Tindung Gold project through its Indonesian subsidiary,
Meares Soputan Mining (MSM). Toka Tindung is about 35 km north east of
Manado in the Indonesian Province of North Sulawesi. The project would
entail the operation of six open pit mines in an area with high and
unique biodiversity and in close proximity to a proposed UNESCO World
Heritage Site.

The original permit for the mine was granted in 1986 under the Suharto
regime and shows clear indication of collusion and corruption as the
permit was issued before the company MSM was even formed. Although
Archipelago Resources and MSM have not received a clearance by the
Indonesian Environment Ministry, the company nonetheless keeps on
proclaiming that it plans to initiate gold production soon. In the
beginning of February 2007, the governor of the Province of North
Sulawesi refused approval of the Environmental Impact Assessment (EIA)
on the grounds that the goldmine puts the environment and peoples'
health at danger. Important sectors of the provincial economy like the
fishing industry and dive tourism would also suffer severely.

During an extraordinary general meeting in London in 2007, Archipelago
shareholders agreed to entitle the company to seek an additional
long-term loan worth 20 Mio USD and issue new shares worth 29,3 % of the
current share capital. Meanwhile, the chances for the company to operate
its goldmine in North Sulawesi shrink further. According to the Dow
Jones Wire, (June 6, 2007) and several Indonesian national news media,
the Indonesian Minister For Environment stated that the ministry will
not issue a license to the project as it has failed to meet the EIA
conditions. Earlier, the Minister of Fishery and Oceans had already
stated his support for the North Sulawesi Governor to reject the mining
project (Media Indonesia online). And on June 18th 2007, the Minister
for Social Affairs also stated his rejection of MSM, as cited in the
local daily „Komentar“. In this light, the continuing media statements
by Archipelago Resources claiming that gold production will soon
commence, can only be interpreted as a desperate effort to prevent
international shareholders and creditors from noticing that the final
verdict on Toka Tindung has already been spoken.

Since WestLB has recognized this and effectively terminated their
relationship with Archipelago Resources, NGOs are hopeful that other
banks and investors will also reconsider their support for this project.