Gag Island is situated in the Raja Ampat archipelago in the province of West Irian Jaya in Indonesia. PT Gag Nikel, an Indonesian company, was formed in 1996 following the signing of a joint venture agreement between BHP Billiton (75 per cent) and Indonesia's state-owned mining company, PT Aneka Tambang (25 per cent). A Contract of Work was awarded in February 1998, and a program of exploration and preliminary evaluation was conducted. In late 1999, the Indonesian Government enacted forestry law (Law 41/1999) prohibiting open cast mining in 'Protection Forest' areas. The forest on Gag Island was subsequently reclassified as 'Protection Forest', rendering any mineral deposits on the island unmineable. Subsequent to these events, the Contract of Work for Gag Island was suspended. No exploration work on the island has been undertaken since late 1999.
Gag Island lies 2400 kilometres east of Jakarta, Indonesia, and 150 kilometres west of Sorong, Papua. Since 2002, nine local people have continued routine environmental monitoring and maintained the small exploration camp. In March 2004, the Indonesian Government published a Decree (Perpu) intended to reinstate the rights of holders of Contracts of Work and, in May 2004, the Implementing Regulation (Keppres) was passed by the Parliament. During the year, it was also reported that the Raja Ampat archipelago, possibly including Gag Island, was under consideration for classification as a World Heritage site.
PT Gag Nickel is seeking clarification of the situation under the new regulations, and exploration activity remains suspended. We have also publicly stated that BHP Billiton would not seek to progress the project if it is classified as a World Heritage site.
Prior to the suspension of the Contract of Work, conceptual mining studies considered three possible alternatives for disposal of tailings from an eventual mining operation, including deep sea tailings placement (DSTP), as well as land-based options. BHP Billiton has subsequently ruled out DSTP as a potential tailings disposal option for Gag Island. BHP Billiton has recently issued a general policy statement which states ‘BHP Billiton has decided not to pursue DSTP as a potential tailing disposal option for any of its current prospects. The Company also believes that given the very specific circumstances where DSTP could be considered appropriate, it is unlikely that the technology will be pursued in any of our future developments.’
The Gag Island community consists of approximately 450 people living at Gambier Bay, which is adjacent to PT Gag Nickel's former exploration camp. The community was established in the early 1960s by people moving to the island in the hope of finding work with nickel exploration ventures at that time. As reported last year, the years of suspended operations and the diminishing prospect of employment have been a major disappointment for the community.
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