International Journal of Civil Engineering and Technology (IJCIET)

Volume 9, Issue 10, October 2018, pp. 707–717, Article ID: IJCIET_09_10_073
Available online at http://www.iaeme.com/ijciet/issues.asp?JType=IJCIET&VType=9&IType=10
ISSN Print: 0976-6308 and ISSN Online: 0976-6316

© IAEME Publication Scopus Indexed

SUSTAINABLE MINING MANAGEMENT

R. Marsuki Iswandi
Agribusiness Department, Agriculture Faculty, Halu Oleo University

La Ode Alwi
Agribusiness Department, Agriculture Faculty, Halu Oleo University

La Baco
Agrotechnology Department, Agriculture Faculty, Halu Oleo University

Lukman Yunus
Agribusiness Department, Agriculture Faculty, Halu Oleo University

ABSTRACT
Mining management should provide social, economic and ecological justice. This
research purposes are to examine the institutional performance of mining
management in Bomabana District; examining the key driving factors of sustainable
mining management; determining priority programs in sustainable mining
management. This research was conducted in Bombana District from February to
July 2017. Data was collected by focussed group discussion (FGD) with word cafe
format. Data analyses used are: (i) Balance weight analysis; (ii) Structural Self
Interaction Matrix (SSIM); and (iii) Multi Criterion Decision Making (MCDM)
analysis, through Preference Ranking Organization for Enrichment Evaluation
(PROMETHEE). The research findings are : (1) Institution in mining management is
not good enough and still have high transaction cost; (2) Key factors as driver power
in sustainable mining management are: availability of regulation/regional
regulations; community involvement; the establishment of a mine board; external
supervision by Regional Government; and supervision at mine production level; and
(3) Investment priority programs from mine recipients, namely: development of
economic facilities, environmental pollution control, environmental services
restoration, empowerment of small and medium enterprises, construction of health
facilities and social conflicts control.
Keyword: Management, mining, sustainable

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 Sustainable Mining Management

Cite this Article: R. Marsuki Iswandi, La Ode Alwi, La Baco and Lukman Yunus,
Sustainable Mining Management, International Journal of Civil Engineering and
Technology, 9(10), 2018, pp. 707–717.
http://www.iaeme.com/IJCIET/issues.asp?JType=IJCIET&VType=9&IType=10

1. INTRODUCTION
1.1. Background
Mining management is sustainable if it can meet current needs without compromising the
needs of future generations. Mining management in a region should be able to provide social,
economic and ecological or environmental justice. Robertson and Shaw (1999), Yu et al.
(2005), Ololade, et al., (2013), Strongman (2002), Kempton (2003), and Kunanayagam
(2006) stated that the mining is sustainable if the mining is used continuously and socially,
economically and ecologically even institutionally. Iswandi et al, (2015) said that mining
activities should minimize the negative externalities to become sustainable.
Strategic region development plan is compiled into medium-term region development
policy (Iswandi et al, 2015). Regional gold mining can accelerate regional economic growth.
But on other hand, gold mining has a negative impact to other, such as the social and
ecological for the lower welfare at mining ring society (Alwi et al, 2016). This opinion is
supported by Fan et al (2017) that the innovation elements including government support, the
technical employees‟ rate and the technical assets rate have significant positive relationships
with economic growth in labor intensive state-owned sector or capital intensive mixed sector.
Economic potential knowledge of each district will facilitate the production of more
efficient investment (Iswandi et al., 2016). The social dimension of mining activities in
Bombana District poses a potential conflict. Anwar (2013) stated that conflicts in mining
areas of Bombana District consist of: (1) conflicts between companies holding Mining
Business License with indigenous peoples because mining is considered to seize the territory
of custom/ancestor; (2) conflicts between companies holding Mining Business License with
community landowners because the company is considered to seize community farms and
livestock; (3) conflicts between companies holding Mining Business Licenses with residents
in mining ring, as companies are considered to pollute the source of river water and waters
where residents seek/maintain fish; (4) conflicts between companies holding Mining Business
Licenses with Regions and communities residing in mine's ring, as they are considered to be
exploring outside areas of control permits by encroaching on protected forests.
The main effects of mining activities on environment for ecological dimension are the
erosion and declining the biodiversity of both animals and plants in the mining locations,
decreasing air quality due to exhaust emissions from processing machinery and tailings waste
as the residual sand grains from mining processing.
Mining activity in a region can provide prosperity and justice between generations.
However, in many cases, mining activities cause inconvenience to community, especially in
mining ring area. This condition reflects poor management in mining. The failure is due to
behavior of mining managers who nuanced by moral hazard and concerned with rent benefits
(Alwi, 2016). Debrah el al. (2018) gave recommendations in light of formalising
communities‟ rights with mining companies‟ and social licence to operate may assist in
building transparency and the „trust‟ needed amongst stakeholders in mining regimes
There are several parties in mining management, among others are mining companies,
government, community organizations and communities in mining ring area. In an effort to

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 R. Marsuki Iswandi, La Ode Alwi, La Baco and Lukman Yunus

realize sustainable development of a region, it is necessary to develop a system to

accommodate the interests and clarify the obligations and responsibilities of each party
related to mining activity. Iswandi (2016) explained the government dimension to monitor
the CSR program and reclamation/revegetation, company dimensions to compensate the
degradation of agricultural land, and community dimensions to control the change functions
of labor agriculture.
Above phenomenon shows the gap between the positive and negative impacts of gold
mining activities. Therefore, this research is conducted to explore the gold mining practices
implementation and best alternative in sustainable mining management.

1.2. Research Problems

The research problems are below.
1. How is the institutional system of gold mining management in Bomabana
District?
2. What are key driving factors of sustainable mining management?
3. What priority programs are required for sustainable mining management?

1.3. Research Objectives

These research objectives are below.
1. To know the institutional system of gold mining management in Bomabana
District.
2. To know the key driving factors of sustainable mining management.
3. To decide priority programs are required for sustainable mining management.

2. RESEARCH METHODS
2.1. Location and Research Time
This research was conducted in February to July 2017 in North Rarowatu District and Lantari
Jaya Sub-district, Bombana District, Southeast Sulawesi Province, Indonesia. The sub-
districts have a gold mining potential of 47% from all gold reserves in Bombana District.

2.2. Types and Data Sources

This research uses primary data and secondary data. Primary data was obtained through
Focus Group Discussion (FGD) using "Word Cafe" format. World Cafe techniques rely on
collaborative dialogue and the importance of active role of dialogue participants. In addition,
World Cafe is a flexible and adaptive technique that can be used in various contexts of FGD
(The World Café Community Foundation, 2015). The World Cafe participants are 42 people,
consisting of stakeholders in Bombana District, namely the government (Bappeda, Forestry
Agency, BLHD, Plantation Agency, Agriculture Agency, and Energy and Mineral Resource
Agency), academics, NGOs, private sector and community.
The questions focuses on each Cafe are follows. Cafe 1: what indicators are needed in
sustainable mining management. Cafe 2: what key driving factors in mining management.
Cafe 3 what is the directions and policies in mining management.

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 Sustainable Mining Management

2.3. Data Analysis Method

Data analyses used in this research are explained below.
1. The institutional index. It is calculated by weighting each attribute and weighted
average. Each attribute has the same weighting with the following formula:

1
The institutional index is calculated by weighted average with formula as follows:

2
The Institutional Index value between 25 - 100 from assessment result is converted base
value of 25 to facilitate the interpretation, by formula: Index x Weighing Value (25). The
institutional performance criterion is presented in Table 1.

Table 1 Institutional Performance Criteria

Index Index (Conversion) Institutional Performancesd
1. 00 – 1.75 25 – 43.75 Not good
1.76 – 2.50 43.76 – 62.50 Less Good
2.51 – 3.25 62.51 – 81.25 Good
3.26 – 4.00 81.26 – 100.00 Very Good
2. Driving factors in sustainable gold mining management are analyzed by
Interpretative Structural Modelling (ISM). This technique provides an analysis
base where the information generated is very useful in policy formulation and
strategic planning (Marimim, 2005). Elements used in this study refer to MCA
(2005), AGDITR (2006), Roseland (2005) and ICMM (2008), and based on
stakeholder opinion as the respondents. Each element is created Structural Self
Interaction Matrix (SSIM) for each element affected. This element is examined by
selected expert in determining the relationship between each sub elements or
factors.
3. The best alternative of mine revenue investment (tax and royalty) is analyzed by
Multi Criteria Decision Making (MCDM) analysis, through Preference Ranking
Organization for Enrichment Evaluation (PROMETHEE). This method can
accommodate the quantitative and qualitative indicators/criteria selection. Brans
and Mareschal (1999) formulated the decision making with multicriteria below:
Max{f1(a),f2(a),........fk(a) : a € A ...................................................................(3)
If a is set of possible alternative options happened, f1, f2, ... fk are the evaluated
indicators/criteria. Each indicator/criterion is given a value from 0 - 5 (Likert scale) by
stakeholders. Calculation the direction of preference is based on left flow and entering flow
index value. The value of leaving flow for each alternative is calculated by equation (4),
while the entering flow value is calculated by following equation (5):

( ) ∑ ( ) ( )

( ) ∑ ( ) ( )

Net Flow = Q+ (a) – Q- (a)

Description:

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 R. Marsuki Iswandi, La Ode Alwi, La Baco and Lukman Yunus

Q (a) = net flow from a alternative

Q + (a) = leaving flow from a toolkit
Q - (a) = entering flow from a alternative
Sorting alternatives is based on net flow (ranking)
The net flow results of all alternatives are sorted from largest to smallest values. The
"best" alternative has the largest net flow value.

3. RESULTS AND DISCUSSION

3.1. Institutional Index of Mining Management
The current study allows valuable recommendation, as more and more sharing networks are
created, facing the problem of whether to regulate access or not (Hartl et al., 2016). The
institutional parameters used in mining management are: community participation, company
supervision, corporate liabilities fulfilment, local government transparency, utilization of
mining funds revenue and transaction costs. The index scores are Community participation of
42,86 (less good); government supervision to company of 43.65 (less good); corporate
liability fulfilment of 49,40 (less good); Local Government transparency of 47.22 (less good);
funds utilization from mining revenue of 48.21 (less good); and transaction fee index of 36.65
(indicating high transaction costs, adverse conditions).
Mining management supervision includes production costs, production and sales
supervision. There is no government involvement in supervision exist. Actually, production
costs, production and production sales are based on mining companies reports in every six
months to local governments through technical agencies (Minerals Energy and Mineral
Resources and Bombana District Environmental Agency). This mechanism gives an
opportunity to companies to submit reports falsely. Mine production determines the amount
of royalty paid to government. Government Regulation no. 45 of 2003 stated that royalty
tariff ad valorem (in percentage) for gold mine is 3.75% from the selling price per unit.
The tax payment of mining company to government depends on the net profit. The net
profits depend on production costs. Higher profit production cost decreases the profit.
Companies tend to make high production cost reports to avoid high tax payments. On other
hand, transaction costs in mining management are relatively high due to informal
relationships, such as negotiations, coalitions, compromises, or open presses such as protests
and demonstrations.

3.2. Key driving Factors of Mining Management

These are an economic dimension, a social dimension, an environmental dimension, a
transverse dimension and a dimension involving governance, political and institutional issues.
A sensitivity and robustness analysis of the Sustainability Index of Mining Countries (SIMC)
with other development indicators confirms the strength of the tool (Dialga, 2018).
FGD results show that in order to realize mining management that equitable and
sustainable benefits, several driver factors in mining management are needed. They are
institutional strengths in realizing the mining management and mechanisms consistent with
organizational procedures adhered as well as transparent, effective and responsive to public
interest. Zvarivadza and Nhleko (2018) stated that large-scale mining companies,
government, and civil society at large have to adopt a cooperative approach to devise
sustainable, workable, and realistic ways to convert artisanal and small-scale minin miners
into contributors to sustainable development.

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 Sustainable Mining Management

Management that responsive to public interests is absolutely needed in an effort to

achieve rationalization of prosperity in sustainable mining development (Sulistyani, 004).
Similarly, Williamson (2000) stated that good management must have a credible commitment
to institutional goals. Gastauer et al. (2018) suggest the management of rehabilitated
ecosystems, thus contributing to more sustainable mining. FGD results identified 12 key of
mining management factors, as shown in table 2.

Table 2 Key Driving Factors of Mining Management

No. Key driving Factors Description
Utilization of mining Revenue management is based on target and the
1.
revenue effectively benefits
The flow pattern is consistent with applicable
2. Financial flow
mechanism or regulation
Supervision strengthening It used to ensure the level of gold production in each
3.
in mine production mining
Strengthening of external
Mining revenue managed by certain institutions (stand
4. supervision (Local
alone) shall be audited by external parties
Government)
Establishment of Mine The availability of a separate institution in mine
5.
Board revenue management
Maintaining the continuity in fulfilling short term
Committees of investment
6. (liquidity) and long term (solvency) obligations and
placement
profit
Community involvement in
7. Community involvement in various mining activities
mining management
The importance of Local Regulations availability to
Regulation availability
8. regulate mining revenue as a perennial fund of region
(Local Regulation)
or generational fund
Fund availability through corporate payments in form
Revenue availability from
9. of taxes and royalty/landrent during mining process
mining
activities
Social impact (lower social
10. Minimize the conflict potential caused by mining
conflict)
Economic impact
Increasing the community income and Gross Regional
11. (increasing the regional
Domestic Product (GRDR) of Bombana District
economic revenues)
Ecological/environmental
The availability of internal supervisors to watch the
12. impact (The absence of
performance of mineral fund management institutions
degradation and pollution)
ISM results continued with SSIM indicates that key driving factors of mining sustainable
management in Bombana District are elements in Cluster IV (Independent), namely: (1)
availability of regulation/Local Regulation; (2) community involvement in various mining
activities; (3) establishment of mine board; (4) external supervisor (Local Government); and
(5) supervision at mine production level. These five indicators are independent variables.
They have large driver power in trade management, but have little dependence on mining
management. Setiawan and Yahya (2018) said that the resulting local behaviors, called as
rules, can be used for guiding stakeholders to pinpoint the relevant behavior for human
capital and productivity enhancement.
Mining CSR is complex and challenging: operations with extremely labor and capital
intensive, often in remote locations where political issues might arise (Selmier, 2017). The
aims of mining management are tax revenue and royalty, Corporate Social Responsibility
(CSR) and reclamation funds (E9) and utilization of taxes, royalties, CSR and targeted
reclamation funds (E1). Each action to enhance the role of these clusters will create

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 R. Marsuki Iswandi, La Ode Alwi, La Baco and Lukman Yunus

sustainable mining management. Adversely, low attention to these each clusters will lead to
failure in mining management.
Cluster II (dependent) shows the aim of institutional management of mineral funds,
namely effective financial flows, i.e., (taxes and royalties, CSR and reclamation funds) (E2).
The financial flows for taxes and royalties, CSR and reclamation funds consistent with FGD
formulation to follow the prevail regulations that mining companies must pay to central
government. Then followed by a natural resource revenue sharing scheme. The local
government share as a producing region is 32%. While CSR and company's reclamation a
fund is given directly to local government through special accounts (together with tax funds
and royalty). The financial flows optimization of taxes and royalties and CSR and
Reclamation Fund can be supervised from production level, production costs and the mine
production selling, the value paid to government will be proportional to the production. Drew
et al (2018) offer alternative public policy solutions which would enable affected
municipalities to recoup some or the entire cost burden placed on them by mining operations
in their respective local government areas.

Figure 1 ISM model diagram of Key driving in Sustainable Mining Management

The investment placement committee of mining revenue (E6) determines the planning of
investment program from targeted mining revenue. Lower social conflict is social impact
(E10), higher regional income (E11) is economic impact and zero environmental degradation
and pollution (E12). These indicators are parameters affected by other parameters in mining
management. Dobra and Dobra, (2013) from an economic perspective, it is argued that the
effect on revenue would be smaller than one might anticipate due to such a royalty crowding
out state levies or encouraging vertical disintegration on the part of mining firms to avoid
much of the burden of the royalty.

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 Sustainable Mining Management

3.3. Priority Investment Program of Mining Revenue for Sustainable

Development
The empirical results also suggest that mining revenue and exchange rate granger cause
economic growth while government consumption is caused by mining revenue and economic
growth (Koitsiwe and Adachi, 2015). Investment of mining revenue at rural or mine area is
based on idea that mining ring area is an area directly affected by gold mining activities. FGD
shows four alternatives of mine revenue sources: (1) existing mining taxes, (2) existing
mining royalty, (3) rent ratio to existing taxes and (4) rent ratio to existing royalty. There are
eight programs that should consistent with mining communities needs. They are: (1)
development of economic infrastructure; (2) SMEs empowerment; (3) development of health
facilities; (4) social conflicts handling; (5) air, water and soil pollution control; (6)
reclamation of ex-mining land; (7) natural resources protection; and (8) recovery of disturbed
environmental services due to mine extraction. Iswandi et al. (2015) said that empowerment
and economic capacity development of Remote Indigenous Community in Bombana can be
done through: a) utilization of land resources, b) ecological and cultural approaches, and c)
institutional.
The data of reinvestment characteristics for mine revenue (taxes and royalties) on various
program options are presented in Table 4.

Table 4 Investment Characteristics of Mining Revenue at Multiple Programs Options in Mining

Landscape Area
Criterion
Ratio M Ratio M
Alternative Min/Max Unit Tax Royalty Rent on Rent on
Tax Royalty
Economic
Max 5-point Average Good Average Average
infrastructure
Very
SMEs empowerment Max 5-point Average Good Bad
good
Health infrastructure Max 5-point Bad Average Average Good
Conflict Min Impact High Moderate Moderate Moderate
Environment pollution Min % -0.58 -3.14 10.68 13.49
Land reclamation Min Dummy No No Yes Yes
Natural resources
Max 5-point Very bad Very bad Bad Average
protection
Environment service Min % 1.73 -0.83 12.99 15.8
The MCDM analysis through PROMETHEE approach shows the mining revenues from
taxes and royalties are prioritized to be invested in: development of economic facilities,
environmental pollution control, environmental service recovery, empowerment of small and
medium enterprises, development of health facilities and social conflicts control. The
remaining two alternative programs include ex-mining reclamation and natural resource
protection rather than priority programs, since ex-mining reclamation and natural resource
protection are the obligations of mining companies and responsibilities of several parties
including the government. The key metrics for environmental sustainability in mining relate
to efficiencies in resource consumption, minimizing land disturbance, pollution reduction, as
well as closure and reclamation of exhausted mine lands (Gorman and Dzombak, 2018).

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 R. Marsuki Iswandi, La Ode Alwi, La Baco and Lukman Yunus

4. CONCLUSIONS AND RECOMMENDATIONS

4.1. Conclusion
1. Institutional mining management in Bombana District of Southeast Sulawesi Province
has indicators of participation, companies supervision, corporate obligations
fulfilment, transparency of Local Government, utilization of mining revenue. All are
less good and still show high transaction costs.
2. Key factors as driver force in sustainable trade management are: (1) availability of
regulation/local regulations; (2) community involvement in various mining activities;
(3) establishment of mine board; (4) external supervision by Regional Government;
and (5) supervision at mine production level.
3. Investment priority programs of mining revenue (taxes and royalties) are:
development of economic facilities, environmental pollution control, environmental
services restoration, empowerment of small and medium enterprises, construction of
health facilities and control of social conflicts.

4.2. Suggestions
It needs to establish a Mining Board to serves as a controller in mining management system
including as planner in investment system of mine revenue (taxes and royalties).

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