Archipelago's Indonesia gold project approved

Reuters, Tue Oct 6, 2009 3:58am EDT

MANADO, Indonesia, Oct 6 (Reuters) - Indonesia's North Sulawesi has approved an environmental study for a gold project involving U.K.-based miner Archipelago Resources (AR.L), the province's governor said on Tuesday.

Archipelago Resources, which owns 85 percent of the Indonesian unit, PT Meares Soputan Mining (MSM), had to delay development of its Toka Tindung gold project in North Sulawesi due to environmental concerns from the local government.

The North Sulawesi provincial government had initially rejected the project on concerns over the impact of tailing from the gold mine despite approval from central government.

The province has approved the firm's environmental study after an independent team confirmed the safety of its land tailing-disposal facility, Sinyo Harry Sarundajang, North Sulawesi's governor told Reuters.

"We support the operation of MSM as it has met requirements set by the independent team. The firm has no issue anymore with its environmental study," Sarundajang said, adding the study was in the process of being approved by the environment ministry.

MSM, which started exploration in 1986, said in October last year it expected to delay commercial production to end of 2009 from an earlier plan for first quarter of 2009.

But Archipelago Resources said in June this year: "Provided unanimous political support and project financing are secured by the third quarter of 2009, production at Toka Tindung would be expected to commence in the second half of 2010."

Production was expected at an average annualise rate of 160,000 oz gold equivalent for the first six years of the initial 8.5 year project life, Archipelago said.

Indonesia has some of the world's largest deposits of gold, tin, copper and nickel, and several leading international mining firms, including Freeport-McMoran Copper & Gold (FCX.N), have operations in the country.

But the sector has often struggled to attract foreign investment because of legal uncertainty, bureaucracy, allegations of corruption as well as concerns over the environment and disputes with local governments.

(Reporting by Novie Waladow; Writing by Fitri Wulandari, Editing by Ed Davies)