Nickel mining boom poses threat to Indonesian forests and Indigenous peoples

Nickel is a crucial raw material for electric car batteries and the decarbonization of transport. However, its mining also poses a new and substantial threat to forests and indigenous peoples in eastern Indonesia.

“We are calling for a halt of mining expansions on forested areas, and strict adherence to the principles of Free Prior and Informed Consent in forested landscapes. We cannot solve the climate crisis at the cost of the human rights of Indigenous peoples and local communities,” says Toerris Jaeger, Executive Director of Rainforest Foundation Norway and continues:

“A holistic approach is necessary to solve the climate and nature crisis. If nickel mining for the decarbonization of cars causes great harm to tropical forests and people, it is not a part of the solution.”

Nickel impacts in Indonesia

Nickel is a mineral mainly used for the production of stainless steel and for batteries and energy storage technologies. Indonesia is home to approximately 21% of the known nickel reserves around the world and was responsible for nearly half (48%) of nickel production in 2021. The electrification boom and growing global demand for Indonesian nickel is increasing the pressure on tropical rainforests.

Indonesia’s nickel reserves are of the laterite type. Laterite nickel deposits require open-pit operations (as compared to sulfite deposits) because most of the nickel ore is at the surface. This means that Indonesian nickel mining may spread out over a wider area and significantly increase deforestation. There are concerns over the environmental and social impacts of the industrial and mining developments in Sulawesi, North Maluku and a range of smaller islands.

Besides deforestation, other environmental hazards of expanding mining operations include pollution of water streams and fishing grounds. Pollution risks are there because to transform nickel ore to battery grade nickel, complex and less conventional methods are being used, such as High-Pressure Acid Leaching (HPAL) which produces toxic waste.

Further, the potential carbon emissions from the expansion of mining operations are significant, considering that the smelting process is highly energy intensive and most smelters in Indonesia are powered by coal.

The expansion of the nickel and electric battery industry must come with the appropriate environmental and social standards that minimize environmental and human rights impacts.

Rainforest Foundation Norway strongly recommends that investors in this industry undertake rigorous due diligence of the social and environmental risks of any company looking to raise new capital.

A new stock listing of a nickel mining company

Earlier this week, the Indonesian company PT Trimegah Bangun Persada, or Harita Nickel, issued an Initial Public Offering (IPO) to be listed on the world stock market. Harita Group's core businesses are in the natural resources sector, including nickel mining, ferronickel smelters, bauxite mining, alumina refineries, palm oil plantations, shipping, timber, and coal extraction. The funding made available with the IPO is intended to increase nickel processing capacity, including the first High-Pressure Acid Leaching (HPAL) mineral smelter on Obi Island in Halamera Island, North Maluku.

To date, Harita Nickel owns and operates two active 5,523-hectare laterite nickel mining concessions located in Kawai and Loji, on Obi Island. A 2022 analysis by The Guardian shows water contamination with cancer-causing chemicals in Kawasi, the main village where Harita Group’s operations are based. They’ve also experienced an increase in respiratory infections. The expansion of the project can create additional deforestation as well as health threats to local residents.

Harita’s IPO is so far the largest IPO in Indonesia this year, raising $ 660mn from investors that include the Swiss commodities trader Glencore and Asian Sovereign wealth funds. The company aims to develop downstream processes to meet the increasing demand for batteries for electric vehicles and energy storage. The Obi Island project is expected to take place on approximately 15 000 hectares of land. The environmental and biodiversity threats of such a project are large considering that Obi Island is an archipelago with a biodiverse ecosystem.